Breach of trust of the Board of Directors – One of a kind court case

Breach of trust of the Board of Directors – One of a kind court caseThe Office of the Special Prosecutor in Iceland broke new ground last month, when he took four members of the Board of Directors of SPRON, Iceland’s largest Savings Bank before the bank collapse in 2008, to court for breach of trust.

This is the first time the OSP has charged a Board of Directors in connection with alleged criminal activities leading up to the fall of the Icelandic financial system in October 2008.

The OSP said at the District Court in Reykjavík, that the Board of Directors had misused their powers by agreeing a 2 Billion IKR loan to Exista two weeks before the collapse in light of the situation in Iceland at that time, and that they breached the trust of the stake holders by agreeing the loan without guarantees. The loan had also been much higher than the Savings Bank could afford.

This groundbreaking case for the OSP, has been in the making for some years, and dates back to the year 2008.  The time-line is like this:

September 18th 2008 – The Board of Directors of SPRON gather for a meeting in its headquarters. The Chairman of the Board, Erlendur Hjaltason, left the meeting when the Board of Directors agreed unanimously to lend the company Exista, which Mr. Hjaltason was the CEO of, 2 Billion IKR.  This was the only loan the Board of Directors approved for the years 2007 and 2008 and was made without any guarantees only weeks before the fall of the Icelandic banking system.

September 22nd 2008 – VIS Insurance Company, owned by Exista, loans SPRON 2 Billion IKR.

September 29th 2008 – Exista, which owed VIS 4 Billion IKR, pays VIS 2 Billion IKR of the loan.

September 29th 2008 – Severe shortage of liquid assets leads to the decision of the Icelandic government to nationalize Glitnir Bank.  Within three weeks all three of the biggest banks had been nationalized and the Financial Supervisory Authority had the permission of the Parliament to overtake all financial institutions.

October 6th 2008 – The Icelandic government passes emergency laws to protect the economy.

December 10th 2008 – The OSP was founded by the Parliament. The aim was to investigate suspected criminal conduct leading up to, in connection with or in the wake of the banking crisis, whether these relate to the activities of financial undertakings, other legal entities or individuals, and, as appropriate, to follow up these investigations by bringing charges in court against those concerned.

January 2009 – Investigations by the OSP begin.

October 2nd 2014 – The OSP formally charge four members of the Board of Directors of SPRON for breach of trust.

The members are: Margret Gudmundsdottir, CEO of Icepharma; Rannveig Rist, CEO of Rio Tinto Alcan; Johann Asgeir Baldurs, Chairman of the Board at Frumherji; and Ari Bergmann Einarsson, investor.

Margret Gudmundsdottir is the CEO of Icepharma, one of the leading companies in Iceland in the health care market and represents brands like Baxter, Bayer, Lilly, Merck Serano, Mylan, Pfizer, Roche, Johnson & Johnson, CSL Behring, Biomet, Coloplast, Hill-Rom, Hospira, Smith & Nephew and Nike, to name a few. She is also the Chairman of the Board of N1, Iceland’s biggest fuel  retail and service company. Ms. Gudmundsdottir worked for N1 main competitor, Shell, for 10 years and was a director at Q8 in Denmark and is on the board of the Federation of Icelandic Trade, before she joined Icepharma.

Rannveig Rist is the CEO of Rio Tinto Alcan in Iceland. She has been on the Board of Directors of HB Grandi, Confederation of Icelandic Employers, Iceland Drilling and Skipti. She was also at Promens and Director of the Icelandic Chamber of Commerce. Ms. Rist is a Lecturer at the University of Iceland.

Johann Asgeir Baldurs is the Chairman of the Board at Frumherji, the leading company in Iceland in inspecting, testing and legal metrology in Iceland. He was the CEO of VIS, Iceland’s largest insurance company and a member of the Board of Directors at IGI Group, Lysing financing company and was the Chairman of the Board of Viking Redningstjenese A/S in Norway.

Ari Bergmann Einarsson, investor, was a Branch Manager for SPRON Savings Bank and now works as and independent investor.

The court case commences in Reykjavik District Court.