Three executives of the defunct Icelandic bank Glitnir, former CEO Lárus Welding, former director of market trade Jóhannes Baldursson and former broker Ingi Rafn Júlíusson, were sentenced to one week in custody by Reykjavík District Court yesterday.

The headquarters of Glitnir, now Íslandsbanki. Copyright: Icelandic Photo Agency.

This was done at the request of Special Prosecutor Ólafur Þór Hauksson in connection with his investigation of the bank’s purchase of and trade with stock issued by FL Group and loans granted to various companies due to purchase of stock issued by the bank in 2007 and 2008. The so-called Stím case is also under investigation, Morgunblaðið reports.

Custody was requested over a fourth individual but the request was rejected. Between ten and 20 people were questioned in connection with this case yesterday and 60 employees of the Special Prosecutor’s Office participated in the operation which began at 7 am.

“Everything went smoothly, neither handcuffs nor other coercion were used,” Ólafur said of the arrests. He explained that the three suspects had been taken into custody to prevent them from influencing others in the course of the investigation and hiding evidence.

The special prosecutor said the investigation might also lead to others being taken into custody. No raids have been conducted but the special prosecutor’s office will continue to work on the case in the coming days.

“We are primarily looking into affairs connected with the operations of Glitnir,” Ólafur responded when asked whether other banks or financial institutions were involved.

A statement from the Special Prosecutor’s Office reveals that the investigation primarily focuses on four aspects:

1. The purchase of Glitnir’s own trade of shares issued by the bank on the stock market. Also the bank’s purchase of and trade with shares issued by FL Group.

2. Loans granted to various companies because of purchase of shares issued by the bank at the end of 2007 and in 2008. The original principal of these loans is believed to amount to almost ISK 37 billion (USD 310 million, EUR 231 million) in total.

3. Trade with forward contracts on shares issued by the bank.

4. Glitnir’s underwriting of the ISK 15 billion (USD 126 million, EUR 93 million) stock offering by FL Group at the end of 2007, beginning of 2008.

Alleged violations of the embezzlement chapter of the penal code in connection with Glitnir’s distribution of funds is under investigation, along with violations of the laws on stock market trade, laws on financial companies, laws on annual accounts and laws on accounting, visir.is reports.

The investigation’s origin can, among other items, be traced back to charges filed by the Financial Supervisory Authority and investigations conducted by Glitnir’s winding-up committee.

It is uncertain whether the custody sentences will be appealed to the Supreme Court.

Click here to read more about the special prosecutor’s investigation into the 2008 banking collapse, which has also led to arrests of former executives of Kaupþing and Landsbanki.

ESA