Allegations of false statements in Bunadarbanki privatization Skip to content

Allegations of false statements in Bunadarbanki privatization

The Icelandic National Broadcasting Service, RUV, reports that Vilhjálmur Bjarnason, adjunct lecturer in business at the University of Iceland, claims that the purchasers of a controlling stake in Bunadarbanki in a controversial privatization in 2002 made false statements to the government.

In late 2002 and early 2003, controlling stakes in the former state banks Bunadarbanki and Landsbanki were sold to business groups with links to the ruling Progressive and Independence parties, respectively.

The purchasers of Bunadarbanki, a consortium of companies usually referred to as the S-Group, claimed that the German bank Hauck und Aufhauser was a shareholder in a holding company called Egla hf.

Egla formed the S-Group together with insurance company Vatryggingafelag Islands (VIS), the pension fund Samvinnulifeyrissjodur and the holding company Eignarhaldsfelagid Samvinnutryggingar.

All the members of the S-Group had strong links to prime minister Halldor Asgrimsson’s Progressive Party. Olafur Olafsson, the chairman of shipping company Samskip, was a prominent member of the S-Group. But also linked to the S-Group was one of Halldor Asgrimsson’s closest political allies, Finnur Ingolfsson, former minister for industry and trade and member of parliament for the Progressives. Finnur served as governor of the Central Bank of Iceland during the privatization of Bunadarbanki; he is currently the CEO of VIS and sits on the board of directors of Kaupthing or KB-bank. Kaupthing acquired Bunadarbanki shortly after the controlling stake was sold to the S-Group. Sigurdur Einarsson, the chairman of Kaupthing, is the son of the former foreign minister and Progressive member of parliament Einar Agustsson.

Vilhjalmur said on RUV evening news Sunday that it was evident from the financial statements of Hauck und Aufhauser that the bank could not have been a shareholder of Egla, as claimed by the S-Group. Vilhjalmur called Hauck und Aufhauser “a rather small institution” comparable to “a large Icelandic savings and loan bank”. According to Vilhjalmur, one of the key arguments used to justify selling 45% of Bunadarbanki to the S-Group was the participation of the “respected international financial services company” Hauck und Aufhauser.

Vilhjalmur said that Icelandic supervisory authorities, the Financial Supervisory Authority, the Icelandic National Audit Office and the government’s Privatization Committee had “failed to catch this” alleged false statement of the S-Group.

At the time of the Bunadarbanki privatization, the head of the Financial Supervisory Authority was Pall Gunnar Palsson, son of the former Progressive minister Pall Petursson.

The economist Steingrimur Ari Arason, a member of the Independence Party and the former political adviser of the current foreign minister, Geir H. Haarde, resigned from the Privatization Committee during the course of the Bunadarbanki and Landsbanki privatization claiming that committee’s procedural rules had been violated. In his letter of resignation he said he had served on the committee since 1991 and “never seen anything like it”.

Last May, the daily Frettabladid ran a series of articles analyzing the privatization of Bunadarbanki and Landsbanki. Among other things, Frettabladid reported that the S-Group received billions of króna in financing from Landsbanki in order to purchase its stake in Bunadarbanki.

When asked if anything could be done about this alleged false statement, Vilhjálmur said, “If people don’t mind being fed lies, nothing will be done.”

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