Cases of Suspected Fraud Investigated in Iceland Skip to content

Cases of Suspected Fraud Investigated in Iceland

A number of individuals have been implicated in an investigation on the acquisition of Q Iceland Finance, a holding company owned by Sheik Mohamed bin Khalifa Al-Thani of Qatar, in a five percent stake in Kaupthing Bank in September 2008. The investigation is being carried out by the office of the special prosecutor.

The headquarters of Kaupthing in Reykjavík. Copyright: Icelandic Photo Agency.

“On one hand we’re looking into whether this trade could be a breach of provisions on market manipulation in the laws on securities transactions and on the other hand of the embezzlement chapter in the general penal code,” explained special prosecutor Ólafur Thór Hauksson to Morgunbladid.

According to Hauksson, this trade may have taken place to distribute wrong and misleading information on the position of Kaupthing. Artificial transactions, for example, fall under the provision on market manipulation.

In relation to the investigation, home searches were undertaken in 12 places on Friday and Tuesday of last week after a search warrant had been granted. Various objects and data, including emails that could prove important to the investigation, can be confiscated during these home searches.

According to the 3rd paragraph of the 74th article of the laws on the treatment of criminal cases, the condition for issuing a search warrant is that a well-founded suspicion is at hand that a crime has been committed for which charges can be filed.

Among places that were searched were the headquarters of Kaupthing in Reykjavík and the homes of the bank’s former executives.

The home of Ólafur Ólafsson, one of Kaupthing’s two largest owners and a personal friend of Al-Thani’s, who was involved in the acquisition, was also searched, as well as the office of Q Iceland Finance.

Furthermore, the offices of Arion Custody Services and Kjölur, a holding company owned by Ólafsson, were searched.

Ólafsson sent a statement to national broadcaster RÚV yesterday, confirming that computer data had been confiscated from his premises in Iceland but that the investigators had not deemed it necessary to confiscate any other data.

Ólafsson stated that he was certain that a detailed investigation would conclude his absolute innocence of all accusations, which, in his view, were made up by the media.

Ólafsson, along with other individuals who are being investigated by the special prosecutor, have repeatedly rejected RÚV’s invitation for interviews.

Al-Thani’s acquisition of a five percent share in Kaupthing worth ISK 26 billion (USD 277 million, EUR 188 million in September 2008) was announced on September 22, just about two weeks before the banking system collapsed and the emergency law was established, Morgunbladid reports.

Kaupthing was the seller of the securities but the bank had earlier purchased its own securities up to the legal maximum.

The acquisition was financed through two companies, registered in the Virgin Islands. The two companies lent money to a third company, which then funded Q Iceland Finance. The companies in the Virgin Islands, which were in the ownership of Ólafsson and Al-Thani, were provided with a loan for the funding at Kaupthing.

According to Morgunbladid, Ólafsson was provided with a loan collateralized with the securities themselves without any personal liability. Al-Thani made a forward currency contract with Kaupthing which ensured him an exchange rate gain once the transaction was settled.

No official information had been submitted at that time on the reason for the trade. However, the executives of Kaupthing reported to the media after the acquisition had been finalized that the fact that Al-Thani was interested in the bank was a considerable declaration of trust.

Click here to read more about the acquisition and here to read more about the office of the special prosecutor.

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