A declaration which freed a certain group of employees at the old Kaupthing Bank from personal liability for loans that they had in the bank allegedly came from former CEO of Kaupthing Hreidar Már Sigurdsson at the end of September.
The loans in question were granted to Kaupthing employees so that they could purchase shares in the bank. According to Kaupthing’s balance sheet, such loans amounted to more than ISK 50 billion (USD 388 million, EUR 304 million), Morgunbladid reports.
The board of Kaupthing Bank accepted the write-offs on September 25, as revealed in a statement released by the board yesterday, Fréttabladid reports. Shortly afterwards, on October 8, Kaupthing was nationalized and the value of shares in the bank collapsed.
Stefán Már Stefánsson, law professor at the University of Iceland, said all decisions that are taken within three months from a company’s bankruptcy are reviewed in the bankrupt estate. He believed the decision can possibly be revoked and the board of the new state-run bank, Nýja Kaupthing, has sought the opinion of an outside lawyer in that regard.
Vilhjálmur Bjarnason, chairman of the Association of Investors, said that with its decision, the board of old Kaupthing had discriminated against other shareholders in the bank.
“They were plainly lied to about the position of the bank,” Bjarnason said. “I did not notice that this decision was published on the website of the stock exchange which naturally should have been published there. Of course it is revocable.”
According to Morgunbladid’s sources, the individuals who had the highest debts because of purchase of shares in the bank were CEO Sigurdsson himself and former Kaupthing chairman Sigurdur Einarsson.
Board members had allegedly also taken high loans to invest in shares in Kaupthing and smaller loans were granted to general employees at the bank for the same purpose.
All of these loan agreements came with margin calls, which enabled Kaupthing to call for increased collateral if shares in the bank dropped in value. Allegedly, these margin calls were never used despite the fact that the value of shares in Kaupthing had fallen considerably for the past 12 months.
Instead, the board and executives of Kaupthing Bank are said to have encouraged its employees not to sell their shares so that the market would not lose faith in the bank.
Minister of Trade Björgvin G. Sigurdsson has requested that the Icelandic Financial Supervisory Authority (FME) launch an investigation into the write-offs.
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Copyright of image: Icelandic Photo Agency.