It was revealed yesterday that the Office of the Special Prosecutor in Iceland, responsible for investigating the banking collapse in 2008, has filed charges against Guðmundur Hjaltason, the former managing director of Glitnir Bank’s company division, along with former CEO of the defunct bank, Lárus Welding.
The headquarters of Glitnir, now Íslandsbanki. Copyright: Icelandic Photo Agency.
The special prosecutor believes that the two men may falsified a loan contract worth ISK 10 billion (USD 81 million, EUR 62 million) to make it appear that the loan was granted to the company Vafningur, whereas in reality, it went straight to Milestone, Fréttablaðið reports.
The two men are charged for having abused their positions within the bank and for having seriously jeopardized the bank’s funds with the loan, which was granted on February 8, 2008.
The charge states that the loan was granted to Milestone without collateral and was at odds with the bank’s regulations on maximum loans disbursed to a single conglomerate.
With the loan, the total credit given to the Milestone conglomerate amounted to 18.8 percent of Glitnir’s equity, whereas the maximum limit was 17 percent.
The purpose of the loan, as stated in the charge, was to enable Milestone to pay up the debt of its subsidiary, Þáttur International, to the US bank Morgan Stanley.
Glitnir had interests to protect in the settlement of the debt because if it hadn’t been paid, Morgan Stanley could have taken over Þáttur International’s seven percent share in Glitnir and put the bank on the general market.
According to the charge, this would have immediately lowered the value of stock in the bank.
The loan, worth EUR 102 million, or ISK 10 billion at the time, was transferred to Vafningur four days later.
A new contract was allegedly made so that it would appear on paper as if Vafningur had received a new loan and thus paid up its debt to Milestone created four days earlier.
The special prosecutor believes that this was not the case; Vafningur had no account at Glitnir and therefore it was impossible to grant the company a direct loan.
The loan was in fact disbursed to Milestone and from there transferred to Vafningur with documents prepared afterwards to make it look as if the loan had gone directly to Vafningur, as concluded in the charge.
Later that same month the company Svartháfur, registered in the ownership of Werner Rasmusson, the father of Karl and Steingrímur Wernersson who owned Milestone, was granted a more than ISK 18 billion loan.
The purpose of this loan was allegedly the same as that of the other loan: to pay up Milestone’s debt to Morgan Stanley.
However, ISK 5 billion of the amount were used to pay half the debt of Vafningur to Glitnir while the other half was never paid.
Svartháfur also never paid its loan and therefore Glitnir was left with a ISK 23 billion (USD 187 million, EUR 144 million) loss of the plot, or almost ISK 35 billion loss compared to today’s exchange rate of the euro.
The latter loan, that to Svartháfur, is not mentioned in the charge, although, according to Fréttablaðið’s sources, it was also investigated by the Special Prosecutor’s Office.
Other charges may still be issued in relation with these loan affairs.
The financial damages caused by the loan for which the charge was issued is estimated at at least ISK 5 billion, or ISK 7.5 billion according to today’s exchange rate of the euro.
“The loan disbursement had part in Glitnir’s collapse in early October 2008 with very serious consequences for claimants, the state treasury and the Icelandic public,” the charge reads.
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