Panama Papers Expose Icelandic Executive Skip to content

Panama Papers Expose Icelandic Executive

Hannes Smárason, former CEO and board director of FL Group, was the authorized signatory of a company in Panama, which received an ISK 3 billion (USD 24 million, EUR 21 million) loan from the holding company Fons in 2007, according to RÚV. This is asserted by Reykjavik Media and based on information from the Panama Papers, a leak of millions of documents from a Panama law firm. The company’s shares were all registered in the bearer’s name. The district investigator has dropped the investigation of the granting of the loan.

The holding company Fons, owned by Pálmi Haraldsson and Jóhannes Kristinsson, was very active in business prior to the financial crisis and invested, among other things, in FL Group and the British grocery chain Iceland. Pálmi was the company’s CEO, but Fons went bankrupt in the spring of 2009.

On April 24, 2007, Fons granted the Panama company Pace Associates an ISK 3 billion (USD 24 million, EUR 21 million) loan. In 2010, the liquidator of Fons reported to police that the loan had been given. A special prosecutor, whose position was merged with the district prosecutor’s on January 1 this year, has investigated the granting of the loan, but the prosecutor has now dropped the case, since conviction was not determined likely in court.

According to news on Stöð 2 in 2011, Pálmi told Fons’ liquidator that the Panama company invested in real estate projects in India.

Pace Associates is one of the offshore companies found in the Panama Papers. According to a database made public by the International Consortium of Investigative Journalists on Monday, the company’s shares were registered in the names of four shareholders. Their names do, however, not appear in the documents, since the shares were registered to the bearers. Thus, it’s unclear who owned the company.

Reykjavik Media does, however, assert, based on information from the Panama Papers, that Hannes was an authorized signatory of Pace Associates, that is, he had the authority to commit the company and allocate its assets from 2007 until April of last year. They also state that Pace Associates received a EUR 50 million (USD 56.5 million) loan from Landsbankinn against a collateral of the company’s own shares.

In another case connected with the financial crisis, Hannes is charged with embezzlement, for having, as board director of FL Group in 2005, had almost ISK 3 billion transferred from the company’s account and allocated to Fons. He was acquitted in district court, but the verdict has been appealed to the Supreme Court.

The Panama company case was, according to RÚV, thought to be sufficiently investigated when the prosecutor decided to drop it. The district prosecutor’s decision can be reported to the state prosecutor, but it’s not clear whether the liquidator will do so.

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