Speaker’s Committee Must Publish Contested Report

Alþingi parliament of Iceland

A report related to the sale of public assets that has been shrouded in secrecy will now likely be made public, thanks to a two-year-old legal opinion, RÚV reports. The Speaker’s Committee of Parliament is required to hand over a report made by the Auditor General in 2018 on the dealings of Lindarhvoll ehf., a private limited company created to sell public assets acquired by the state in the aftermath of the banking collapse. An ongoing lawsuit asserts Lindarhvoll did not get the best possible price for the public assets it sold.

Report’s author calls for its publication

The legal opinion in question was carried out for the Speaker’s Committee over two years ago by law firm Magna but was only made public last week. According to RÚV, the committee decided to make the 2018 report public in April of last year, but Speaker of Parliament and Independence Party MP Birgir Ármannsson has stood in the way. Birgir asserts that the articles pertaining to freedom of information do not apply to the report as it is an internal document that was never meant for the public.

The report’s author, then-Auditor General Sigurður Þórðarson, has called for it to be made public. Opposition MPs have also called for its publication.

Committee members never received copy of report

Lindarhvoll was founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse, worth up to ISK 100 billion [$708 million, €664 million]. In 2018, when the assets had been sold, Lindarhvoll was dissolved and Sigurður’s report was submitted to the Speaker’s Committee. Nevertheless, committee members never received a copy of the report and were only permitted to look at it in a closed room, without their phones or any writing implements.

Lawsuit against Lindarhvoll ongoing

In 2020, Frigus II ehf. sued Lindarhvoll and the Icelandic state for ISK 651 million [$4.6 million, €4.3 million] due to the sale of Klakka ehf. (previous called Exista) to another company. According to Frigus, the company’s purchase offer for Klakka ehf. was rejected in favour of an offer that did not fulfil the conditions of the sale. If that assertion proves true, it would mean Lindarhvoll did not necessarily act in the public’s best interest in the sale of public assets. Other internal documents from Lindarhvoll have been handed over to Frigus II in the ongoing case.

The ties between Frigus and Klakka go beyond the sale that is the lawsuit’s focus. Frigus II is owned by Sigurður Valtýsson, who is the former CEO of Exista, as well as brothers Ágúst and Lýður Guðmundsson, who had a 45% stake in Exista before the banking collapse through their company Bakkavör.

Whether and when the 2018 report on Lindarhvoll will be published has yet to be determined.

Iceland: Internal Documents May Shed Light on Sale of Public Assets

Iceland's Althing

Lindarhvoll, a company founded to handle public assets following the banking collapse, must hand over a 37-page internal report on its dealings, the Prime Ministry’s Information Committee (Úrskurðarnefnd um upplýsingamál) has ruled. Opposition MPs have demanded the publication of other internal documents from the company that pertain to the sale of public assets that fell into state hands due to the banking collapse. The document is expected to shed light on whether the company in fact sold public assets at the best possible price. RÚV reported first.

Read More: Opposition MPs Demand Access to Banking Collapse Related Report

Lindarhvoll was founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse. In 2020, Frigus II ehf. sued Lindarhvoll and the Icelandic state for ISK 651 million [$4.6 million, €4.3 million] due to the sale of Klakka ehf. to another company. According to Frigus, the company’s purchase offer for Klakka ehf. was rejected in favour of an offer that did not fulfil the conditions of the sale. If that assertion proves true, it would mean Lindarhvoll did not necessarily act in the public’s best interest in the sale of public assets.

Internal data handed over

Opposition MPs have been calling for a 2018 internal report from Lindarhvoll to be made public, but despite pressure, it remains an internal document. Last Monday, the governing majority also voted against permitting MPs to submit questions about Lindarhvoll in parliament, leading Social-Democratic MP Jóhann Páll Jóhannsson to ask “What is it that the public is not allowed to see?”

The ruling made by the Information Committee does not concern the 2018 report, but other internal documents from Lindarhvoll: a 37-page report and memoranda on Lindarhvoll written by the law firm MAGNA for the Speaker’s Committee of Parliament. These documents will now be handed over to Frigus, as per the ruling.

Opposition MPs Demand Access to Banking Collapse Related Report

Alþingi parliament of Iceland

Iceland’s Parliament has voted against permitting MPs to put forth questions about Lindarhvoll, a company founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse, RÚV reports. Opposition MPs call for an internal report of the company from 2018 to be made public, which the Auditor General has opposed.

Social-Democratic Alliance MP Jóhann Páll Jóhannsson and Pirate Party MP Bjön Leví Gunnarsson, both submitted questions about the 2018 report last week. “Yesterday, the Independence Party, the Left-Greens and the Progressive Party used their majority power in the Alþingi to forbid me to ask the Speaker of the Alþingi about a report that deals with [current Finance Minister] Bjarni Benediktsson’s sale of tens of billions worth of state assets through the private limited company Lindarhvoll ehf.,” Jóhann Páll wrote on Facebook. “The report was prepared by an official of Alþingi, on behalf of the public, with public funds, and deals with the sale of public assets. The question remains: what is it that the public is not allowed to see?”

The Auditor General has opposed the document being made public as it was never written for publication, but rather only for internal use. He also noted that the office submitted a final report on Lindarhvoll in 2020.

Icelandic State Acknowledges Fair Trial Violations in Banking Collapse Convictions

The Icelandic state has acknowledged that five Icelanders who were sentenced in the aftermath of the 2008 banking collapse did not receive a fair trial. The European Court of Human Rights was set to rule on the five cases this morning but has struck the applications out of its list of cases as a result of friendly settlements reached between the Icelandic state and the defendants.

According to a press release from the ECHR, the Icelandic state will pay Sigurjón Þorvaldur Árnason, Ívar Guðjónsson, Sigurþór Charles Guðmundsson, Margrét Guðjónsdóttir and Karl Emil Wernersson €12,000 each in damages and cover any costs incurred. In light of the state’s acknowledgement, the applicants have the possibility of applying to reopen their cases.

The cases concern the applicants’ criminal convictions related to the 2008 financial crisis and its aftermath in Iceland. They were convicted for a variety of financial offences, including abuse of power and negligence of duties related to their high-level positions in the banking industry. The applications were lodged with the European Court of Human Rights on various dates in 2016 to 2018.

Relying on Article 6 of the European Convention on Human Rights (right to a fair trial), the applicants complained of the manner in which the Supreme Court of Iceland overturned or partially overturned their acquittals, or, in Sigurjón and Ívar’s cases, various aspects of the criminal proceedings against them.

Investigate Supreme Court Bias in Banking Collapse

European Court of Human Rights

The European Court of Human Rights (ECHR) will discuss the shareholdings of two Icelandic supreme court justices – specifically whether their losses in the 2008 banking collapse influenced their rulings on bankers. RÚV reports that Ólafur Ólafsson, one of the main owners of now-defunct Kaupþing bank, has sued justices Markús Sigurbjörnsson and Árni Kolbeinsson who ruled in the infamous Al-Thani case in which Ólafur was convicted of market abuse.

Big losses, heavy convictions

The Al-Thani case was one of the most extensive criminal cases in Iceland. The convictions received by the four defendants are also the most heavy ever given for financial crime. In the case, Ólafur and three other executives of Kaupþing were convicted of market abuse for falsifying transactions to keep stock prices high at the bank.

The defendants previously appealed the case to the ECHR, which concluded that Justice Árni Kolbeinsson was not impartial in his ruling due to his son’s work for Kaupþing. Ólafur’s current complaint concerns the two justices’ shareholdings before the banking collapse, which disappeared when Kaupþing declared bankruptcy in 2008.

The ECHR sent a letter to all parties involved in the case earlier this month. In the letter, the Icelandic state is requested to try and reach an agreement with Ólafur. If an agreement is not reached by December 2, the ECHR will continue its deliberations on the case and begin more substantive proceedings.

Central Bank Was Wrong to Grant Loan During Banking Collapse

Central Bank of Iceland

Central Bank of Iceland Director Már Guðmundsson says that the institution made the wrong decision when it granted a loan to Kaupþing Bank during the banking collapse, RÚV reports. The Central Bank has published a report on the controversial ISK 75 billion ($605m/541m) loan, which it granted to Kaupþing Bank just days before it went bankrupt in the 2008 economic crisis. The report states, however, that no laws were broken in the granting of the loan.

The Central Bank of Iceland granted Kaupþing Bank an ISK 75 billion ($605m/541m) loan on October 9, 2008, just before emergency trading restrictions were put in place by the government. Kaupþing went bankrupt only two days later, leading to a loss for the Central Bank purportedly amounting to ISK 35 billion ($282m/€252m). The decision to grant the loan proved controversial and the reasoning behind it opaque.

No written documentation

The main objective of the recently published report was to clarify the reasoning behind the loan. It has been in the works since 2015 and its release was repeatedly postponed. The report states that information on the loan is lacking, making it difficult to determing the reasoning behind it. Notably, there is no written documentation that Kaupþing requested a loan in the first place. There is also no evidence that the Central Bank’s Board of Directors approved the loan. There is, however, no doubt that the decision was made by the Board in consultation with then-Prime Minister Geir H. Haarde.

Geir was highly criticised for his response to the banking collapse and tried by the High Court in Iceland, which convincted him on one the four charges, namely, not having held cabinet meetings on important matters in the lead-up to the economic collapse. A recorded telephone conversation reveals that Geir did not expect the loan granted to Kaupþing to be repaid.

Hindsight and lessons

Although hindsight reveals that granting Kaupþing a loan was the wrong decision, Már asserted that it was not clear at the time the decision was made. The loan would have been justified had it succeeded in rescuing the bank. “It’s not always appropriate to use the metrics of information of later times when assessing particular decisions. In the financial whirlwind that raged around the world then, banks and central banks were fighting to stay afloat and other authorities came to their aid.”

Már stated that two important lessons can be learned from the situation. The first is that regulations on the granting of emergency loans need to be better clarified. The second is that shares in foreign banks are not suitable collateral for such loans, as it can quickly become worthless in a financial crisis.

Supreme Court Rules in Favour of Press

Iceland’s Supreme Court has ruled entirely in favour of news outlet Stundin and media company Reykjavík Media in a media injunction case that has been ongoing since October 2017. Kjarninn reports that on Friday, the Supreme Court rejected all claims made by Glitnir HoldCo Ltd, the corporation that oversees the remaining assets of Glitnir bank. The first of these claims was that the journalists involved in the case should be legally compelled to share evidence that might have bearing on it, even if they might, in the course of their testimony, inadvertently reveal information about confidential sources. The company’s secondary claim was that the information reported on by Stundin and Reykjavík Media—information that was obtained from leaked bank documents—should be protected by bank confidentiality.

Friday’s ruling did not address the validity of the original injunction, which was struck down by the Court of Appeals, or Landsréttur, in October 2018. At the time, Landsréttur ruled that Stundin did not have to give up the Glitnir files. It also found that further reporting from the files couldn’t be forbidden. In its ruling, Landsréttur stated that Stundin’s coverage had focused on the business dealings of then prime minister and current Minister of Finance Bjarni Benediktsson, as well as people connected to him, and that this information was undeniably important to the public, especially leading up to elections. It was Glitnir HoldCo Ltd’s contention that the files could be used to report on individuals’ financial affairs which were not matters of public import, a claim that Landsréttur rejected. In that Glitnir HoldCo Ltd appealed Landsréttur’s decision to the Supreme Court, however, the injunction has remained in place since.

Protection of sources is of the highest importance

When the Supreme Court agreed to take the case in November 2018, it did so with the understanding that it would not be reviewing the validity of the initial media injunction, but rather the validity of Glitnir HoldCo Ltd’s assertion that Stundin and Reykjavík Media should not be allowed to use the information found in the leaked files in their reportage and should turn the Glitnir files back over to the holding company. Glitnir HoldCo Ltd’s claims were based on their belief that the data in the files should be protected by bank confidentiality.

The Supreme Court rejected all of the company’s claims. The main of these was that both the District Court and Landsréttur were wrong not to compel three known witnesses, all journalists for the media outlets, to answer questions related to the existence, content, and custody of the leaked bank documents. The company maintained that the courts’ decision not to do this stripped it of its legitimate right to evidence—namely, how the documents were leaked to the media in the first place. The company claimed that being denied this evidence was grounds for automatic dismissal of the first District Court case.

The Supreme Court rejected this claim, stating that compelling the journalists to testify put their source(s) at risk, since there was a significant likeliness that during such testimony, journalists would inadvertently share the names of, or information about, their source(s). With its ruling, then, the Supreme Court determined that the importance of protecting sources takes precedence in such cases.

Public figures necessarily have less right to privacy

On the matter of bank confidentiality, the Supreme Court found it significant that the original injunction was levied on October 16, 2017—just 12 days before parliamentary elections—which made it all the more important that media coverage related to elected officials should not be any more restricted than was absolutely necessary. It noted, however, that the outlets’ coverage was primarily related to the former prime minister’s dealings with Glitnir bank in the lead up to the failure of the Icelandic banks in 2008 and that the tenor and focus of the coverage has largely been the same from the beginning, even after the injunction went into effect.

In its judgement, the Supreme Court noted that is generally understood that individuals involved in public offices have less claim to privacy and confidentiality than private citizens. The role of the media in a democratic society must be considered in such cases, it continued, as must the relevance of the topics and dealings that were under discussion in this instance. “In light of the enormous overall impact that the banking collapse had on Icelandic society, it’s only natural that a reckoning like this would be conducted in the media and the public discussion that usually follows,” read the judgement. The business dealings of former prime minister Bjarni Benediktsson fall within the purview of open public debate, concluded the Supreme Court. Moreover, the business dealings of people close to Bjarni are also open to public discussion, as they are “so interwoven with” those of Bjarni’s that “they should not be separated.”

Finally, the court found that prior to the injunction, all media coverage of parties whose connection to Bjarni Benediktsson was not clear “immediately” was focused on parties who were publicly prominent in the run-up to, and wake of, the 2008 banking collapse and who, therefore, enjoy less privacy and confidentiality than the average private citizen. This was further evidenced by the fact that the media outlets’ coverage of these parties and their part in the 2008 banking collapse has not needed to be adjusted in any meaningful way following the injunction.

The damage is “irreversible”

 Although today’s Supreme Court ruling was in the media’s favour, however, Stundin editors Ingibjörg Dögg Kjartansdóttir and Jón Trausti Reynisson and Reykjavík Media Editor-in-Chief Jóhannes Kr. Kristjánsson expressed dismay at the fact that although “Freedom Has Won,” in the end, the effect of the 522-day media injunction still had what they consider to be a seriously deleterious effect on public discourse. For one, it “…without a doubt, had a deterrent effect on people in our society who hold information or data that has significant relevance to the public, people who want to come to the media in the name of justice,” they wrote in a public statement on Facebook.  They continued by saying that the possible legal costs associated with losing a case like this are not enough to deter unlawful injunctions from being made about topics that are of vital public importance. Regardless of the outcome of the case, they concluded, “[t]he fact remains that there has been a violation of the public’s right to information and when you really think about it, the right to free elections.”

Ingibjörg Dögg repeated this sentiment in an interview with RÚV, wherein she said that although she and her publication felt a sense victory with the ruling, the entire situation remained “incredibly sad.” Given the relevance of the information that was being published had to the 2017 elections, the damage that this injunction did is irreversible.

Former Kaupþing Bank CEO Convicted of Insider Fraud

Judge's gavel

Hreiðar Már Sigurðsson, the former CEO of Kaupþing Bank, was convicted in Reykjavík District Court today for insider fraud, Kjarninn reports. Namely, he was found guilty of selling his shares in the bank to his own company. This is Hreiðar Már’s third conviction related to financial crimes during his tenure at Kaupþing, for which he has, thus far, earned a cumulative sentence of seven years in prison.

Per the findings of the court, Hreiðar Már bought shares in Kaupþing for ISK 246 million ($2m/€1.8m) on August 6, 2008. That same day, a private limited company in his ownership purchased the shares for ISK 572 million ($4.7m/€4.1m), funded by a loan that the company had received from Kaupþing. The resulting “profit” – a difference of ISK 326 million – was then transferred to Hreiðar Már’s personal bank account later that month. The loan taken by the private limited company was supposed to be paid back in 2011, however, by then, Iceland’s banks – including Kaupþing – had long-since crashed and the company had gone bankrupt.

The indictment against Hreiðar Már made a particular point of emphasising that when this sale took place, stock prices in Iceland were dropping rapidly. Iceland’s banking crisis is typically dated to October 6, 2008, the day that Former Prime Minister Geir H. Haarde notified the nation of the gravity of Iceland’s financial situation in a televised address. Over the next few days, Iceland’s banks crashed one by one.

Hreiður Már was tried in this fraud case alongside Guðný Arna Sveinsdóttir, Kaupþing’s former chief financial officer. Guðný Arna was charged with participating in the commission of the crime, such as instructing lower-level employees on the settlement of securities transactions and loan distribution to Hreiðar Már’s company. However, Guðný Arna was acquitted of all charges in this matter.

Prosecutor Finnur Þór Vilhjálmsson requested that the court levy an additional sentence of 12 to 15 months against Hreiðar Már for this fraud conviction, which he said represented another serious breach of trust and also afforded him significant personal gains. The District Court did not sentence Hreiðar Már to prison time for his crime, however, as he has already been sentenced to seven years in prison, which exceeds the maximum sentence allowances for economic crimes.

Heiðar Már was previously found guilty for major market manipulation and breach of trust in 2016, and embezzlement and breach of trust in 2015.

Former PM Haarde Takes Position on Board of World Bank

Former Prime Minister Geir H. Haarde will step down as Iceland’s ambassador to the United States on July 1, 2019 and will take up a position as a representative for the Nordic and Baltic states on the board of the World Bank, Kjarninn reports. Geir’s new position was announced on the website of the Ministry for Foreign Affairs on Friday.

The announcement came almost ten years to the day since Geir notified the nation of the gravity of Iceland’s financial situation in a televised address. He concluded his statement with the words “Guð blessi Ísland” (May God bless Iceland). This marked the beginning of the economic collapse and in the next few days, Iceland’s banks crashed one by one.

Geir was later tried by the High Court in Iceland for violations of the constitution. This was a historic trial, marking the first time an Icelandic minister was indicted for misconduct in office.

He was acquitted of three charges, but was convicted of one, namely, not having held cabinet meetings on important matters in the lead-up to the economic collapse.

The majority opinion in the conviction stated that when Geir became aware of the risk to which the Icelandic banks were exposed, which could jeopardize financial stability in the country and thus the position of the state treasury, he should have realized that it had to be immediately investigated whether this information was true. Information on impending danger which Geir knew about, or was bound to know about, should have been reason for him as prime minister to discuss it at a cabinet meeting, if not immediately then as soon as possible.

Geir later referred the case to the European Court of Human Rights on the grounds that he had not received a fair trial, and also stating that the Icelandic parliament’s decision to press charges against him was made on political grounds. The court ruled, however, that Geir’s rights were not violated in the landmark case.

Geir has been Iceland’s ambassador to the US since 2015. He will be succeeded by Bergdís Ellertsdóttir, who is currently Iceland’s permanent representative to the United Nations.

Offer Free Dry Cleaning for Job Seekers

A dry cleaner in Akureyri, North Iceland offers free service to those with an upcoming job interview, RÚVreports. Preben Pétursson, the company’s CEO, says the idea came up in the aftermath of the banking collapse in 2008.

Preben’s company also struggled to stay afloat after the crash, which left some 13-15,000 Icelanders unemployed after the collapse. “So we put our heads together to see what we could do without sinking the company,” he says.

The company has now offered free dry cleaning for job seekers for nearly 10 years. Preben says it isn’t necessary to provide proof you are looking for work to get a suit cleaned. “I don’t think people come here pretending to be unemployed for fun,” he says.

Less than ten customers a year have taken advantage of the offer since it began. Preben says it’s a small gesture from the company in the grand scheme of things. “We believe looking good matters and clothes make the man.”