Luxembourg Court backs Iceland’s decision not to pay banker-created Debt

By LUIS MIRANDA | THE REAL AGENDA | JANUARY 29, 2013

Who has to pay the bankers in Iceland’s banking crash? Not the Icelanders. Different from countries such as Spain and Ireland, Iceland decided that taxpayers should not pay for the excesses of an industry that had grown disproportionately, but most importantly, that had ramped up the country’s debt to a point where upwards of 90 % of the debt written under the country’s name was actually bank debt.

Iceland will compensate the British and Dutch two of the countries that had bet more heavily in the fictitious financial products offered by banks out of Iceland. The citizens said no twice through referendums, and now, five years after the collapse of its banking system, a Luxembourg court just gave the northern nation the reassurance that they did what needed to be done to get rid of the bankers’ tentacles.

The Court of the European Free Trade Association (EFTA) believes that the country did not violate any law when it refused to return to 300,000 savers money deposited in foreign entities offering some interests that then seemed to good to pass. “It is a victory for democracy. It sends the message that banks can not reap the benefits and send the bill to taxpayers when things go wrong, “says Magnus Skúlasson, an Icelandic economist.

The court, which also represented Norway and Liechtenstein, provides a very interesting nuance: Iceland is not obligated to pay as “the deposit insurance fund was unable to meet its obligations in the event of a systemic crisis “. The decision by the court would be equal to the FDIC fund not having enough cash to ensure the banking entities in the United States, with bankers demanding that U.S. taxpayers assumed the responsibility of a carefully crafted collapse of the American banking system. Just as in the case of Iceland, U.S. taxpayers would not be liable for the banks’ misconduct and therefore they wouldn’t have to pick up the tab.

A community spokesman was quick to answer that Brussels clings to the obligations of the deposit insurance funds that remain “valid also if there is a systemic crisis.” Nevertheless, the European Commission says it needs time to study the ruling. “The ruling is also good for the Netherlands and the UK. If they had won, it would mean that the nation-state is responsible for all bank deposits, something no country wants, “adds Jon Danielsson of the London School of Economics.

After the bankruptcy, the governments in London and Amsterdam used their coffers to compensate customers of the Icelandic bank. Shortly after they began the legal process that came to an end yesterday, as the ruling that Reykjavik considered “satisfactory”, does not admit any appeals.

Despite the support of the courts, Iceland has ended up paying some of the money. Reykjavik has already repaid about 3,300 million euros, about half of the total paid in Icesave, that corresponds to debt that the government itself was actually responsible for. The money corresponds to the debt from Landsbanki, one of three banks that failed in 2008 and led the entire country’s banking system to bankruptcy. The amount paid is more than 90% of the guaranteed minimum that the State was obliged to return.

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Accountability eruption: Iceland arrests, jails bankers responsible for crisis

Can Greece, Britain and the United States follow up on Iceland’s lead?  Will they?

BREITBART

More than a year and a half after Iceland’s major banks failed, all but sinking the country’s economy, police have begun rounding up abankers number of top bankers while other former executives and owners face a two-billion-dollar lawsuit.

Since Iceland’s three largest banks — Kaupthing, Landsbanki and Glitnir — collapsed in late 2008, their former executives and owners have largely been living untroubled lives abroad.

But the publication last month of a parliamentary inquiry into the island nation’s profound financial and economic crisis signaled a turning of the tide, laying much of the blame for the downfall on the former bank heads who had taken “inappropriate loans from the banks” they worked for.

On Wednesday, the administrators of Glitnir’s liquidation announced they had filed a two-billion-dollar (1.6-billion-euro) lawsuit in a New York court against former large shareholders and executives for alleged fraud.

“I think this lawsuit is without precedence in Iceland,” Steinunn Gudbjartsdottir, who chairs Glitnir’s so-called winding-up board, told reporters in Reykjavik.

“It is about higher figures than we have ever seen,” she said, adding that she expected Glitnir to file more lawsuits going forward, but that “it is unlikely any will be this big.”

Glitnir said it was suing “Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir’s chief executive, Thorstein Jonsson, its former chairman and other former directors, shareholders and third parties associates with Johannesson for fraudulently and unlawfully draining more than two billion dollars out of the bank.”

The bank also said it was “taking action against its former auditors PricewaterhouseCoopers (PwC) for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the bank’s collapse in October 2008.”

Glitnir’s suit, filed in the New York state Supreme Court on Tuesday, blamed most of the bank’s woes on “Johannesson and his co-conspirators,” who had “conspired to systematically loot Glitnir Bank in order to prop up their own failing companies.”

Johannesson, the former owner of the now-defunct Baugur investment group with stakes in a number of British high street stores including Hamleys, Debenhams and House of Fraser, said he was shocked by the lawsuit.

“The distortions and the nonsense in the lawsuit are incredible,” he told the Pressan news website.

Glitnir’s administrators “can get a 10-year-prison sentence for misusing US courts in this manner,” he insisted.

The bank’s chief administrator Gudbjartsdottir took his comments in stride.

“I didn’t expect him to be happy with the lawsuit,” she said.

In addition to its New York suit, Glitnir said it had “secured a freezing order from the High Court in London against Jon Asgeir Johannesson’s worldwide assets, including two apartments in Manhattan’s exclusive Gramercy Park neighbourhood for which he paid approximately 25 million dollars.”

Gudbjartsdottir said Johannesson had just 48 hours to come up with a satisfactory list of his assets.

“If he does not give the right information he faces a jail sentence,” she said.

Four former Kaupthing executives, who all live in Luxembourg, have meanwhile been arrested in Iceland in the past week and Interpol has issued an international arrest warrant for that bank’s ex-chairman, Sigurdur Einarsson.

Former head of the bank’s domestic operations, Ingolfur Helgason, and former chief risk officer Steingrimur Karason were arrested late Monday on arrival from Luxembourg, just days after former Kaupthing boss Hreidar Mar Sigurdsson, along with Magnus Gudmunsson, who headed the bank’s unit in Luxembourg, were taken into custody.

The 49-year-old Einarsson, who lives in London, said late Tuesday he had no plans to travel to Iceland to be arrested.

“I’m absolutely flabbergasted about the latest news,” he told the Frettabladid daily.

“There is in my opinion no need for the arrests or custody rulings, and I will not of my own free will take part in the play that it appears is being staged to soothe the Icelandic people,” he said.

“I’ll put the human rights I enjoy here in Britain to the test and will not therefore come home (to Iceland) to these conditions without being forced,” he added.