Moral Low Ground


Iceland Jails Former Kaupthing Bank Bosses for Financial Fraud

(Photo: Álfheiður Magnúsdóttir)

(Photo: Álfheiður Magnúsdóttir)

Four former bosses of a failed Icelandic bank have been sentenced to prison terms for fraud and market manipulation, crimes which significantly contributed to the 2008 financial crisis that nearly bankrupted the Nordic island nation.

BBC reports Hreiðar Már Sigurðsson, former CEO of Kaupthing Bank (Kaupþing banki), was sentenced to five and a half years behind bars. Sigurður Einarsson, Kaupthing’s former chairman, received a five year sentence. Magnús Guðmundsson, former CEO of the bank’s Luxembourg branch, was sentenced to three and a half years’ imprisonment, while  Ólafur Ólafsson, one of Kaupthing’s majority owners, was handed a three year sentence.

The Financial Times reports the sentences were given for fraud and market manipulation relating to the September 2008 acquisition of a five percent stake in Kaupthing by Sheikh Mohammed Bin Khalifa Bin Hamad Al Thani of Qatar with money lent illegally by the bank itself.

The sentences are the most severe for financial fraud in Iceland’s history. Unique among Western nations, Iceland has aggressively prosecuted the perpetrators of financial crimes. The leaders of the nation’s three biggest banks– Kaupthing, Glitnir and Landsbanki– have seen their leaders criminally charged in connection with the crisis. Special prosecutor Ólafur Hauksson, a former small-town policeman, has led the way, securing the fraud convictions of former Glitnir CEO Lárus Welding, and the bank’s former head of corporate finance, Guðmundur Hjaltason, both of whom were sentenced to nine months behind bars.

(Mike Licht)

(Mike Licht)

No one has been above prosecution in Iceland– the country’s former prime minister, Geir Haarde, was the first world leader to face justice for his role in the crisis. Last year, Haarde was found guilty of negligence for his mishandling of the crisis, but cleared of three more serious charges.

Kaupthing, Glitnir and Landsbanki made up 90 percent of Iceland’s financial system. At one point prior to the crisis, the three banks were worth 10 times as much as the country’s economy. They collapsed after an international lending bender in which Icelandic businessmen used their loans to buy up prestigious properties in Europe and the United States.

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