Published March 24, 2015
For several years, the internet has been teeming with stories of how Iceland sent their bankers to jail. They are, largely, not true. While a handful of bankers have received jail sentences in the years since the 2008 financial crash, their sentences have for the most part been only a few months long, and they have been largely suspended ones. The one exception was when in 2012 the Supreme Court sentenced two bankers to four and half years each in prison, for shenanigans too boring to explain. Now it looks like those two will have some company.
Hopefully the company won’t be a bank. I wouldn’t trust them with an ice cream van, personally.
Last month, the Supreme Court of Iceland sentenced four businessmen to jail for financial fraud. This caused a great amount of gleeful chuckling in Iceland, as these were some of the main people behind Kaupthing, one of the banks that drove the whole of Iceland’s financial system into a ditch.
If only people had laughed at them when they were running the banks.
The shortest jail term, four years, was given to Sigurður Einarsson, the former chairman of the board, while the longest, five and half years, was handed down to Hreiðar Már Sigurðsson, the bank’s former chief executive. The other two who received four and a half year sentences are Magnús Guðmundsson, former chief executive of Kaupthing’s Luxembourg subsidiary, and Ólafur Ólafsson, one of Kaupthing’s majority owners.
That doesn’t seem that such a long time for driving an entire economy off the rails.
Icelandic prison sentences are not as long as those in some other countries. So, if you keep in mind that murderers usually get sixteen years, four or five years is quite a severe punishment. The sentenced parties have reacted in different ways. One, Ólafur Ólafsson, asked to start serving his sentence immediately. Another, Sigurður Einarsson, agreed to be interviewed live on television. Perhaps to cope with the stress, he decided to fortify his spirit with some alcoholic spirits.
Usually when people notice someone being drunk on television, it’s not because they’re unusually witty.
Indeed, he rambled and mumbled. Within a few minutes, the news anchor mercifully decided to end the interview. At one point, he said that the Supreme Court was “convicting people for who they are, not what they did.” Which is basically like saying that the court is racist against bankers. Though perhaps the most interesting thing he said was at the end: “What it is all about it is that no funds went out of the bank, none went into the bank. So the bank was positioned in exactly the same way before as it was after.”
That sounds less like a defence against accusations of financial fraud than a confession.
The bankers were convicted for making it appear that a well-respected Qatari businessman had bought shares in Kaupthing after other Icelandic banks had collapsed, when in fact it was only the bank buying shares in itself. The phrase “þetta reddast” is common in Iceland. It means, roughly, “everything will work itself out.” It is generally used when a situation seems hopeless and something needs to be done. Then some people will resort to a “skítaredding,” i.e. “a shitty fix.” A classic example of a “skítaredding” would be duct-taping a plastic shopping bag over a broken car window.
Ah, I understand, so these bankers tried to duct tape a plastic bag over a broken bank?
Sort of, if the window had just been broken by a still-raging sandstorm, and there was no plastic bag even though the bankers were telling you they had just covered the window with it. Also, they were trying to convince you to lend them money they were going to pay you back once they had sold the perfectly undamaged car to some guy you’ve never heard of.
So these bankers didn’t get sent to jail for the damage they caused, but their stupid attempt to fix things?
While the financial fraud in question was merely a shit cherry on top of an ice cream sundae made of shit, it may have caused more damage by convincing the Icelandic Central Bank to lend most of its foreign currency reserves to Kaupthing.
That seems like a smart thing to do, giving all your money to people who’ve driven your economy into a ditch.
At the time, Icelandic bankers had been praised to the skies by Icelandic politicians, including the incumbent president, as well as by the media. The idea of an Icelandic banking miracle was still fresh in people’s minds. That kind of dream can take a long time to wake up from. It is not so strange that it has taken the courts so many years to send the former miracle workers to prison.