Landsbankinn Execs Accused Of Fabricating Bank’s Financial Data

Former Landsbankinn executives have been accused of deliberately providing false information about the bank’s situation when they purchased management liability insurance at the beginning of 2008, RÚV reports.

These accusations were brought forth in court by a lawyer representing Brit Insurance, following a claims evaluation request made by that company. A lawyer on Landsbankinn’s winding-up (liquidation) board said that in all of Icelandic legal history, there has never been a claims evaluation of such extensive scope.

This claim evaluation, made on behalf of Brit Insurance and another insurer, was the primary focus of the court proceedings in the District Court of Reykjavík on Friday. The claims evaluation is part of the insurance company’s legal proceedings against the bank’s winding-up board and the former Landsbankinn executives who purchased liability insurance. Such insurance is payable to an organization’s directors and covers “claims resulting from managerial decisions that have adverse financial consequences.” The winding-up board claims that the former bank executives Sigurjón Þ. Árnason, Halldór J. Kristjánsson and Elín Sigfúsdóttir are owed 27 billion ISK as part of their insurance settlement.
Viðar Lúðvíksson, a lawyer for Brit Insurance and other insurance companies, said that when Landsbankinn bought management insurance at the beginning of 2008, pertinent information was withheld from the insurance company, while at the same time, managers also deliberately gave the insurance company the wrong information.

Viðar says that the bank managers’ insurance claim was made on January 9, 2008. Brit Insurance wants to assess what the bank’s situation actually was as of February 1, when the insurance should have taken effect, as well as during the two previous years when it is presumed that the bank submitted fabricated financial statements.

The insurance company wants to establish a clear picture of the bank’s situation and its actual holdings at the time. It is suspected that the bank’s holdings were greater than the permissible limit for liquidated banks, even though it claimed to be unable to meet its financial obligations.
The insurance company is also investigating claims made by parties related to the former Landsbankinn management, for instance, by Landsbankinn’s former majority owner and chairman, Björgólfur Guðmundsson, and Björgólfur Thor Björgólfsson, whose holding company once owned a 45% share of Landsbankinn.
Jóhannes Sigurðsson, the winding-up board’s lawyer, said that the insurance company had immediately attempted to void the management insurance after the crash, on the basis of the bank’s nationalization and the change in government.

Jóhannes also questioned the extent of the claims evaluation. The first step of the evaluation requires that the financial statements of the two years in question be redone entirely and then be reevaluated at three additional points in time. “It will quickly become clear that the scope of the claims evaluation is enormous. There has never been an evaluation of this scope in Iceland,” Jóhannes said. “It’s completely absurd for the insurance company’s lawyer to say that this investigation will cost around ten million ISK. It could cost hundreds of millions.”

Sigurður G. Guðjónsson, the defense counsel for Sigurjón Þ. Árnason, said the claims evaluation is so extensive and so long after the fact that it will not be possible to comply with it. Helga Melkorka Ólafsdóttir, the defense counsel for Elín Sigfúsdóttir, added that the insurance company is just trying to prolong the issue so that they will not have to pay out the compensation fees.
A British lawyer for the insurance company denies that they are trying to drag the matter out. He also said that the defense lawyers for the winding-up board and former bank managers have exaggerated the time and expense of this investigation.