Iceland Mag

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Iceland Mag

Crime

District court of Reykjavík sentences former Glitnir bank CEO to five years in prison

By Staff

  • More bankers behind bars Lárus Welding (left), the former CEO of failed Glitnir was sentenced to five years in prison, while Jóhannes Baldursson (right), the former head of capital markets at Glitnir was sentenced to two years in prison. Photo/visir.is

Earlier today the District Court of Reykjavík sentenced Lárus Welding, the former CEO of failed bank Glitnir, to five years in prison, the Icelandic National Broadcasting Service reports. Jóhannes Baldursson, the former manager of capital markets at Glitnir, received a two year sentence while Þorvaldur Lúðvík Sigurjónsson, former CEO of investment bank Saga Capital received an eighteen month sentence.

Read more: 26 bankers already sentenced to a combined 74 years in prison

At the heart of the case is a 20 billion ISK loan (312 million USD/210 million EUR at the exchange rate at the time) from Glitnir to an investment company called FS 37, which was later renamed Stím, to buy shares in Glitnir and FL Group, an investment company with close ties to Glitnir. The shares were sold by Glitnir. FL Group owned a third of the shares in Glitnir, while Glitnir was the largest shareholder in FS 37, later Stím.

Further loans and transactions, including a purchase of a Stím bond from Saga Capital, were argued to be a breach of the fiduciary duties of Lárus, who signed off on the loans, and a part of attempts by Glitnir to manipulate the market for Glitnir shares. The case, which involved transactions totalling 25 billion ISK (390 million USD/263 million EUR at the exchange rate of the time) is one of the largest investigated by the special prosecutor for financial crimes.

Read more: More bankers behind bars: Three Landsbankinn bosses sentenced to prison

The court found that the loans to FS 37/Stím, which were made by Lárus, were in breach of his fiduciary duties. When the loan, which was only secured with the shares themselves, was made the price of the shares had already fallen and the position of FS 37/Stím extremely precarious, thus creating a great risks for Glitnir. This is the third sentencing in a case involving Lárus. He has been acquitted in one case by the Supreme Court, while a second case is to be retried after the Supreme Court invalidated the earlier acquittal by the District Court.

Jóhannes was recently sentenced to three years in prison for his role in a case involving loans made by failed bank Kaupþing and share purchases in Kaupþing.

Read more: Three former top bankers and one broker at failed bank Glitnir sentenced to 2-4 years in prison

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