Failed Donald Trump Tower included busted Icelandic Investment Company FL Group as key partner
While FL Group was still flying high The board of directors of failed Icelandic Investment Company FL Group in 2006. At the time the company was expanding its stake in Icelandic real-estate companies. Later the company made large investments in the US, including failed Trump Tower in Fort Lauderdale, Florida. Photo/visir.is
Eight years after having collapsed one of the largest and most controversial of the pre-crash investment companies, the Icelandic FL Group finds itself at the centre of yet another controversy. This time it is its ties to a failed Fort Lauderdale development which bore the name of GOP presidential hopeful, Donald Trump.
The Miami Herald reports that as the GOP’s Florida primary draws closer the failed Fort Lauderdale Trump Tower has emerged as a campaign issue as Trump’s political opponents claim the development raises questions about Trump’s character and judgement. Buyers of apartments in the 24-story Trump Tower lost millions in deposits, sparking dozens of lawsuits. The Miami Herald argues the issue has ”become a focus of public scrutiny, raising questions about Trump’s character, business practices and his associates.”
One of the principal partners in the project was the Icelandic Investment company FL Group.
Failed investment company, created out of a corporate raid
FL Group was created in 2005 when Hannes Smárason, one of the most prominent “corporate viking” of the era, acquired Flugleiðir, the holding company of Icelandair. Hannes Smárason proceeded to sell off assets, redefining the company as a leveraged investment company with stakes in various travel companies. FL Group was also one of the largest shareholders in failed bank Glitnir. The collapse of the Icelandic banking system in the fall of 2008 took FL Group, which had been re-organized as Stoðir, down with it.
The reorganization of Flugleiðir, the former holding company of Icelandair, has been described as little more than a corporate raid. Questions have also been raised about the role of FL Group in the financial dealings surrounding Glitnr in the months leading up to the 2008 crash. In 2013 Hannes Smárason, the CEO of FL Group, was indicted for having embezzled nearly 50 million USD from the company. He was acquitted of the charges by the Reykjavík District Court. The ruling was appealed by the prosecution to thhe Supreme Court.
In 2007 FL Group invested 50 million USD in the Trump Tower and two other real-estate projects with links to Trump, Trump Soho in Manhattan and a development in Whitestone, Queens. At the time the involvement of FL Group with the US real-estate mogul was the source of significant excitement in Iceland, as the Icelandic National Broadcasting Service RÚV reports in its review of the case.
Links to organized crime
The participation of FL Group in the Trump Tower came about due to a close relationship between the Icelandic investment company and Bayrock Group, the developer behind the Trump Tower. The two companies worked together on several projects at this time.
Among the key points of criticism regarding the Trump Tower is the role of Bayrock Group and the less than reputable background of its executives. One, Felix Sater, an executive on the Fort Lauderdale project, has been jailed for stabbing a man with a broken margarita glass in a bar brawl. Sater has also plead guilty to defrauding investors of 40 million USD with members of the Gambino crime family.
An anti Trump ad airing in Florida warns voters “Trump entrusted convicts to help him run his company”, arguing this raises serious questions: “Who would he entrust to run the country?”
The Icelandic National Broadcasting Service RÚV points out that other executives of Bayrock have also had run-ins with law enforcement, including its CEO Tevfik Arif who was arrested on his yacht off the coast of Turkey in 2010, accused of involvement in human trafficking and running a prostitution ring. He denied the charges.
130 million USD bankruptcy
In February 2008, after the US real-estate bubble had burst, FL Group announced it was divesting itself of its real-estate projects in the US. The Trump Tower project, along with other US based real estate projects, were moved to a subsidiary of FL Group called FL Bayrock Holdco. This company posted more than 140 million USD in losses in 2008. The company was declared bankrupt in January 2014, costing investors and creditors nearly 130 million USD in losses.
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