Tuesday, 26 March 2013 18:39
REYKJAVIK: The former head of Iceland's once biggest bank, Kaupthing, will be charged next month with fraud and for manipulating the bank's share price which helped lead to the bank's collapse in 2008, a prosecutor said on Tuesday.
Special prosecutor Olafur Thor Hauksson said the charges would be filed against the bank's former chief executive, Heidar Mar Sigurdsson, and eight other former Kaupthing employees on April 24 in Reykjavik's district court.
The trial could last "up to one year", Hauksson said.
According to the charges to be filed, Sigurdsson took a loan from Kaupthing to buy shares in the bank.
He then sold his shares to his own holding company for 572 million kronur ($4.6 million, 3.58 million euros), thereby artificially elevating the bank's share price. Sigurdsson made 325 million kronur in the transaction, prosecutors said.
Two months after Sigurdsson's 2008 transaction, Kaupthing collapsed.
Charges will also be pressed against six former executives of Landsbanki, then Iceland's second biggest bank, including its former chief executive, Sigurjon Th. Arnason, for manipulating the bank's share price by lending funds to investors on condition they buy shares, according to media reports.
Iceland's banks had gone on an international buying binge in the early 2000s fuelled by cheap foreign loans.
But the collapse of the US investment bank Lehman Brothers in September 2008 froze credit markets and Iceland's banks quickly collapsed, plunging the island's economy into a deep recession.
Iceland's then prime minister Geir Haarde was last year found guilty of one minor charge but cleared of serious accusations relating to his handling of the banking collapse.
Haarde has argued that the government's choice to let the banks fail and repudiate their foreign debts saved the country from bankruptcy.
Copyright Reuters, 2013