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Business

Icelandic bank files two-billion-dollar suit against former associates

Text by News Wires

Latest update : 2010-05-12

Icelandic bank Glitnir filed a two-billion-dollar lawsuit in a New York court against former shareholders and executives for alleged fraud that led to the bank's collapse in October 2008.

AFP - Failed Icelandic bank Glitnir said Wednesday it had filed a two-billion-dollar (1.6-billion-euro) lawsuit in a New York court against former large shareholders and executives for alleged fraud.
  
Glitnir said it was suing "Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir's chief executive, Thorstein Jonsson, its former chairman and other former directors, shareholders and third parties associates with Johannesson for fraudulently and unlawfully draining more than two billion dollars out of the bank."
  
The bank also said it was "taking action against its former auditors PricewaterhouseCoopers (PwC) for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the bank's collapse in October 2008."
  
Iceland suffered a massive blow in late 2008 when its three largest banks -- Kaupthing, Landsbanki and Glitnir -- collapsed and were taken over by the state during the global financial meltdown.
  
The former bank heads helped bring about the downfall by taking "inappropriate loans from the banks," a parliamentary inquiry into the collapse found.
  
Four former Kaupthing executives have been arrested in Iceland in the past week and Interpol has issued an international arrest warrant for that bank's ex-chairman, Sigurdur Einarsson.
  
Glitnir's suit, filed in the New York state Supreme Court on Tuesday, blamed most of the bank's woes on "Johannesson and his co-conspirators," who had "conspired to systematically loot Glitnir Bank in order to prop up their own failing companies."
  
They had "seized control of Glitnir, removing or sidelining experienced bank employees, and abused this control to place the bank in extreme financial peril," it charged in the statement.
  
"The defendants' transactions cost Glitnir more than two billion dollars and contributed significantly to the bank's collapse," it insisted.
  
Johannesson is the former owner of the now-defunct Baugur investment group, which has stakes in a number of British high street stores including Hamleys, frozen food retailer Iceland, fashion label All Saints, department store Debenhams as well as clothing stores Oasis, Principles, Warehouse, French Connection and House of Fraser.
  
He is, according to the Glitnir statement, believed to be living in Britain and "still holds a number of high-profile directorships there, including Iceland Foods and House of Fraser."
  
In addition to its New York suit, Glitnir said it had "secured a freezing order from the High Court in London against Jon Asgeir Johannesson's worldwide assets, including two apartments in Manhattan's exclusive Gramercy Park neighbourhood for which he paid approximately 25 million dollars."
  
The US litigation was being led by Glitnir's so-called winding-up board, appointed by an Icelandic court to supervise the bank's liquidation.
  
"On behalf of Glitnir's creditors, the winding-up board is determined to pursue recovery of assets looted from Glitnir by Johannesson and the other defendants," the statement said, charging that the bank was "robbed from the inside."

Date created : 2010-05-12

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