Iceland lifts lid on banks 'excessive loans' to billionaires

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Iceland lifts lid on banks 'excessive loans' to billionaires
13 April 2010, By Rowena Mason (Telegraph.UK)
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7583268/Iceland-lifts-lid-on-banks-excessive-loans-to-billionaires.html

Iceland’s banks gave “excessive” loans to a handful of powerful billionaires, including Robert Tchenguiz, the property entrepreneur, Jon Asgeir Johannesson, the retail tycoon, and Bjorgolfur Gudmundsson, the former owner of West Ham FC, according to a damning inquiry.

Its parliamentary investigation – The Truth Report – found numerous potential cases of illegality, including possible share price manipulation and exaggeration of asset values, within the island nation’s three banks – Kaupthing, Glitnir and Landsbanki.

The long-awaited report also suggests that the banks were effectively controlled by five investors wielding “unlimited influence”, with some acting as shadow directors. The report accuses the bank’s owners of pressuring management into awarding loans to their companies and friendly clients, with little or no collateral.

The UK lost £8bn in the Icelandic collapse of October 2008, and charities and councils are still waiting for £1bn in compensation. Most controversially, the Treasury bailed out 300,000 British savers with Landsbanki’s high-interest Icesave accounts, sparking a diplomatic row over the responsibility for the £2.3bn bill this produced.

It emerged in the report that companies connected to Mr Gudmundsson, whose family owned 40pc of Landsbanki, had borrowed almost as much as the entire £2.3bn Icesave debt to finance their own private investments. The loans amount to 140pc of the bank’s equity.

The report quotes Sigurjon Arnason, ex-chief executive of Landsbanki, as saying: “Resisting the requests from the owners of the banks would have equalled quitting from my position.”

The report also criticises Kaupthing’s loans to London-based property entrepreneur Mr Tchenguiz, whose companies received £1.4bn.

“We consider that Kaupthing’s loans to Robert Tchenguiz and companies have been in excess of that which could reasonably be considered a commercial assumption. Rules on large exposures were not followed,” it says. The report adds that it is “difficult to see how loans of this magnitude were taken with the bank’s interests in mind”.

Mr Tchenguiz, who owned large stakes in Sainsbury’s and Mitchells & Butlers before they were seized by Kaupthing’s winding-up committee, was not a direct shareholder. However, he sat on the board of Exista, an investment firm that owned 23pc of the bank. He denies any wrongdoing and said his loans were not against the rules.

Mr Johannesson, the former boss of failed British retail giant Baugur, a current director of House of Fraser and chairman of Iceland Foods, also comes under ­scrutiny for his role at Glitnir. Companies connected to Mr Johannesson, one of Glitnir’s biggest shareholders, borrowed £3.5bn.

The 2,000-page document is heavily critical of Iceland’s former ruling political party.

It says ex-Prime Minister Geir Haarde acted with “gross ­negligence” and reveals that former central bank manager David Oddsson turned down help from his UK counterpart Mervyn King.

The banks’ owners and key shareholders have all repeatedly denied any wrongdoing.


Iceland lifts lid on banks 'excessive loans' to billionaires 13 April 2010 (Telegraph.UK) http://tinyurl.com/y444xt5

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Robert Tchenguiz was Icelandic banks' biggest borrower
14 April 2010, Rowena Mason (Telegraph.UK)
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7587359/Robert-Tchenguiz-was-Icelandic-banks-biggest-borrower.html

Iceland's investigation into the collapse of its financial system has laid bare the astonishing relationship between London-based property billionaire Robert Tchenguiz and its largest failed bank, Kaupthing.

The 2,300-page report devotes entire sections to Mr Tchenguiz, with his name cropping up more than 100 times, and reveals him to be the Icelandic banking system's largest borrower.

Kaupthing backed some of Mr Tchenguiz's most high-profile acquisitions, including stakes in Sainsbury's, Mitchells & Butlers, Whitbread, Town & City Pub Company and Bay Restaurant Group and Somerfield with £1.4bn of debt.

It collapsed along with two other major banks, Landsbanki and Glitnir, in October 2008, decimating its financial system and causing losses of £8bn to British taxpayers. All three banks are now the subject of a criminal investigation into alleged share manipulation, excessive loans to related parties and exaggeration of assets.

This week's report found that Kaupthing – which conducted two-thirds of its business in London – secretly owned almost half of its own shares.

Written by a committee of MPs, the inquiry goes into some detail about Kaupthing's relationship with key clients. In particular, it notes a huge increase in loans to Mr Tchenguiz's companies in early 2007 at around the time he became a board member of the bank's largest shareholder, an investment firm called Exista.

It says Mr Tchenguiz was a part-owner of Exista, adding that a "sharp increase in facilities to Mr Tchenguiz in the period January 2007 to October 2008 is interesting in this light".

The document goes on to describe how Mr Tchenguiz "benefited from particular goodwill among the bank's management, making its facilities easier to access than otherwise".

Rather than start calling in Mr Tchenguiz's loans when his companies were suffering margin calls in 2008, the bank carried on lending its key client more money.

At this time, the British regulator knew the bank was having liquidity problems and still allowed Kaupthing to set up retail operations attracting £2.5bn of deposits from UK savers in April – a move that is now under investigation by the Serious Fraud Office.

In the first nine months of 2008, in the throes of the credit crisis, Kaupthing awarded Mr Tchenguiz an additional £170m to meet margin calls from its subsidiaries in Luxembourg and the Isle of Man, plus Morgan Stanley and Dawnay Day.

Between 2005, when his involvement with Kaupthing started to grow, and the peak of his borrowings, The Sunday Times Rich List estimates that the wealth of Mr Tchenguiz and his brother Vincent more than doubled from £418m to £850m.

The bank eventually forced the firesale of stakes in Sainsbury's and M&B on the eve of its collapse, causing him hefty losses. Its winding-up committee is now involved in a tussle with Mr Tchenguiz over his £643m stake in Somerfield, put up as collateral for part of the loans.

In turn, Mr Tchenguiz claims he is a creditor of the failed bank owed £650m and is likely to launch legal action based on the argument that the bank misrepresented its position. A source close to the Tchenguiz family said the bank entirely misrepresented its position and investors had no idea about the scale of Kaupthing's problems.

The Icelandic MPs behind the report are unable to explain exactly why the bank's patronage to Mr Tchenguiz was so great.

The investor is known to be a longstanding friend of Dorrit Moussaieff, the wife of Iceland's president, but he only started doing business with Kaupthing relatively late in his career.

One theory is that the property investor became a valuable contact in London society for introducing new clients. The report mentions that he introduced two other property investors, Moises and Mendes Gertner, whose share dealings with Kaupthing are now under scrutiny by a special investigator.

Regardless of Kaupthing's motives for its relationship with Tchenguiz, the report concludes that it is "difficult to see how loans of this magnitude were taken with the bank's interests in mind".

However, Mr Tchenguiz steadfastly regards himself as a victim in the crisis – claiming to have lost around £1bn – and says his loans were not against the bank's rules.


Robert Tchenguiz was Icelandic banks' biggest borrower 14 April 2010 (Telegraph.UK) http://tinyurl.com/y2p3b5w

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The mysterious but amazing Tchenguiz family

Robert Tchenguiz: is an Iranian born Iraqi jew, described in headlines as "a London tycoon," he was involved with Kaupthing Bank. Iranian-born Tchenguiz is known for opulent parties on his yacht in Cannes and dating the model Caprice. He is said to have introduced Princess Diana to Dodi Fayed. Owns 150ft yacht named My Little Violet. He operates from MI5's old headquarters in Mayfair. Robert even worked in the World Trade Center sometime in the 1980s as an oil trader. He is close friends with Philip Green. He may be a long time friend of Dorrit Moussaieff.

Vincent Tchenguiz: was an investor in Bernard L. Madoff Securities. He owns a Damien Hirst skull, which sits in his Park Lane office. He was photographed with Bill Clinton. His yacht is called Veni, Vidi, Vici. He owns/owned a purple Lamborghini, two Rolls-Royces, two Bentleys and an Aston Martin. Vincent owned Peverel which he paid £500 million for. Peverel "organised the upkeep" of 200,000+ flats, including those owned by John Major and Chelsea Clinton. At a party of Vincent's in Monaco, a girl there recalled: "At one stage Richard Branson, Flavio Briatore, Bernie Ecclestone and Vincent all went off to a room for a meeting." Vincent hired Black Cube, an elite intelligence unit in Israel, to help him with the SFO case, but they fell out, and are now both suing each other. A girl who hung around Vincent, Martine Vik Magnussen, would be murdered in March 2008, apparently by Farouk Abdulhak as he fled to Yemen where his father is one of the country’s richest men and a personal friend of president Ali Abdullah Saleh.

Their father Victor Kedourie Molaaem was reputedly the Shah of Iran's jeweller, or at least he worked for the Royal mint. He had "fled" Iraq for Iran in 1948, changed his name to Tchenguiz after Genghis Khan, and somehow ingratiated himself with the Shah. In 1979 the family fled Iran too. Viktor supposedly gave Robert and his brother Vincent a large sum in the 1990s to buy an office building in Hammersmith and from that they somehow created a large property empire. The father lives in Israel.