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Arion Bank’s bizarre acrobatics

God, there are so many corruption scandals emerging these days that my head is spinning. I’d love to inform the World at Large [that’s you] about them but honestly, I wouldn’t know where to start.

Except maybe with Kaupthing Arion Bank’s bizarre and completely outrageous settlements with this country’s former tycoons.

First, Hagar. Hagar is a company formerly owned by Jón Ásgeir Jóhannesson* and his father Jóhannes Jónsson of Baugur renown. It holds a whopping 60 percent market share in grocery retail in this country, runs Bónus and Hagkaup and 10-11, as well as a slew of other shops like Zara, Debenhams, All Saints, Top Shop et al. When Baugur went bust last year, they managed to pull a few acrobatic stunts with Hagar so it didn’t go under with the rest. Long story short, Hagar is now owned by Kaupthing Arion [or AriJón as it’s dubbed by some people around here], who have reportedly been tossing it around like a hot potato, at a loss as to what do with it.

First, Jón Ásgeir and Jóhannes asked if they could kindly have it back, minus the colossal debts that are on it. The logic was that there was no one else in the entire country better equipped to run it than they were, what with their vast experience in insanely leveraged takeovers food retail operations. Kaup Arion hummed and hawed about that one for a while until the roar of indignation from the Icelandic public managed to penetrate the glass walls of their castle and they refused.

Now, a few months later, they have decided to put Hagar on the market, i.e. list it on the Iceland Stock Exchange, allowing “the public” [who of course are swimming in money these days] to buy shares. Meanwhile, Hagar staff are allowed to own a piddly 15 percent, of which Jóhannes Jónsson may own only ten percent. Jóhannes, however, gets to stay on as Chairman of the Board, i.e. run the company.

The trouble with the above arrangement is the aforementioned lack of funds amongst the Icelandic public AND as of yet there is no discernible method for preventing shell companies formed in tax havens [but surely not by JÁJ and JJ, no no no] to buy large chunks of the company, thereby regaining control of it.

So that’s one stunt. But Arion has pulled more. For instance, allowing Ólafur Ólafsson, formerly one of Kaupthing’s owners and renowned for his involvement in the Sheik Al-Thani deal shortly before the bank collapse, to maintain control of his shipping company Samskip. Not only does Ólafur owe the bank BILLIONS of krónur, he is also under investigation by the Special Prosecutor’s Office and had his homes and other properties raided a few weeks ago.

Happily, though, Arion has rejected the request by the two Björgólfurs that it write off the loan they took to acquire Landsbanki back in the early noughties and is now initiating proceedings against them to try to reclaim that capital. It does, however, beg the question – why do JÁJ, JJ and ÓÓ hold such favour, when the two B’s do not?

* Clearly Jón Ásgeir’s Wikipedia page hasn’t been updated in a while.



Comments on this entry are closed.

  • Flygill February 10, 2010, 11:52 am

    Arion is owned by the foreign creditors now, so they could stop this travesty if they wanted to. They have the majority of directors (something like 3-4 outsiders vs 2 Icelanders) and have the power to fire any Icelandic employees or reverse their decisions.
    It’s clear that the Kaupthing Committee tried to rig the game in favor of the Icelandic / old Kaupthing directors and officers before they handed Arion / New Kaupthing over to its new owners, and the old cronies no doubt realize that the foreigners don’t have the knowledge to run the bank on their own (and by knowledge, I mean connections with the old crony “businessmen” in Iceland.)
    There’s probably another side to this story, too, namely, that Samfylkin party wants to keep Jon Asgeir & friends in power, as a counterweight to Sjalfstaedisflokkur and their friends, the Bjorgulfur father&son crowd. Doesn’t Jon Asgeir still control the newspaper DV?

  • Michael Lewis February 10, 2010, 1:12 pm

    This is similar to “pre-pack” bankruptcies here in the UK. Its borderline fraud or in some cases may be genuine fraud. A company goes bust, but pops back up seconds later with all the assets less the debt. Fraud is fraud is fraud.

  • kevin o'connor waterford Ireland February 10, 2010, 2:41 pm

    Controls 60% of food supply be nice to these people they have the power to starve 200,000 icelanders to death all resistance is futile, maybe it would be good if the British fleet (whats left of it these days) steamed in to Reykjavik harbour and took over, after all from my potted history of Iceland that I know, it is common knowledge that the WWII occupation was a good thing,yes thats the best plan a joint British/Dutch/EU takeover of Iceland,just think Johanna would be spared all those tedious EU application forms to fill in. ha ha

  • Andrew (the other one) February 10, 2010, 2:44 pm

    Same old people doing the same old things and making lots of money. Do you wonder why people are reluctant to lend Iceland any money when this sort of thing happens? I think to restore credibility to the Icelandic business sector, there needs to be a much more urgent investigation and hopefully prosecution of all these people. The taxpayers of several countries have already paid out because of their antics. Enough is enough!

  • James February 10, 2010, 4:01 pm

    “why do JÁJ, JJ and ÓÓ hold such favour, when the two B’s do not?”

    Arion Bank clearly employs a rating system based on initials, similar to credit ratings. J’s and O’s must be higher up the scale and B’s (whether one or even two of them) must be lower down the scale. The bank should be transparent and disclose this rating system so parents can name their children appropriately – just in case they grow up to be high-leveraged business moguls.

  • Simon Brooke February 10, 2010, 4:52 pm

    It probably is true that there is a shortage of people who know where the bodies are hidden with the experience and brass neck self confidence to run these companies.

  • sylvia hikins February 10, 2010, 9:23 pm

    ‘owns 60% market share in grocery retail’. Holy s***! Even Tesco couldn’t get away with that in the UK. Q: Do you have any anti-monopoly legislation in Iceland?
    sylvia from viking wirral

  • alda February 10, 2010, 9:33 pm

    Thanks everyone!

    James – Perhaps Transparency International can get on that. 🙂

    sylvia – a valid question indeed! Believe it or not we do. Unfortunately, however, it seems about as dysfunctional as everything else in this society.

  • Joerg February 10, 2010, 9:56 pm

    I guess, as the former business moguls are widely suspected to have money stashed away somewhere in “money heaven”, the hope might be, that some of this money could re-materialize by reinstalling them as shareholders.

    I wouldn’t expect so. It’s more likely the other way round.

  • Another Andrew February 12, 2010, 10:40 am

    Was there a recent earthquake in Iceland which destroyed financial oversite and the justice ministry? This seems to be the case as these persons of who you write about continue to work and do business.
    Is there no one in Iceland willing to clean up this “alledged” corruption?