Economic Disaster Area » Exista

Bah Bah Brynjolfur

Dadi — Thu, 15 Oct 2009 11:12:36 +0000

If Hannes Holmsteinn Gissurarson and Milton Friedman were right and capital flows like a river to wherever it is put to the best use possible, then someone must have built a dam somewhere on the way to float 1 billion ISK into the safe haven of the curious company Lamba ehf.

Lamba which is officially registered as a company in the business of breeding sheep and goats, apparently has no sheep or goats on their books. Instead it borrowed money to buy shares in Siminn, which was then turned into shares in Skipti which eventually turned into shares in Exista. And while Exista’s worth has plummeted, Lamba’s loans are still outstanding and are now somewhere around 1 billion ISK.

Lamba’s owner is Brynjolfur Bjarnason, the noted Independence Party approved CEO of Siminn. And now the question is whether the bank is going to write off his debt? Which is very likely.

This is what Iceland had become, a country where CEO’s bah bah’d all the way to the bank.

I’m the one feeling sheepish. When my partner and I closed off our ehf. company we made an honest commitment to pay the outstanding debts. And we paid our debts.

But like the newswoman on Channel 2 said yesterday, it does matter in Iceland whether you are “Jon” or “Jon ehf” if you want your debts written off.

I would like to add to that that it matters even more if you are “Political Party Jon” or “CEO Jon”. Then you are the king of the sheep.

New Kaupthing Reports Exista, Deloitte and Logos To Special Prosecutor

Dadi — Fri, 25 Sep 2009 21:23:24 +0000

New Kaupthing has reported the management of Exista, employees of Deloitte and the law firm Logos to the Special Prosecutor because of the sale of Exista’s shares in Bakkavor Group on September 11, 2009.

Brothers Agust and Lydur Gudmundsson financed their own 8,4 billion ISK purchase of 39,2% in Bakkavor through Exista which is mostly owned indirectly by creditors today. The brothers did not provide any equity themselves and the loan’s due date is unclear. Deloitte and Logos assisted in the deal, in spite of serious remarks by the Company Registry of Iceland.

A ray of hope in “New Iceland”. And reported by mbl.is, Morgunbladid’s website no less.

One question, what does Deloitte’s head office think of its Iceland office role in the Icelandic crash?

How Long Are The Bakkavor Brothers Going To Get Away With It?

Dadi — Wed, 16 Sep 2009 23:11:27 +0000

How did the brothers, Agust and Lydur Gudmundsson score the majority ownership of Bakkavor? Well, with a vendor loan from Exista the company Lydur told the nation was heading for a bankruptcy earlier this evening. Which is where the brothers are also the largest shareholders. A vendor loan is basically a fancy way of saying IOU.

Lydur’s comments about people who questioned the sale, “negative comments come from people who don’t know enough about the sale.”

The sale was approved by the board of Exista in October last year. The next day, Kaupthing was nationalized and with it went the largest asset of Exista, which owned 25% in the bank. The sale was approved on the condition that the largest creditors of Exista would have to approve. That does not seem to have been the case and creditors are apparantly trying to get it nullified.

So the big question is, how long are the brothers going to get away with it?

No Justice, No Fairness, No Society

Dadi — Mon, 27 Jul 2009 10:39:04 +0000

When I was a student at a university in the US, the women’s soccer coach was fired from his job for pushing a player. This despite his record of leading the team to the final four in consecutive seasons. This was eight years ago and he still hasn’t been able to find another job as a soccer coach since.

I have coached soccer on the side for seven years and now have a UEFA-A coaching licence. When I lost my second job at the second doomed company I worked for last year I was offered a full-time coaching position at the club I’d been working for. I absolutely love the change from working on the “Icelandic economic miracle”.

But sports can offer a reflection of the society we live in. And during a U-16 game earlier this year an incident happened, with consequences that are in hindsight typically Icelandic. With just over 15 minutes played, the referee warned the players that he would start calling wrong throw-ins. Tensions were high, as the two teams were neighbors with a bit of rivalry. The next throw in was for the opponents but the player made a wrong one. When the referee made the call, the 27 year old opposition coach ran onto the field and gave him an x-rated earful. The ref answered with a harsh warning and play resumed. The ball went upfield where my winger was pulled down by a marker right next to the other team’s substitutes’ box. The coach lost his rag and kept shouting obscenities at the referee who then showed him a red card.

What happened next is ugly enough in a sporting context but keep in mind that the players on the field were 14-16 year olds. The coach kicked the ball full force into the referee and then proceeded to hit him in the side. Leaving the field he threatened to wait for him and kill him. Play resumed in a tough but fair match which was incidentally won by the opposition, 1-0 with a goal three minutes from time.

The aftermath might explain a lot about Icelandic society and why crimes do go unpunished and people in position of power never resign.

The referee and the linesmen left the field into the clubhouse to fill out the FA forms. While discussing the incident, the coach popped up from behind a counter where he was hiding and pleaded with them to not include this in their report. He told them he was on some sort of a probation within his club. Later it turned out that two weeks earlier there had been a meeting adressing similar sort of behavior on his part.

The referee was still in a state of confusion, and to add to the complexity of the situation they knew each other a little bit. So the referee wrote on the FA form that the coach had received a red card but did not describe the incident. The next morning, Channel 2 had a report on it. The referee contacted the Icelandic FA which asked for a more comprehensive report which he proceeded to write with the two linesmen. Parents at the game had also called the FA with complaints about the behaviour of the coach.

Then the Icelandic way of dealing with these kind of things took over. Officials from the coaches’ club who were at the game tried to make it look like it wasn’t as bad as described. Then the coach was interviewed on a popular radio show where he told everyone that this had been blown out of proportion and that he was somehow a victim of a smear-campaign. Then he hired a lawyer.

Normally in soccer when you hit a referee, let alone twice you can expect at least one year’s suspension, and in some cases life. Respectable clubs do not hesitate in firing coaches who resort to this kind of behaviour. But the coach and his lawyer spotted a loophole. According to strict interpretation of the Icelandic FA’s laws, only the referee’s official match report can be used as evidence. So the report was deemed invalid and he got away with a one-month ban, just in time for the official season.

His club fumbled about and removed him from the U-16 position, but he remained as their U-14 coach. Why? Because he had coached them from a young age and they were doing so well. Notably they have such talent in their ranks that any half-decent coach should be able to turn them on. Then there were stories about him having experienced difficulties in his life etc.

The referee who could have pressed criminal charges against him for assault didn’t because he thought the FA would hand him a fair punishment. Afterwards he just didn’t want anything more to do with the whole thing. And now three months later the guy is back on the bench with the U-16 team although another coach is there in the name.

So how is this relevant to the Icelandic economic situation?

- Unruly behavior is often swept under the carpet in Iceland. A drunk man who hits someone is dragged away by his friends, who excuse his behaviour with the amount he’s had to drink or some sort of incident which is supposed to justify it, a divorce, a death in the family etc. No expense is spared in making the victim feel guilty if he tries to prosecute the offender. That is why Glitnir CEO Birna Einarsdottir tells a sobbing story of cancer and her home being splashed with paint in this weekend’s DV. That is why the former owners of the banks talk endlessly about people’s ire affecting their poor families. That is how Bjorgolfur Gudmundsson managed to play himself a “victim” after being sentenced in the Hafskip scandal in 1980′s and returning as a prodigal son of the Independence Party to acquire Landsbankinn, through a company called Samson no less.

- When official institutions try to do their job, they are confronted with agressive lawyers who will shamelessly pull any trick in the book. For the FA in this instance, read the Financial Authorities. And now the Bjorgolfur father and son destruction team has issued a statement excusing the incredible loans made to them through Landsbankinn with technicalities.

- Interconnectedness skewes the picture in difficult matters. It was understandable that the referee felt sorry for the guy he knew and therefore excused his behavior to begin with. And here you can echo the accusations made by Eva Joly towards Valtyr Sigurdsson, State Prosecutor whose son is a CEO of Exista. Valtyr just doesn’t get it, too many in Iceland don’t, and even more use it to their advantage.

- With great powers comes great responsibility. And from a crappy movie come great words to live by. The coaches behavior was outrageous on every count, but his players, all under the age of 16 were not told by their parents or officials of the club that this had been wrong. Instead they were quick to make excuses for him and they had him exalted to a victim’s status in no time. He has never made an apology to the opposition for his behavior. By allowing him to continue, his club and the parents of the players have taken a stand against respect for the game, and with violence and disrespect towards referees.
Resignations have been few and far between since the economic crash. Before the crash Icelandic politicians just did not resign. Gudmundur Arni Stefansson, MP for the Democrats resigned in the 1990′s and was rewarded with an ambassador position, from the opposition party leaders. Arni Johnsen, MP for the Independence Party was forced to resign earlier this decade for embezzlement but after serving time he went to audacious lenghts to get a pardon and his “honor restored”, unusal for anyone who’s served time in Iceland but easy when your friends hold the executive powers. Bjorgvin G. Sigurdsson was asleep as a Minister of Commerce last year and resigned the day before all hell broke loose in January, most likely to play the resurrected victim in the next parliamentary elections. In which he succeeded.

Unfortunately the way the country deals with its bullies and criminals is dangerous to the society. When pillars of justice, fairness and responsibility are constantly being bombarded, it is no surprise to see the foundations collapse as they have and will continue to do so if not addressed correctly.

Eva Joly With A Bang

Dadi — Wed, 10 Jun 2009 21:45:00 +0000

Eva Joly came in with a bang in Iceland today when after a couple of months away she returned to state her displeasure at the way things are being done in investigating the economic crash. She said she did not want her name associated with the investigation unless some radical changes would be made.

And then she threatened to resign from what she calls one of the most important investigation in Europe.

She said she’d leave her post unless Valtyr Sigurdsson, state prosecutor is removed from his post and three special prosecutors would be appointed to investigate each of the banks. Support to the office of the special prosecutor would also have to be improved greatly.

The reason she wants Valtyr Sigurdsson gone is that he is the father of Sigurdur Valtysson, the CEO of Exista, a large shareholder of Kaupthing. There must be no doubt regarding conflicts of interest.

Joly said she had come here to assist with this huge investigation, but now it seemed like Icelanders are lacking the will to execute it with the power needed to shed lights on the biggest cases and bring those responsible to justice.

Eva Joly must be praised for exposing the nepotistic corruption rife in Iceland to the world.

Watch the video of RUV’s interview with Eva Joly here

The Sugar Tax, Bakkavor, Sjova And The State’s Foray Into Telecommunications

Dadi — Sun, 17 May 2009 10:36:53 +0000

I spent most of last week in the UK. I intended to keep blogging while there but when I ascended from Icelandic soil I experienced such relief at being away for a few days that I decided to use the opportunity to refresh from the most depressing winter of my life, probably most Icelanders’ life.

Coming back things seem to be going where I predicted around Christmastime. The dirt is flowing from all cracks in Icelandic business and politics, exposing some of the country’s top businessmen as nothing short of criminals and some of the leading politicians as inepts.

The highlights.

The sugar tax? Minister of Health, Ogmundur Jonasson is proposing a tax that would increase the price of sugary drinks and candy. All in the name of better dental-health for Icelandic youth. Considering that those products are already priced 63% higher than on average in Europe, one would think that this tax already exists in the form of the volatile Icelandic krona, inflation and tariffs. And still Icelanders consume more than most Europeans of those products. So what is the deal? Just another ideological social issue that the Left Greens feel they must make a stand against without considering the consequences, such as its effect on inflation and the effect on the national psyche of people that are already feeling the pinch everywhere.

The insurance company Sjova. Why did the Icelandic businessmen that bankrupted the country so actively try to acquire insurance companies to go with everything else they owned? Well, turns out Milestone, owner of Sjova, one of the three largest insurers in Iceland brazingly managed to use the strong position company’s claims fund as a collateral for acquiring Swedish insurance and investment vehicle Invik & Co. Sjova itself was effectively turned into an investment vehicle in the last few years, something the Special Attorney investigating the economic crash is reviewing right now. The insurance part of Sjova is said to be a viable business, while its investment part is anything but.

Bakkavor, the company of the brothers behind Exista cannot pay a 20 billion ISK loan and is therefore effectively bankrupt. Meanwhile DV reported on the brothers’ wifes going on a luxury trip with their “champagne club” to Oman, a social circle that counts former Kaupthing chief Sigurdur Einarsson’s wife as a member. While Icelanders are being advised to tighten their belt buckle, take the bus and eat more porridge, it is nice to know that somewhere it is still 2007. The story of how the Bakkavor brothers started their escapades abroad comes to mind. When they realised that a business they wanted to buy was out of their reach they came up with the wonderfully innovative plan of calling Siggi (Sigurdur Einarsson). And he said no problem guys and the three amigoes proceeded to weave an intriguing web between Bakkavor and Kaupthing.

And the state which sold Exista the national telephone company in 2005 in the name of healthy free market competition, which lead to higher phone bills and worse service, is becoming the owner of its competitor Teymi which operates the Vodafone franchise in Iceland and the “low cost” telephone company Tal. This is thought Landsbankinn, Teymi’s creditor which is assuming control of the business loaded with debts. So now the state is in the peculiar position of competing against the business it sold four years ago and being accused of granting Teymi an unfair competitive advantage over Siminn which says it can pay its own bills. Ah, the wonders of capitalism!

More later on a couple of more issues, including fashion queen Karen Millen’s foray into the exciting world of Icelandic Savings & Loans.

Tchenguiz’s Icelandic saga with a bitter ending

Dadi — Tue, 14 Apr 2009 22:46:48 +0000

With hindsight, the episode looks all the more uncomfortable because of Kaupthing’s complex relationship with Tchenguiz. He was not just its largest customer but also led a series of private equity-style joint-venture deals in which Kaupthing co-invested its own money. Moreover, in early 2007 he became a major investor and board member in Exista, an Icelandic holding company which was the largest shareholder in Kaupthing.

Among the Tchenguiz-led joint ventures in which the bank invested its own money were retailer Somerfield and bar and restaurant companies behind chains including Yates, Slug & Lettuce, La Tasca, Ha! Ha!, Hogs Head and Litten Tree. The bank also had a investment interest in Tchenguiz’s stake-building at J Sainsbury and M&B.

From the Guardian

The devalued Prime Minister of a devalued Government

Dadi — Wed, 25 Mar 2009 09:17:07 +0000

You would think that Icelandic MP’s would have had the guts to stand up to the architects of the ruin in this manner now that this country is in a worse shape than the UK.

But they won’t. Instead, foreign minister Ossur Skarphedinsson has decided to hand Valgerdur Sverrisdottir a position as a leader of new council on international development. This is on the same weekend that Morgunbladid publishes its findings on the privatization of the banks when Valgerdur was Minister of Commerce and states that the whole thing was designed to get the banks into the hands of people loyal to the Independent Party and Valgerdur’s Progressive Party.

It should be noted that Ossur Skarphedinsson is in the Alliance Party, a rival political party. Aren’t there any qualified people within his own ranks? The position is unpaid but it would look good on the CV of a quite a few people. Besides, isn’t it odd to hand such a prestigious position to a person who was instrumental in privatizing the banks and then sat herself on the board of Gift, a company most people didn’t know existed anymore but was an investor for the group that got the banks? A business that used to be an insurance company that people thought had folded but had billions to spend in money from its customers, who were the rightful sharholders. Money that bought the large owners of Kaupthing like Olafur Olafsson, the Exista brothers and Kristjan Loftsson, the one whose interests in whaling are more important than the nation’s reputation, their way into billionaire heaven.

The question is, why don’t the Alliance Party, Left Greens, Progressive Party and Independent Party just form a single party? Or are the Icelandic political parties just like the shell companies that the banks created to hike up the value in their own stock, all the same but different in the name just for show?