Icelandic corporate raider attacks Reykjavik authorities for accusing him of exerting improper influence over the failed bank
Icelandic corporate raider Jon Asgeir Johannesson, once one of Britain’s most powerful retail tycoons, has used a newspaper owned by his wife to deliver a fierce attack against authorities in Reykjavik who accuse him of exerting improper influence over the failed Icelandic bank that financed much of his business empire.
Johannesson, whose Baugur investment vehicle once owned stakes in chains such as Hamleys, House of Fraser, Iceland Foods, All Saints, French Connection, Debenhams and Karen Millen, has claimed the prosecution is part of a campaign of persecution against him stretching back a decade.
Writing recently in Frettabladid, Iceland’s largest-circulation paper, Johannesson, who lives in London, said: “I am saddened that I have been persecuted by the authorities for 10 years. From August 2002 I have been an official suspect [in criminal inquiries]. This has been a heavy burden for me and my family … That is what is happening in this case and others.”
The Baugur empire, which had been run by Johannesson from offices in Mayfair, failed in the wake of Iceland’s 2008 financial meltdown. The country’s three dominant banks, Kaupthing, Glitnir and Landsbanki, also imploded and, as a consequence, the government was forced to seek an IMF bailout.
A year earlier, at the height of his success, Johannesson’s personal fortune had been estimated at more than £600m and he was named as the third most powerful retailer in the UK by Retail Week.
It is his links to Glitnir that are at the heart of the case against him. Companies linked to Johannesson borrowed more than €1.5bn (£1.2bn) from the bank before the crash. Meanwhile, other firms allegedly linked to him, or alleged close associates, acquired major interests in Glitnir shares. He disputes the significance put on these links by prosecutors.
Charged alongside Johannesson is Larus Welding, who had been appointed chief executive of the bank in sweeping board changes in April 2007, which, prosecutors say, was shortly after Johannesson became a major force on the Glitnir share register. Welding, who also now lives in the UK, rejects allegations he acted at Johannesson’s behest. He has pleaded not guilty to a charge of illegal lending.
It is not the first time Johannesson has claimed that establishment forces in Iceland have conspired against him. He was convicted six years ago of corporate misconduct relating to the affairs of Baugur dating back to 2002. Since the conviction, he has sought to brush the episode aside as the work of “established business and political interests in Iceland” bent on “destroying Baugur and my reputation” out of “jealousy”.
But the latest charges against Johannesson have been brought to court under a very different political regime – a reforming coalition that swept to power in the wake of the financial crisis. New ministers in 2009 set up an independent committee, chaired by a supreme court judge, to produce a detailed report into the nation’s financial meltdown. The report, which ran to more than 3,000 pages, found that the island’s outsized banking system was shot through with corruption and had been compromised by close relations with large borrowers. A series of criminal charges have followed.
Johannesson disputes the parliamentary report’s findings and notes that he was never formerly interviewed. “The perception in Iceland, both of the general public and of the media which is overtly hostile, is that I am, at least in part, responsible for the collapse of [Glitnir],” he has complained.
Johannesson appeared at Reykjavik district court last week to plead not guilty to charges of encouraging top bankers at Glitnir to advance a loan of 6bn kronur (£29m) to companies with which he was linked in July 2008, three months before the banking crash.
The bank agreed to take shares in Aurum Holdings, the British firm behind jewellery chains Goldsmiths and Mappin & Webb, as security. It is Glitnir’s valuation of these shares which is now in dispute.
Leaving court, he was asked by a reporter from Channel 2 – which, like Frettabladid, is controlled by his wife’s company 365 Media – if he had received special treatment from the bank. “I was just a regular customer of Glitnir, like others,” he said.
In UK civil proceedings three years ago, administrators to Glitnir argued that the shares in Aurum had been effectively worthless by the time they were put up as collateral, and that the 6bn kronur loan was therefore “manifestly contrary to the bank’s interests”.
Aurum had made a pretax profit of just £800,000 for the year February 2008 but had more than £170m in liabilities at year-end. The subsequent set of accounts showed the business had been rescued by lenders, who wrote down the value of loans and took control of Aurum in a deal to keep it from going bust. Administrators to Glitnir secured an international freezing order against Johannesson’s assets from the British courts in 2010, pending the outcome of Icelandic litigation over the controversial 6bn kronur loan. After hearing evidence of emails between Johannesson and Welding presiding judge Mr Justice David Steel said: “The prospect of establishing that he had no control over the bank and/or that the loan was a bona fide commercial transaction looks somewhat forlorn.”This had been hotly disputed by Johannesson, who told the court: “The implication that this loan is an example of the way in which [an associate] and I treated [Glitnir], essentially as some form of personal bank account, is entirely misconceived.”
Johannesson insists the valuation on Aurum shares accepted by Glitnir as collateral for the loan had been fair at the time.
The criminal charges and civil claims against Johannesson in Iceland relate to the treatment of shares in Aurum and there is no allegation of impropriety by the British jewellery chain group, which was sold last month to US private equity firm Apollo.