Iceland Mag

2 Reykjavik

Iceland Mag


Former tycoon Björgólfur Guðmundsson charged in a massive fraud cases in France

By Staff

  • Björgólfur Guðmundsson Former tycoon and "corporate viking" Björgólfur Guðmundsson has been charged for having misled customers as the largest shareholder and member of the board of directors of failed bank Landsbankinn. Photo/Vilhelm Gunnarsson.

A French investigative judge has charged Björgólfur Guðmundsson, the largest shareholder of bankrupt Landsbankinn along with eight top managers of the Luxemoburg branch of Landsbankinn for having misled customers and mismanaging their investments. The scale of the case makes it one of the largest fraud cases in France.

Questionable equity release loans
The Icelandic National Broadcasting Service reports that a French investigative judge, Renaud van Ruymbeke, filed charges yesterday against Björgólfur Guðmundsson and the top brass of the Luxembourg branch of Landsbankinn in a case involving equity release loans offered by the subsidiary.

Related: Bankers Behind Bars: A guided walking tour through the collapse of Iceland's banking system in 2008

The loans were offered to French and Spanish customers, mainly retired clients who owned valuable real estate. The loans allowed the customers to mortgage their properties, accessing their equity. Typically a fourth of the loan was paid out in cash, while the rest was invested with the promise that the returns on this investment would pay for the servicing of the loan.

“Risk free” investments, mismanagement and deception
Björgólfur, who sat on the board of Landsbankinn, and the Landsbankinn managers are charged for having promised its customers a “risk free” transaction, which is illegal under French law. They accused of having misled the customers about the nature of the investments, as the bank invested in different securities than it promised its customers, buying large amounts of bonds issued by Landsbankinn and Kaupþing, another Icelandic bank which went bankrupt in October 2008. They are also accused of having mismanaged the investments and ignored complaints from customers. The crimes allegedly took place in 2006-2008.

The charges follow a five month investigation. According to Sigrún Davíðsdóttir, the London correspondent of the Icelandic National Broadcasting Service, the investigation was only opened after a group of diligence of a group of French borrowers. The borrowers had attempted to bring the case to the Luxembourg authorities, which refused to investigate it explicitly siding with Landsbankinn. Sigrún argues the scale of the case makes it one of the largest fraud cases in France.

Former tycoon, father of only Icelander to get on Forbes list of 500 richest people on earth
Björgólfur, who declared personal bankruptcy in 2009, is the father of Icelandic tycoon, Björgólfur Thor Björgólfsson. The father and son team were the largest shareholders in Landsbankinn, one of the three large Icelandic banks which went bankrupt in October 2008. In 2007 Björgólfur Thor Björgólfsson was the 249th richest man in the world, according to Forbes. Björgólfur Thor is currently the 1,415 richest man in the world according to Forbes. Björgólfur Thor is not connected or named in the fraud case against his father, nor is his investment fund Novator.

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