uti.is 19 June 12: SFO and the Tchenguiz brothers: Vincent’s case dropped

For those who hope that the authorities know what they are doing when it comes to investigating financial fraud it’s been an excruciating experience to follow the SFO investigation into the Tchenguiz brothers’ relationship with Kaupthing. Regarding Vincent, all went wrong at the SFO that could go wrong. The SFO must be reviewing it all in detail, ia how documents already with the SFO, showing that Vincent wasn’t fooling Kaupthing with his collaterals came to be ignored – Kaupthing did indeed know the bank couldn’t enforce the collateral.

It’s crystal clear that the SFO went about all this completely in the wrong way, in Vincent’s case. After much confusion the SFO is now satisfied there is nothing there to investigate. What remains is Robert’s relationship with Kaupthing. His loans went from just over a billion euros to €2.2bn in one year – the fatal year when no banks were lending, ie from end of 2007 until the collapse of the bank in Oct. 2008.

As to the Kaupthing managers, the question is why the bank was willing to lend Tchenguiz, as so many of its main clients, against no or poor collaterals and, time and again, to expose the bank to excessive risk whereas the favoured clients were completely, or mostly, sheltered from any risk. Some would say that such lending is a breach of a manager’s duty, on behalf of a bank’s shareholders, to take into account the interest of the bank – and not just the interest of a few favoured clients, who in some cases also were among the bank’s shareholders.

These stories are all laid bare in the Icelandic SIC report, cases involving this type of lending are being pursued by the Office of the Special Prosecutor in Iceland (now with one case ended and two bankers sent to prison for 4 1/2) years. Not only Kaupthing but also Landsbanki operated in this way – both banks operated in the UK: these are not Icelandic stories, except that the banks were Icelandic – these are international stories.

And yet and yet, other countries such as the UK – not to mention Luxembourg where the core of the shadiest Icelandic operations were carried out – seem to be utterly complacent. That said, not much is being done to investigate lending by the three bust Irish banks and the Spanish cajas – but that’s another story for another day.

Link to Sigrun Davidsdottir's blog here

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