Icelandic businessman acquitted

Icelandic businessman Hannes Smarason, former chairman of now bankrupt company FL Group, has been  acquitted of embezzlement charges in Reykjavik's district court. The verdict was made known this morning.

Smarason was accused of transferring 46,5 million dollars from FL Group's account with Kaupthing bank in Luxemborg (KBL) to another company Fons, now also bankrupt. The transfer was said to have been made in April 2005 without the knowledge of any other member of the board. Smarason was the only one with access to the account. Smarason maintained his innocence throughout the trial. The prosecutor was unable to provide documentation directly linking Smarason to be the one responsible for the transfer.

Fons, lead by Icelandic business tycoon Palmi Haraldsson, in turn used the money as part of its purchase in Sterling Airlines. The majority of the 46,5 million dollars was transferred   to the account of the majority share holder in Sterling Airlines, the company Fred. Olsen & Co.

The prosecutor argued that Smarason's move was seen as a sign that Smarason wanted FL Group to be in on Fons's purchase of the airline. FL Group then bought Sterling Airlines in October 2005.

Other board members of FL Group were unaware that the transfer was made until two months later.

The money wasn't returned to FL Group until late June under pressure from Ragnhildur Geirsdottir, then president of the company. Three members of the FL Group board resigned stating that they were kept in the dark with Smarason making investment decisions on his own.

The prosecutor had called for a two to three year sentence with the maximum possible punishment being six years according to Icelandic law. The district court came to the conclusion that Smarason's guilt wasn't proven and he was therefore acquitted of the charges.

It is expected that the Special prosecutor's office will appeal the verdict to the Supreme Court. They however refused to comment on today's verdict and so did the attorney's of Smarason.

Four bankers waiting to do time

Just last week four former bosses of the Icelandic bank Kaupthing were sentenced to between four and five and a half year in prison in The Supreme Court of Iceland.

They are the former chief executive, the chairman of the board, one of the majority owners in addition to the chief executive of the Luxembourg branch. The foursome was accused of hiding the fact that a Qatari investor, Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani, bought a stake in the firm. Al-Thani had bought the stakes with money illegally loned by Kaupthing.

Al-Thani's purchase, a 5,1% share in the bank, was announced only a few weeks before the collapse. The investor's purchase was seen as a confidence boost for the bank while rumors circulated about the bank having troubles.

The Supreme court confirmed the five and a half year verdict Hreidar Mar Sigurdsson, the former chief executive, received in the district court. Sigurdur Einarsson, former chairman of the board, was sentenced to four years in jail.

The Supreme Court gave Olafur Olafsson, one of the majority owners four and a half years and Magnus Gudmundsson, the former chief executive of the Luxembourg branch, four and a half years as well. They received a three and a half year and three year sentence respectively in the district court.

These are to date the heaviest sentences for financial fraud in Iceland's history. The four will have to pay their own legal costs for the case which amount to 82 million kronur or approximately 670 thousand US dollars.