The winding-up committee of Glitnir Bank filed to the Icelandic Special Prosecutor’s Office in January the case of an ISK 4 billion (USD 31 million, EUR 23 million) letter of credit having been granted by the bank because of the acquisition of Formula 1 race team Williams in summer 2008 due to reasoned suspicion of breach of trust.
The story was reported by Fréttablaðið on Thursday last week.
The case concerns Icelandic businessman Jón Ásgeir Jóhannesson, who was CEO of Baugur Group and one of Glitnir’s main owners at the time, having agreed in December 2007 that British companies owned by Baugur sponsor Williams.
In January 2008, Jón Ásgeir made an agreement in the name of Baugur subsidiary Sports Investments on acquiring a large share of the Williams team and, according to Fréttablaðið, Jón Ásgeir was personally liable for the acquisition.
Later that year it turned out that both the acquisition and sponsorship agreement were defaulted. Therefore amended agreements were made, fixing the share Sports Investments intended to acquire in Williams at ten percent.
In August 2008, the then CEO of Glitnir Lárus Welding announced to the bank’s risk committee that Sports Investments was seeking a letter of credit from the bank worth GBP 20 million (ISK 4 billion at today’s exchange rate) to buy a share in and make a sponsorship agreement with Williams. At the time, Sports Investments had no assets.
The meeting was only for the sake of appearances, Fréttablaðið states, because Lárus and Magnús Arnar Arngrímsson, who served as managing director of Glitnir’s company division, had agreed to granting the letter of credit the day prior.
With the letter of credit, the liability for ISK 4 billion was shifted to Glitnir. Later it turned out that the amended agreements were never signed and Sports Investments’ planned acquisition of Williams was revoked.
However, after Glitnir collapsed in October 2008, Williams made a GBP 10.75 million claim to the bank’s estate due to defaulted sponsorship agreements. The claim was rejected and so Williams took Glitnir to court. The case opened on Friday.