The Supreme Court of Iceland convicted former CEO of Byr savings bank Ragnar Z. Guðjónsson and former chairman of the bank’s board Jón Þorsteinn Jónsson for breach of trust in the so-called Exeter case yesterday—thereby reversing an earlier verdict of Reykjavík District Court—and gave both of them a four-and-a-half year non-suspended prison sentence.

The Supreme Court of Iceland. Photo by Páll Kjartansson.

These are the longest sentences that have ever been announced because of economic crimes in Iceland, Fréttablaðið reports.

The case of the third defendant, former CEO of MP Bank Styrmir Þór Bragason, was referred back to the district court.

This is the second verdict announced by the Supreme Court in cases filed by the Special Prosecutor’s Office in connection with the 2008 banking collapse.

The first verdict was announced over former undersecretary of the Ministry of Finance, Baldur Guðlaugsson, who was sentenced to two years in prison for insider trading.

In both cases the prosecutor’s demands of maximum punishment were agreed to.

The Exeter case involves a more than ISK 1 billion (USD 7.7 million, EUR 6.2 million) loan that Byr granted to Exeter Holding during the banking collapse to buy founders’ capital shares in Byr from select parties, including Jón Þorsteinn and a company owned by Ragnar and MP Bank.

Thus, the total risk of the collapsing value of the founders’ capital shares was shifted to Byr. Ragnar and Jón Þorsteinn are said to have decided to grant the loan to Exeter Holding in violation of the savings bank’s regulations.

Reykjavík District Court had determined that Ragnar had been authorized to violate the regulations and didn’t consider it proven that his intention had been to cause Byr financial damage.

One district court judge submitted a dissenting opinion, concluding that both Jón Þorsteinn and Ragnar should be convicted but Styrmir acquitted. Styrmir was charged with having been party to the others’ violations in addition to money laundering.

Because the district court didn’t take a position on Styrmir’s part in the violations, the Supreme Court decided to refer his case back to Reykjavík District Court.

Prosecutor Björn Þorvaldsson said he had expected the district court’s verdict to be reversed. “It is a very clear and concise verdict and it will likely affect other cases involving similar loans.”

Click here to read more about the Exeter case and here to read about a similar case that is ongoing.

ESA