Iceland’s special prosecutor issued indictments on Monday against two former top executives of collapsed Glitnir Bank claiming they committed fraud by handing out an unauthorized loan of more than 100 million euros (US$130.2 million) in early 2008.
Iceland’s financial system imploded in late 2008, its currency slumped and the nation is only just beginning to recover after a loan from the IMF and other lenders.
The two executives, former Glitnir CEO Larus Welding and head of corporate finance Gudmundur Hjaltason, are charged with abusing their positions by lending an investment firm some 10 billion Iceland krona — then worth about US$133 million — without any collateral and without consultation with other members of the bank’s risk management board.
The special prosecutor -estimates Glitnir’s loss on the loan at 53.7 million euros.
Welding and Hjaltason could face up to six years in prison if found guilty, according to the indictment.
The two are the first executives of Iceland’s top banks to be indicted for offences committed in the lead-up to the collapse of the financial system in October 2008.
A former permanent secretary of the finance ministry has been sentenced to two years in prison for insider trading. That case has been appealed to the Supreme Court.
Two top executives of the collapsed Byr savings & loans were also charged with fraud. They were cleared in a municipal court, but the case was also appealed to the Supreme Court.
Dozens of cases related to the banks’ role in the crash are under investigation by the Special Prosecutor’s office, set up to deal with the events leading up to 2008.