Iceland review - 2015, Page 62

60 ICELAND REVIEW
trouble facing the Icelandic banks and surely changed the view of
many investors in a more positive direction.
Only much later did it become known that the bank had lent
the full amount, most of which had no other collateral than the
shares themselves. The Sheikh wasn’t risking much of his own
money. Apparently, Kaupþing’s second-largest owner Ólafur
brokered the deal. In secret the bank lent the money to Ólafur’s
and Al-Thani’s companies without much collateral, who in turn
invested it in the bank. The issuing of the loans later proved to
be the criminal deeds in the case.
The few previous sentences passed for financial crime in
Iceland have most often amounted to two years or less. Though
quite a few cheered the up to five-and-a-half-year sentencing of
the bankers in a kind of schadenfreude, others in our close-knit
society only felt sad to see some of the country’s formerly most
celebrated businessmen being locked up. Perhaps most were just
calmly relieved that the judicial system seemed to be working in
the way it should. Special Prosecutor Ólafur Þór Hauksson said
the conviction held precedence for many upcoming cases, some
against the same culprits, who could, thus, face added prison time
to their sentences. Whether these sentences will hold precedent
elsewhere is still unknown. However, the fact that Icelandic laws
on finances are for the most part the same as elsewhere on the
European internal market has caused a nervous wave across the
financial world. Heavier sentences have been issued for financial
crime in the U.S. but not in relation to the 2008 crisis.
A MORE PROFOUND CRISIS
The ruling in the Al-Thani case is just one
example of how Iceland has responded
differently to the crisis than many other
countries. Not bailing out the banks and
then refusing to implement strict austerity
is another example of Iceland’s unique path
in this crisis. To understand the nature of
this crisis it’s important to keep in mind
that the crash not only was a severe finan-
cial crisis but also served a devastating
blow to Icelandic politics. Key government
institutions and the political class stood
accused of having sponsored the rise and
collapse of the failed neoliberal model. The
profound crisis opened new opportuni-
ties for political reform in addition to the
economic recovery. In a series of largely
non-violent protests, branded the Pots-
and-Pans Revolution, the Independence
Party-led government was popularly ousted
in February 2009. A fragile left-wing coa-
lition government, the first in the young
republic’s history, replaced it.
Many measures were taken in the after-
math of the crash, which collectively had
the aim of widespread political reform.
The parliament appointed a Special
Investigation Commission to analyze the
events leading up to the crash and estimate
whether government ministers had been
at fault. Significantly for the case dis-
cussed here, the government furthermore
established the Special Prosecutor’s Office,
which was to investigate criminal activity in
the financial sector leading up to the crash.
The left-wing government was however
becoming increasingly unpopular, losing
spectacularly in the 2013 parliamentary
election, which resulted in a right-of-center
coalition being formed, led by Iceland’s
old agrarian party, the Progressive Party,
together with the Independence Party.
BANKING COLLAPSE
Then Kaupþing, now Arion Bank, headquarters, Reykjavík.
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