latest on fraud investigation and Kaupthing from the Sunday Telegraph
SFO to probe collapse of Icelandic bank
Intelligence finds and plight of UK savers prompt prosecutor to investigate possible criminal activity in failure of Kaupthing
By Richard Fletcher and Rowena Mason
Published: 10:43PM GMT 12 Dec 2009
The Serious Fraud Office is preparing to launch a formal investigation into Kaupthing, the failed Icelandic bank, amid suspicions that it may have been involved in criminal activity.
According to sources, the SFO is expected to announce this week that following four months of intelligence gathering it is to launch an official inquiry. The prosecutor is expected to appoint one of its most experienced investigators to take charge.
Alistair Darling: questions over Icelandic banks' compensationMembers of the former Kaupthing board are understood to have appointed one of London's leading fraud solicitors ahead of the formal announcement. Ian Burton, the senior partner at Burton Copeland, who defended jockey Kieron Fallon and Independent Insurance founder Michael Bright, is believed to be acting for former members of the board. A spokesman for Burton Copeland refused to comment.
Kaupthing collapsed last October, along with two other Icelandic banks, Glitnir and Landsbanki, leaving 300,000 British savers unable to access their money and institutions nursing billions of pounds in losses.
Two-thirds of the bank's corporate clients had links to London and the bank had relationships with a number of leading UK entrepreneurs - including Sports Direct owner Mike Ashley and property tycoon Robert Tchenguiz e_SEnD who could find themselves drawn into the investigation despite no suggestion that they were involved in any wrongdoing. The pair could be among a number of entrepreneurs interviewed as witnesses.
Robert Tchenguiz, the former billionaire property investor who lost a large chunk of his fortune in the recession, was Kaupthing's biggest client as well as a director of its largest shareholder.
The bank's leaked loan book shows that Mr Tchenguiz borrowed €1.7bn to finance his private investments from the bank. Earlier this year, Kaupthing sued the businessman for the return of £643m held in Oscatello, an company based in the British Virgin Islands.
Kaupthing also financed Sports Direct's acquisition of stakes in rival retailers Blacks Leisure and JD Sports. The stakes have since been seized by Ernst & Young. The Icelandic bank also advised the entrepreneur on his acquisition of Newcastle United.
Following Kaupthing's collapse, the Treasury had to pay £7.5bn to compensate UK savers, although £2.3bn of this will be repaid by Iceland over the next 15 years. The UK was forced to freeze the bank's assets just before its collapse amid fears that money could be transferred back to Iceland.
One source said the aim was to conduct a full SFO inquiry on behalf of the hundreds of British charities, councils and offshore savers still waiting to be fully compensated a year after the crisis.
Since August, the SFO has been gathering intelligence to "get to the bottom" of the collapse. Investigators have also travelled to Reykjavik to help the Icelandic authorities, which are conducting seperate investigations into the collapse of Kaupthing along with Glitnir and Landsbanki.
The SFO's interest in Kaupthing will be uncomfortable for the bank's London advisers although there is no suggestion of any wrongdoing on the part of any individuals or other companies.
Icelandic investigators have already put Kaupthing's dealings with Kevin Stanford, the retail investor, and Moises and Mendi Gertner, the London-based entrepreneurs, under scrutiny.
The Icelandic financial services regulator has handed files relating to Kaupthing and suspected market manipulation to the country's special investigator. The authorities have been examining Kaupthing's transactions with a company linked to Mr Stanford and its trading in credit default swaps (CDS) relating to the bank.
Mr Stanford's company, Trenvis, is believed to have been set up by Kaupthing in the British Virgin Islands before receiving a loan of €41.7m (£35.3m) from the bank.
Mr Stanford was a business associate of the Icelandic retail giant Baugur, which borrowed heavily from Kaupthing.
A spokesman for the Gertner brothers declined to comment and Mr Stanford could not be reached.The SFO also refused to comment.