Iceland jails former Kaupthing bank bosses

Kaupthing was the largest of the Icelandic banks to go into administration in 2008

Four former bosses from the Icelandic bank Kaupthing have been sentenced to between three and five years in prison.

They are the former chief executive, the chairman of the board, one of the majority owners and the chief executive of the Luxembourg branch.

They were accused of hiding the fact that a Qatari investor bought a stake in the firm with money lent - illegally - by the bank itself.

Kaupthing collapsed in 2008 under the weight of huge debts.

For years, Kaupthing and other Icelandic banks had aggressively pursued overseas expansion plans, but when they went into administration, they brought the country's economy to its knees.

Just a few weeks before the collapse, Kaupthing announced that Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani had bought a 5.1% stake during the financial crisis in 2008.

The move was seen as a confidence boost for the bank.

Legal costs

Hreidar Mar Sigurdsson, the former chief executive, received five and a half years, while Sigurdur Einarsson, former chairman of the board, was sentenced to five years in jail.

These are the heaviest sentences for financial fraud in Iceland's history.

The court gave Olafur Olafsson, one of the majority owners three years and Magnus Gudmundsson the former chief executive of the Luxembourg branch, three and a half years.

None of them were in court for the decision but it is expected that they will appeal.

The four were also made to pay their own legal costs for the case, which amount to millions of pounds.

The special prosecutor, Olafur Hauksson, said the deal had influenced the bank's share price. He also said the loans provided for the deal were illegal.

Mr Hauksson told the BBC that there was still another, bigger case against Kaupthing Bank ongoing, in which it is accused of market manipulation. It is due to come to court at the end of January.

Deceived

Kaupthing Singer and Friedlander was the UK arm of Kaupthing Bank - the largest of the Icelandic banks that went into administration in October 2008.

According to the Icelandic media, the charges state that the deal was done by first depositing a loan from Kaupthing bank into shell companies in the British Virgin Islands.

The money then went from there to a Cypriot based company called Choice, which was owned by Olafsson, Sheikh al-Thani and al-Thani's adviser.

From there it was moved to another firm called Q Iceland Finance, also owned by al-Thani, and then finally ended up back in the bank to pay for the shares.

It was never publicly stated that the company owned by Olafsson was party to the deal.

Sheikh al-Thani did not testify but he gave a statement to the prosecutors. In it, he said he did not know of any direct involvement by Olafsson to the deal.

Al-Thani's lawyers, who made an agreement with Kaupthing's administrators, said he considered himself to have been deceived.