Weekend Round-Up: True Grit

This weekend was quite the homage to cowboys the world over.

To start things off, former chairman of Kaupthing Sigurður Einarsson hired himself Ian Burton as his attorney, a man who is apparently the go-to lawyer for millionaires being investigated for fraud.

In a brief interview with Vísir, Burton had some choice words for special prosecutor Ólafur Þór Hauksson:

"It seems to me that this prosecutor wants to show the public that he's a tough guy and he can lock people up. This prosecutor isn't interested in discussion. He wants to behave like John Wayne in a cowboy movie."

Comparisons to John Wayne are pretty interesting. It's similar to Sigurður's remark that the prosecutor's recent arrests were "a drama ... being put on to soothe the anger of the nation." In both cases, it's hyperbolic language saying that Ólafur Þór is reckless and not behaving realisitically.

This is despite the fact that the Special Investigative Commission (SIC) report on the economic collapse was pretty damning when it came to Kaupthing, and Ólafur Þór would be negligent not to go after them. And if anything, Kaupthing's actually the safer bet, prosecution wise. A political investigation, which could begin this fall if the parliamentary committee decides to press charges against anyone, is going to be fairly protracted and possibly ugly, as political trials anywhere often are.

To imply that Ólafur Þór is somehow acting recklessly right now is transparently comical. But Burton also told Vísir that he could send Sigurður to Iceland with just one call from Ólafur Þór, and added that the special prosecutor was welcome to question Sigurður in London. Of course, the Minister of Justice contends that Britain and Iceland do have an extradition treaty, so Burton's offers might go unheeded.

My laughter then turned to blind rage when it was announced that Magma Energy - the Canadian company that already owns 46% of Iceland's third largest energy company, HS Orka, is set to buy the 52% stake that another Icelandic company - Geysir Green Energy - already has of HS Orka. This means Magma Energy will own 98% of the company.

It also means that Magma Energy CEO Ross Beaty pretty much lied when he told the Grapevine last fall: "I went to Iceland earlier this year and looked at opportunities and it seemed that HS Orka could benefit from capital infusion, reorganisation of its shareholding to stronger positions and it looked like there was an opportunity to do something that would help us and help HS Orka and, in the big picture, help the country of Iceland."

Because what helps a country more than moving a public utility into the private sector, where 98% of revenues leave the country altogether? That's right - Iceland is pretty much set to make the exact same mistake California made when it comes to privatizing energy, only the owners won't even live in this country.

Right now, the government is reviewing the sale, spurred on by Leftist-Green MP Ögmundur Jónasson, who quite correctly pointed out that selling natural resources is sorta kinda, you know, completely contradictory to the entire Leftist-Green raison d'etre. We'll see how that goes.

The cherry on top of this weekend was to wake up this morning and see the front page of Fréttablaðið, where it was reported that pharmaceutical giant Roche is considering boycotting the sale of medication to Iceland. The reason? Apparently we don't charge people enough money for their medication. Roche CEO Robin Turner said, in part, "It is obvious that if drug prices go below a certain limit, my company will have no other choice but to stop selling medication in Iceland."

Keep in mind that Roche made about $49 billion in 2009 alone, and Iceland's pharmaceutical market is about 300,000 people, so even if Turner's complaint was true, it's not like Iceland is exactly bleeding out Roche. Roche also makes a lot of cancer medication. But hey, you can't let people in a depressed economy have a bit of a break and get well if it means your profits might take a miniscule dip that probably totals the amount of money Turner spends on vacation.

Weekends are supposed to be relaxing. I demand a refund!

Holy Wow

As most of you know by now, former Kaupthing chairman of the board Sigurður Einarsson is now wanted by Interpol. Yes, that's a big story. I honestly can't remember an Icelander who's ever been wanted by Interpol. Then again, I'm American by birth, and our concept of Interpol is this shadowy secret police that hunts down international jewel thieves with underground lairs. Maybe this sort of thing is more common than I know.

However, what I found particularly stunning is that the newspaper Fréttablaðið not only got an interview with him, but just how clueless and arrogant his responses were.

For example: his take on the special prosecutor seeking out the bankers and investors who played Vegas with other people's money and ruined the nation is "I am absolutely flabbergast at recent events. It really surprises me that men are being arrested upon their arrival in Iceland."

Of course it surprises him. White collar criminals don't get arrested; they get escorted. They don't get put in prison; they're slapped with a flight ban. They can still roll up to court in their Land Rovers, and strut into the building in their finest clothes, sipping their bottled water. Real criminals - you know, people who steal cash the old fashioned way - they're the ones who get cuffs and jailcells, who get led into court with their jackets over their heads. In other words, crooks steal thousands; businessmen steal billions.

But my favorite quote from this guy would have to be this:

"I find these arrests and jailings absolutely unnecessary, and will not at least take any part in this drama, which I believe is being put on to soothe the anger of the nation."

You see? He's the victim here, people. The decent, hard-working former bank managers of Kaupthing are being scapegoated to placate us angry peasants. It's all just one big circus to distract us from the real culprits behind the economic collapse: plain ol' bad luck! Or the Rosicrucians. I don't think anyone's mentioned them yet, which I think is very suspicious.

FIRST

Most of what I do for the Grapevine is translate domestic news into English. And because it was the economic collapse in fall 2008 that got me posting news again, it's made a red thread of itself through most of the news I post. So naturally, when I heard that Former Kaupthing manager Hreiðar Már Sigurðsson, along with former Kaupthing bank manager in Luxembourg and current director of Banque Havilland, Magnús Guðmundsson, had been arrested for financial wrongdoing in light of a report from the Special Investigative Commission (SIC), this caused a certain sense of relief. When I'd read Vísir disclosing where the men were being held after their arrest, the police station by Hlemmur, I imagined for a moment a mob descending on the place.

However, at work the following day most everyone was decidedly cautious about celebrating just yet. This is entirely new territory for Iceland, after all. White collar crime is notoriously underprosecuted. All the same, when Reykjavík District Court denied the men immediate release, and instead sent them to custody at the prison Litla-Hraun - where they'll be in solitary - for twelve and seven days respectively, This gave me a bit of hope. The judicial system, it seems, is willing to act.

But even if there aren't any convictions - and I'd be surprised if there weren't - to go from collapse, change of government, investigation and then arrests within about 18 months is quite a feat.

My biggest worry right now is that special prosecutor Ólafur Hauksson will stay focused on the banks alone. As professor of Economics and Law William Black told me during his visit to Iceland, "the Icelandic government at the time [leading up to the bank collapse] was an almost literal cheerleader for the industry. ... That included the prime minister [Geir H. Haarde], that included the Central Bank chairman [Davíð Oddsson], and that included the regulatory agency."

It's not illegal to be a libertarian, of course. Oddsson and Haarde are welcome to believe in the invisible hand. But what Black points out is that the government did not exert the kind of vigorous supervision that is necessary for a healthy economy: "You have to be more objective. For financial institutions to work well, you need trust, and the paradox is, you need somebody who is skeptical. And there was nobody. Nobody in the senior ranks that was skeptical. ... the ruling political parties at that time, if you had to start with accountability, that's where you would start."

Negligence or collusion, there's enough to bring charges on both Haarde and Oddsson. Whether they'd stick is another matter. In the SIC report, Oddsson depicts himself as being constantly lied to by bank managers. He related a story of yelling in the face of an Financial Supervisory official when presented with Glitnir's numbers shortly before the government took it over. He paints himself to be a decent man surrounded by liars. Even the front page of the newspaper he edits, Morgunblaðið, saw fit to run "The Banks Are Responsible" as their banner headline the day after the report was released, while Oddsson himself was recusing himself from his chair for the week. Making charges stick on Oddsson will necessitate proving that he either purposefully turned a blind eye or was in cahoots.

Haarde, for his part, comes out as more clueless than anything else and, unsurprisingly, terrified of Davíð Oddsson. He wouldn't be alone. Oddsson has a strong grip on the old guard of the conservatives especially. But fear carries with it resentment, of course, and some of his own party members have turned a cold shoulder to him.

Even the President has been brought into this. The SIC report basically said the guy was the PR man for the "outvasion vikings", and used his office to gain favors for some of them. The President's denied any wrongdoing, and said the report has numerous inaccuracies regarding him. It's moot either way, because no one is arresting the President of Iceland. It's just not gonna happen.

Right now, there are two men in solitary confinement in prison, essentially charged with helping to ruin Iceland. We're off to a good start. But none of it will mean anything until the apparatus of government itself is changed.

The banks were allowed to grow ten times the size of the GDP not just because the government was whistling as it drove along, the bolts flying off the wheels. There's never been a real financial supervisory force in place. Privatizing the banks - which was finalized in 2003 - was done on the belief that it was more freedom the banks needed, that this would stimulate growth. The pendulum had swung from one side, to straight through the opposite wall.

Until an active, powerful and politically neutral institution that can and does monitor and calibrate the economy is established, nothing in this country is going to change.