The financial avalanche of 2008 rumbles on – now tumbling on to the glamorous international race tracks of Formula 1.
A case went to trial in Iceland on Friday last, 15th February, brought by the Williams F1 team against the Glitnir bank, which collapsed in October 2008. That was the month that was.
The case rests on a rejected claim for £10.4 million Williams had made to the bank’s estate in respect of sponsorship agreements which had been defaulted.
Glitnir Bank was part of the Baugur Group whose CEO at the time, Jon Asgeir Johannesson, agreed in December 2007 that UK based Baugur companies would sponsor Williams.
Shortly afterwards, in January 2008, Jon Asgeir agreed an acquisition of a large shareholding in Williams, in the name of Sports Investments, a Baugur subsidiary. Jon Asgeir is thought to be personally liable for this acquisition.
Both of these agreed investments were defaulted. This led to a new acquisition agreement at a much lower level – for 10% of Williams.
In August 2008 in a farcical post facto corporate ritual, Glitnir’s risk committee was asked by the bank’s CEO, Larus Welding, to agree a letter of credit for £20 million to Sports Investments – which at that time had no assets, in order to enable it to complete an acquisition in Williams and to fulfill a sponsorship agreement.
The ritual element of this meeting was down to the fact that the day before, Larus Welding and Magnus Arnar Arngrimsson, MD of Glitnir’s corporate division, had agreed the letter of credit.
The issue of the letter of credit shifted the liability for £20 million to Glitnir and away from Sports Investments, hence Williams targeting Glitnir in its legal action.
Back in December 2012, Iceland’s Office of the Special Prosecutor filed charges against the three men named above and a fourth, Bjarni Johanesson. Jon Asgeir Johannesson and Bjarni Johanesson are facing charges of abetting the principal defendants in what is a breach of trust case, Larus Welding and Magnus Arnar Arngrimsson.