Icelandic Prime Minister Had Stake In Failed Banks, Leaks Suggest

Leaked documents show he and his wife were creditors to three banks that failed in 2008, even as he campaigned against creditor bailouts.

04/04/2016 10:47 AM AEST | Updated 04/04/2016 10:47 AM AEST

Iceland's prime minister is in hot water on Sunday after documents revealed he was once a creditor to the three major Icelandic banks that collapsed during the 2008 financial crisis. After the crisis, he campaigned heavily against bailing out the banks' international creditors.  

Iceland's opposition party is taking preliminary steps to eject him from power in the wake of the allegations, a parliamentarian said.

Prime Minister Sigmundur David Gunnlaugsson and his wife owned an offshore company, Wintris Inc., that owned bonds in three of the major Icelandic banks that failed during the 2008 financial crash, making the couple creditors to the banks, according to leaked documents obtained by the the International Consortium of Investigative Journalists

The ICIJ released a trove of information Sunday from documents leaked from Mossack Fonseca, a law firm based in Panama. According to the documents, Mossack Fonseca helped hundreds of the world's wealthiest and most powerful politicians, businesspeople and celebrities create offshore businesses. 

Gunnlaugsson, the chairman of the Icelandic Progressive Party, which is actually center-right, has been a member of Icelandic parliament since 2009 and prime minister since 2013. According to ICIJ, not disclosing the assets he held through the ownership of Wintris after he was elected to parliament is a violation of Iceland's ethics rules.

Early reports on Sunday that Gunnlaugsson would resign were false, but there will be political fallout in Iceland as this story unfolds. 

The Icelandic opposition is planning to meet at 8 a.m. Monday to discuss the issue, according to Icelandic parliamentarian Ásta Helgadóttir. 

"It is very likely that we will put forward a motion of distrust against the prime minister and his government and the real question is if the majority parties will defend him from this motion when it will be voted on," she told The Huffington Post. "This is an unprecedented situation in Icelandic politics and people and us who work in the parliament are simply shocked about this breach of trust those reports demonstrate."

Here are the key allegations from ICIJ's story:

In December 2007, Gunnlaugsson and his wife, Anna Sigurlaug Pálsdóttir, purchased Wintris Inc. from Mossack Fonseca through the Luxembourg branch of Landsbanki, one of Iceland’s three big banks. The couple used the shell company to invest millions of dollars in inherited money, according to a document signed in 2015 by the prime minister’s wife, the daughter of a wealthy Icelandic Toyota dealer, after she was asked by Mossack Fonseca where she had gotten the money.

That inherited money was invested, at least in part, in Icelandic bank bonds, including the three banks that collapsed in 2008: Landsbanki, Kaupthing, and Giltnir. That makes the couple creditors, theoretically with an interest in recovering as much money as possible from the failed banks.

In 2015, Gunnlaugsson reached an agreement with Icelandic bank creditors that was more generous than his previous government allies expected.

On Sunday, the Guardian published a video interview between Gunnlaugsson and Swedish television company SVT, in which the interviewer asks the prime minister about his involvement with Wintris. In the video, the prime minister appears caught off guard and calls the questions "totally inappropriate."

"No no no. You are asking me nonsense," he says to the assertion that he sold his shares in the company to his wife for $1 in 2009. About a minute into the video, he begins to walk out of the interview. 

In the wake of these allegations, the prime minister issued a lengthy statement on his and his wife's assets abroad, claiming the couple never breached Icelandic ethics rules. 

"Companies owned by MPs’ spouses, regardless of the nature of that legal entity, are not subject to the reporting requirement according to the rules on disclosure of financial interests," the statement says.

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