Archive for October 12th, 2008

‘The devils are enjoying their last days in Hell’ – the billionaire, his blonde wife and friends who helped bring Iceland to the brink

They giggle and drink bottle after bottle of expensive wine, blithely unconcerned by the
turmoil around them.

This was Icelandic billionaire Jon Asgeir Johannesson, dressed casually in black, legs outstretched, and his merry court at 1am yesterday, holed up in a chic hotel in the capital Reykjavik.

His failed bank Glitnir, of which he is the majority shareholder, owes millions of pounds to British investors, including companies, town halls, police authorities and charities.

But while Reykjavik burns and its assets freeze, The Mail on Sunday found Mr Johannesson still doing nicely – evidenced by the £85 bottles of white wine on his table.

The 41-year-old, who was found guilty of false accounting last year, drives a Bentley and lives in a three-storey Reykjavik mansion that boasts a  bullet-proof room in case of attack. Some people half joke that he may yet need it.

He is one half of Iceland’s most glamorous couple: his 47-year-old wife is Ingibjorg Palmadottir, who owns a yacht which she moors in the Caribbean and drives a customised white Mercedes known in Reykjavik as the White Pearl.

They hosted an impromptu get-together for friends at Hotel 101 on Friday night as their island nation effectively went bankrupt, owing Britain £20billion and others £15billion.

That is £116,000 for every one of its 320,000 inhabitants.

‘It is like being in Hell and watching all the little devils enjoying the last days of normal life in Iceland,’  said an elderly diner.

Earlier on Friday, British tycoon Sir Philip Green, who owns Topshop, held talks with Mr Johannesson, his friend and former business partner, at the hotel.

Although Mr Johannesson refused to confirm that Sir Philip was buying a stake in his retail empire Baugur, the news channel he owns, TV2, said a deal would go ahead.

Baugur is the last private company standing amid the wreckage of Iceland’s economy but is struggling to stay afloat.

After the talks, floppy-haired Mr Johannesson, who looks more rock star than businessman, said: ‘We are looking at the state of business between Iceland and Britain and trying to calm the atmosphere that has become very hostile, as can be seen on the front covers of British newspapers.’

Beyond the hotel, the mood was sombre. Iceland once boasted the highest earnings per person in the world. Now evidence of meltdown abounds: Half-finished buildings scar the landscape and expensive cars no one can afford are piled in the dockyards.

Thorhallur Vilhjalmsson is in charge of building the £117million National Centre but construction all but halted last Tuesday when the bank scandal broke.

He said: ‘The bankers’ debt is 12 times the size of Iceland’s gross domestic product. It is unbelievable that the bankers won’t take responsibility, even now. It is totally crazy.’

Gretar Jonasson, director of the body in charge of Iceland’s real estate sector, said: ‘Repossessions haven’t started yet but they are about to explode. The construction industry has stopped.’

Kolbeinn Blandon, Reykjavik’s biggest car dealer, said: ‘People are going bankrupt all over the place. I hear there has been a big rise in suicides.’

A spoof advert on eBay offers Iceland for sale for 99p.

Boutique owner Freyr Jakobsson  imports designer labels from London, Paris and Milan but has to pay suppliers back within four weeks.

‘But the bank froze my money on Monday and I can’t pay anyone. It’s awful,’ he said.

This small volcanic island has caused havoc with global markets. Its national parliament, the Althingi, resembles a barn and houses fewer than 50 people.

But back in Hotel 101 there was little evidence of gloom. Mr Johannesson and his wife, whom he married last year,  treated their friends to langoustines amid peals of laughter.

Supermarket magnate’s daughter Ms Palmadottir owns the hotel and also runs 101, a tourism agency for the super-rich, whose clients include Chelsea owner Roman Abramovich.

Others seated at Mr Johannesson’s table included Thorsteinn M. Jonsson, a co-owner in Glitnir, Ari Edwald, the chief executive of a media company and Reykjavik’s former Mayor Olafur F. Magnusson.

He was appointed despite suffering a nervous breakdown before the elections.

He was subsequently accused on Icelandic TV of erratic behaviour, excessive drinking and cronyism. He denies all the allegations.

‘I cannot believe they are here drinking bottle after bottle of wine and rubbing it in our faces,’ said a diner.

‘They are all part of the same cosy set, brazenly pouring the last of the country’s wealth down the drain.’

Mr Johannesson attended Iceland’s top business school Verzlunar Skoli, whose deputy head Thorkell Diego said yesterday: ‘I suppose you want to know how we produced this monster.’

After leaving, Mr Johannesson got an £8,000 loan, using it to open a shop called Bonus which sold baked beans and Coca-Cola cheaply.

He built Bonus into a supermarket chain, eventually buying a stake in Arcadia which he later sold to Sir Philip Green for £70million.

He set up investment company Baugur, meaning ring of steel, in the late Nineties.

It employs 50,000 and has a turnover of £6billion. Baugur owns stakes in half of Britain’s High Street, including Woolworths, Debenhams, House of Fraser and Hamleys.

In 2003, a former business associate accused him of using a Baugur credit card to pay £10,000 for escort girls at a party on his yacht The Viking, in Miami.

Baugur called the claim a ‘scurrilous rumour put about by a disgruntled former business partner’.

Later that year during a radio interview, former Icelandic Premier David Oddsson accused him of offering a 300 million krona bribe. Baugur denied this.

Last year the Icelandic Supreme Court found him guilty of false accounting and passed a three-month suspended prison sentence.

Meanwhile, emergency talks between Britain and Iceland yesterday gave fresh hope for the 300,000 UK account holders hit by the collapse .

British Treasury officials landed in Reykjavik late on Friday night to begin a weekend of crisis talks aimed at reclaiming up to £20billion of British assets that have been frozen.

The talks began early yesterday morning and all officials remained behind closed doors for the rest of the day.

Last night the Icelandic government and the Treasury said ‘significant progress’ had been made.

The news may defuse the threat of all-out financial war.

The statement said: ‘Significant progress was made on retail depositors of Icesave with arrangements agreed in principle for accelerated payout to depositors.’

The talks were convened after a week where Gordon Brown and his Icelandic counterpart Geir Haarde exchanged strong words over Iceland’s role in the crisis.

Following the nationalisation of Iceland’s three largest banks last week, its government implied that Britons would be left out of pocket.

After Mr Brown said that this was unacceptable, Mr Haarde appeared to row back and offer a form of guarantee. The talks last night were aimed at rubber stamping the details of that guarantee.

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