Icelandic tycoon still living the high life in London after the collapse of Icesave

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Icelandic tycoon still living the high life in London after the collapse of Icesave

The man known in the
UK as 'Thor' runs an empire as opulent, and opaque, as ever, three
years after the failure of the savings bank that swallowed up £5bn of UK
savers' money

  • Thor and partner Kristin Olafsdottir at a party in Cannes.
    Thor and partner Kristin Olafsdottir at a party in Cannes. Photograph: Michael Buckner/Getty Images

    This article is the subject of a legal complaint from Mr Björgólfur Thor Björgólfsson.


    One
    of the world's most extravagant superyachts, which recently became the
    most expensive item ever put up for sale at Harrods, was designed as a
    floating palace for a controversial Icelandic billionaire who, together
    with his father, controlled the bank behind Icesave.

    The
    90-metre luxury cruiser, projected to cost more than £100m, was to be
    the ultimate testimony to the vast fortune built up by London-based
    investment tycoon and amateur bodybuilder Björgólfur Thor Björgólfsson,
    known in the UK simply as "Thor".

    His lavish private spending
    plans, while unconnected to the affairs of Landsbankí, the bank behind
    Icesave, will stick in the craw of many British victims of the online
    savings scandal.

    Thor's relationship with Landsbankí, before it collapsed almost three years
    ago, has been criticised for allegedly providing him with abnormally
    easy access to borrowing, in his capacity as one of the bank's largest
    shareholders. He denies this.

    Lured by market-beating interest
    rates, hundreds of thousands of British savers, together with scores of
    councils and charities, poured almost £5bn into Icesave internet
    accounts, mostly between the start of 2007 and October 2008, when
    Landsbankí collapsed. Over the same period, companies linked to Thor
    rapidly expanded their already huge borrowings from the ill-fated bank.
    In fact, Landsbankí's loan exposure to the Thor empire leapt by 58% to
    €973m over the period, according to a special investigation commission's report for the Icelandic parliament. Thor disputes many of the report's findings.

    The
    collapse of Landsbankí forced Thor's empire to retrench. The plan for a
    superyacht, known as Project Mars (a play on his thunder god name) [see
    footnote], were abandoned just as building work was about to begin at a
    shipyard in Italy. Since then the designers have been hawking the
    concept around, looking for another billionaire to pick up Thor's dream.


    Thor Bjorgolfsson's Project Mars yacht

    An artist's impression of the £100m Project Mars yacht

    With its almost vertical bow, Project Mars is designed to echo the
    shape of a dreadnought. The blueprint incorporates a helipad, a gym and
    spa, a seven-metre pool, a "beach club" and a sail-in "garage" to house a
    tender and two motorbikes. Artists' impressions of the imagined
    interiors playfully include images of James Bond. The yacht had been a
    playboy's dream for Iceland's
    richest son, echoing a life of entrepreneurial adventure that had seen
    Thor amass rapid fortunes in brewing, telecoms and pharmaceuticals in
    some of the most notoriously challenging eastern European markets, among
    them Bulgaria and Russia.

    His equally swashbuckling compatriot,
    Jón Asgeir Jóhannesson, cultivated fame and became a celebrity figure on
    the business pages of UK newspapers as his Baugur empire bought stakes
    in British high street chains such as Hamleys, House of Fraser, Iceland
    Foods, Oasis, Karen Millen, All Saints and Goldsmiths. But Thor chose to
    avoid the media spotlight and his successes, though orchestrated from
    offices in Mayfair, went largely unnoticed. And despite his imposing
    stature and vast wealth, the young tycoon was outshone on the public
    stage when his father, Björgólfur Gudmundsson, bought West Ham football club in 2006.

    Glimpses
    of Thor's high living occasionally reached the Icelandic media, most
    notably when he flew friends out to Jamaica to celebrate his 40th
    birthday in 2007. The entertainment was provided by pop stars Jay Kay,
    50 Cent and Ky-Mani Marley, Bob Marley's son.

    As well as having a
    reputation for partying that stretched back to his school days – when he
    is said to have run a Reykjavík nightclub and established Iceland's
    first Oktoberfest beer festival – Thor was equally well known for the
    pride he took in his physique. Rumour spread in banking circles that he
    was immensely physically strong and could bench press more than 450lbs.

    It
    was not until 2002, after significant success in Russia, that Thor and
    his father reinvested some of their newfound fortune in Iceland,
    acquiring a 42% stake in Landsbankí when it was privatised. At the time,
    there were murmurings about the suitability of Thor and his father as
    owners of a bank. The two appeared to have returned from Russia with a
    sizable fortune after selling a brewery in St Petersburg. They had
    earlier fallen out bitterly with fellow investors in a Russian soft
    drinks venture.

    Moreover, recalled the detractors, Thor's father
    had a blemished past, having been convicted in 1991 of false accounting
    and given a 12-month suspended sentence.

    Initial misgivings were
    quickly drowned out as Iceland's economic miracle, as it was at the time
    perceived, transformed one of Europe's smallest economies into a
    financial powerhouse. And at the vanguard were the powerful banks whose
    affairs were tightly intertwined with a handful of seemingly Midas-like
    tycoons, Thor and Jón Asgeir among them. Then, abruptly, a shadow was
    cast over the party in 2006, as international bond markets started to
    question Iceland's success, in particular the robustness of funding for
    the island's voraciously expanding banks.

    Landsbankí's aggressive
    entry into the UK savings market in October 2006 was a direct response
    to this looming funding gap. "What we considered a permanent solution
    was simply not being as dependent on the financial markets," said
    Landsbankí's triumphant chief executive Sigurjón Arnason in early 2007.
    "All I have to do is to check at the end of the day how much money has
    come in: £50m was deposited only last Friday."


    Björgólfur 'Thor'  Björgólfsson with his father and 50 Cent.

    Björgólfur 'Thor' Björgólfsson with his father and 50 Cent.

    But as concern about risky banks spread around the world in 2007,
    Britain saw a run on deposits at Northern Rock, and the government was
    forced into a bailout. Meanwhile, on the Icesave website, savers were
    told: "You can also rest assured that with Icesave you are offered the
    same level of financial protection as every bank in the UK." Ultimately,
    savers were, rightly, unconvinced. A mini-run on deposits in spring
    2008 temporarily abated, but began again after the fall of Lehman
    Brothers.

    After a panic-filled weekend during which the Icesave website was shut,
    it fell to the then chancellor, Alistair Darling, to stop the run. The
    Treasury extended a state guarantee to Icesave retail deposits and at
    the same time temporarily seized the bank's UK assets using emergency
    financial stability laws.

    As a result of the scandal Landsbankí
    and Iceland's ministry of finance was for a period placed on a UK list
    of "financially sanctioned" organisations alongside al-Qaida, North
    Korea and Burma.

    While a major additional headache at a critical
    time for the UK, the failure of Landsbankí was part of a near
    system-wide financial meltdown in Iceland that effectively left the
    country facing insolvency. Iceland had to ask the International Monetary
    Fund for a loan.

    In the frantic days before Landsbankí fell, Thor
    personally took part in meetings with Icelandic ministers in his
    capacity as a major shareholder in the bank. To those present he
    appeared to be in control of the bank, according to witness testimony
    later published in the parliamentary report.

    Arni Mathiesen, who
    had been finance minster at the time and held talks with Darling over
    Icesave, claimed in his testimony to the commission that several bankers
    had lied to the government over a range of issues in early October.
    "The worst one was Björgólfur Thor Björgólfsson … he lied to others as
    well and they came to us later that evening and said: 'Nothing that this
    man says can be trusted'."

    Thor has responded by accusing
    Mathiesen of misunderstanding the situation, and suggesting the former
    minister had been relying too heavily on competitor banks for
    information. He said he did attend some emergency meetings concerning
    Landsbankí "as a representative of the shareholders", together with top
    executives from the bank.

    Three years on, despite having to drop
    Project Mars, the 45-year-old tycoon retains many of trappings of the
    super-rich, including a townhouse in Notting Hill acquired in 2000 for
    £4m and substantially extended. Other UK assets include an Aston Martin
    car with a personalised number plate and a number of motorbikes. He
    declines to say whether he still owns a house in the Home Counties, a
    Challenger private jet, or a 42-metre yacht called Element.

    "He
    neither uses nor operates a private jet or a yacht," a spokeswoman for
    Thor said. "Many of his private assets were part of his settlement with
    all his creditors… Many of the assets he was previously reported to own
    may not be in his possession any more." But neither the jet nor the
    yacht appears to have been sold.

    Thor claims to have drawn a line
    under the financial turmoil that engulfed much of his business in 2008,
    and to have reached a confidential settlement with Landsbankí and other
    creditors a year ago. As a result the scale of his empire is harder than
    ever to measure.

    He continues to pursue business interests from a
    penthouse office on Park Lane, but there are signs that his grip on his
    biggest asset, Swiss-based generic drugs maker Actavis, which he bought in 2007 for €4.7bn,
    may already be largely lost. Deutsche Bank now states that it is able
    to exert "significant influence" over this business following a
    punishing refinancing of the debt-laden firm. Significantly, the German
    bank's interest in Actavis is now treated as an investment rather than a
    loan.

    Many victims of the Icesave affair would dearly like to
    know the details of the backroom deal in Reykjavík between Landsbankí
    administrators and Thor – not least because of serious questions about
    the relationship between his business empire and the bank in the months
    before the collapse. Concerns raised in the parliamentary report, which
    runs to more than 3,200 pages, include allegations that:

    ■ In the
    summer and autumn of 2008 Thor's business empire appeared to be in a
    "difficult" situation after taking on €4.4bn of borrowings to acquire
    Actavis in a highly leveraged deal one year earlier. Despite this, loan
    exposure to Thor continued to grow.

    ■ Landsbankí's foreign
    currency loan exposure to Thor companies increased at a time when it was
    straining to retain enough reserves to deal with Icesave and other
    foreign currency obligations.

    ■ Loan exposure of almost €1bn to
    Thor companies when the bank fell were equivalent to about 70% of
    Landsbankí's capital base – far exceeding the 25% legal limit concerning
    large exposures.

    Thor disputes all the allegations as incorrect
    or misleadingly incomplete. "The commission writes at length about how
    the rules should have been, or how they should have been interpreted at
    the time," said a Thor spokeswoman. "That hindsight does not amount to
    any rules having been broken."

    The affairs of another failed
    Icelandic bank, Kaupthing, which also took billions of pounds in
    deposits in the UK and also stands accused of having a questionable
    relationship with its largest shareholder are now the subject of an
    investigation by the Serious Fraud Office. While British fraud
    investigators are known to have gathered intelligence on several other
    collapsed Icelandic banks, including Landsbankí, there is no suggestion
    that they are pursuing inquiries in relation to Icesave, Landsbankí or
    Thor.

    A spokeswoman for Thor said: "Icesave was never the monster
    it was made out to be... Thor [has said] Landsbankí assets would fully
    cover the claims."

    Landsbankí administrators paint a more nuanced
    picture. They are hopeful that priority creditors, including the UK
    Treasury, will eventually recoup much or all of their losses, but
    without interest. Non-priority creditors, including many UK
    universities, pension funds and councils, can expect to get little or
    nothing.

    • The following correction was published on 4 September 2011:
    A
    profile of the Icelandic billionaire Thor Björgólfsson referred to his
    plan for a super yacht known as Project Mars, as a play on his thunder
    god name. To clarify: Thor is the hammer-wielding Norse god of thunder.
    His nearest Roman equivalent is the thunderbolt-wielding Jupiter, rather
    than Mars, the Roman god of war.

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