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Podcast: Iceland: offshorisation, collapse and recovery. What are the lessons?

In the October 2016 Tax Justice Network podcast: we look at the offshorisation of Iceland’s economy, its collapse and recovery. What are the lessons? Also, Brazil adds Ireland to its tax haven black list and Panama threatens anyone who dares call it a tax haven with a new law…plus more scandal and unique analysis you won’t find anywhere else. Produced by Naomi Fowler for the Tax Justice Network and featuring Sigrun Davidsdottir, journalist, blogger and podcaster, journalist Ingólfur Sigfússon and John Christensen of the Tax Justice Network.

You can download this directly onto your mobile device. phone or tablet (‘right click and save link as’ here)

“Iceland didn’t do what Europe has been doing, lingering in a limbo and not really tackling the big issues, we can see that every so often the European banking sector is struggling now with Italian banks, with Deutsche bank and so on, and this is very much down to the fact the painful things have been avoided and I often say that Iceland shows that a quick stab is better than a lingering pain. Iceland took the quick stab, it was extremely painful at the time but at least things have and are being slowly cleared out and that makes a huge difference compared to the so many European countries where the lingering pain is still there.”

Sigrun Davidsdottir, journalist, blogger and podcaster. Read her Icelog

“Panama is not just a major secrecy jurisdiction, it is a politically delinquent secrecy jurisdiction…they are moving away from a democratic country where civil society can interact freely…to an increasingly autocratic model and Panama now deserves to have strong international sanctions imposed upon it to make sure it doesn’t proceed down this highly autocratic highly secretive, highly non-cooperative model because the only people who’ll benefit from that are the criminals”

John Christensen of the Tax Justice Network

The Taxcast is also available on iTunes

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[KR741] Keiser Report: Rip Up Money, Get More ??? PROFIT!

We are joined by Professor Steve Keen (@ProfSteveKeen) to discuss building new economic models to make the current model obsolete. We consider Quantitative Easing (QE) for the people and examine Iceland’s radical new plan to remove the power to create money from commercial banks.

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Ex Tory Treasurer and City Grandee: ‘I prefer to be the house, not the punter’


In June 2010 in Monte Carlo – Michael Spencer, CEO of interdealer broker ICAP and serving Tory Party Treasurer was awarded the EY “Global Entrepreneur of the Year.”

In a subsequent interview, reflecting upon his award, Spencer was asked: “are you going to be visiting the [Monte Carlo] Casino tonight? to which he replied: “No, I prefer to be the house rather than the punter.”


When visiting a casino, we expect the odds to be stacked in favour of ‘the house’. However few would have expected such honesty from Michael Spencer, by referring to his own firm ICAP in such fashion.

Fast forward to 2013 when ICAP were fined $87 million for involvement in LIBOR rigging, and it becomes obvious just what sort of ‘house’ ICAP have been running. A house with the odds rigged firmly in its own favour, be that through LIBOR benchmark manipulation, or twin zero’s on the European roulette wheel.

Michael Spencer’s problems with regulators don’t stop at LIBOR rigging. ICAP are responsible for the daily setting of the $379 trillion swaps benchmark, ISDAfix. A global exchange between floating and fixed rates of interest.

ICAP including its New Jersey office known as “Treasure Island” because it makes so much money has been the subject of a long-running US led CFTC investigation into the suspected rigging of the ISDAfix swaps market.

ISDAfix is inherently linked to the LIBOR rate, with the daily manipulation of UK LIBOR, feeding into the daily ‘fixing’ of the 10 year ISDAfix swap rate, set in NYC.

The recent FOIA disclosure of a 2009 loan agreement between RBS and Brent Council in London to Move Your Money has raised fresh questions of ICAP’s ‘market making’ activities, and the lack of regulatory oversight of UK local authority finance.

The loan agreement known as a ‘lender option borrower option’ or LOBO, is noteworthy for several reasons.

Firstly the firm who advised Brent Council to take out the loan in 2009 was Butlers, a subsidiary firm of ICAP – noteable for losing half a billion of council cash in Iceland when the banks crashed in 2008.

The loan deal was executed by Garban International – another ICAP subsidiary, earning tidy profits for ICAP on both sides of the trade.

Finally, the structured loan signed in August 2009 features a fixed “teaser” rate, reverting to a floating interest rate which can be “called” higher by RBS at regular intervals, references not just the manipulated LIBOR rate, but the suspect ISDAfix rate as well.


Brent agreed to pay RBS an interest rate of LIBOR +0.25%, fixed for 2 years, reverting to an eye-watering floating rate of 8.70% less the 10 year swap rate (aka ISDAfix) in a structure known as an “inverted floater.”

On Butlers advice, Brent wind up paying an effective borrowing rate of 6.8% on a £10m loan. Twice the current mortgage lending rate available to you or I on the high street. Why?

The RBS loan is costing Brent 6.8% interest, when RBS can access credit via the Bank of England FLS window at 0.25% ?

Assessing the Brent LOBO, the impact of LIBOR rigging on the deal is counter-intuitive, with the loan costing the council more money as LIBOR interest rates were rigged lower.

In a scenario involving LIBOR rigging RBS as lender, and ICAP its conflicted adviser fiddling both benchmarks on which the loan is based, it appears Brent council (‘the taxpayer’) will be paying over the odds to RBS for as long as QE and low interests rates remain.

With £12 billion of these LOBOs on council books throughout the UK (60 year loans), rest assured this is not the last you will hear about these teaser rate loans, described by one analyst as: “payday loans for the public sector.”

Many of the loans, in places like Kent County Council (who have a staggering £441 million in LOBOs) appear to be designed by Barclays to blow up with higher interest rates in 2016-18, just as the worst of the coalitions austerity cuts happen to kick in.

Back at ICAP, it must be comforting for Michael Spencer to know that as ‘the house’, even when the punters lose (as in Iceland) – you still win!


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Four banksters jailed in Iceland. Four council officers ‘disciplined’ in UK

This week, more than five years on from the banking crisis, executives of the failed Iceland bank Kaupthing finally saw justice as four former bosses from the Icelandic bank were sentenced to between three and five years in prison for fraud. Whereas Iceland criminally pursed those individuals who took excessive risks, no such prosecution appears likely in the UK.

In October 2008 with news of Iceland’s banks collapsing amidst a bursting property bubble, a quiet scandal unfolded in the UK, as close to £1bn of taxpayer investments was announced to be at risk in failed Icelandic banks, across 123 public authorities.

It transpired that local authorities led by Kent County Council had been lured by obscure financial consultants Butlers, Sector and Stirling to place high stakes punts on Iceland with little regard for taxpayer losses on the downside. Brokers including ICAP run by Michael Spencer, and Tullet Prebbon led by Michael Fallon MP were also involved.

Some councils’ such as the London Borough of Barnet had been outright gambling, with £27.4 million of taxpayer funds earmarked for schools, transferred to Iceland to make a quick quid, ultimately resulting in the dismissal of Treasury Manager Patrick Towey and criticism of former Barclays banker and Council Leader, now Barnet MP, Mike Freer, who accepted a £2000.00 donation from failed Kaupthing Bank Executive Antonios Yerolemou in 2010.

Fast forward to 2013, and the sobering reality is many UK councils are yet to be fully repaid the multi-million pound deposits they invested – putting continued strain on council budgets at a time of continued austerity and 35% budget cuts.

The closest we have come to recompense for the people responsible for losing taxpayer money Iceland is an announcement this week from CIPFA (Chartered Institute for Public Finance and Accountancy) that four council officers would be struck off for 12 months for “financial mismanagement” of council Iceland investments, which occurred more than 5 years ago. None of the private financial advisors who promoted Icelandic investments to Councils have been punished.

If we take a look at the 10 biggest local authority losses suffered in Iceland we note that a small number of poorly regulated financial advisors lost the majority share of public money. Those advisors were Butlers (£469.5m) and Sector (£313.5m).

Top 10 council investors in Iceland banks

Who are Butlers and Sector? Butlers were a subsidiary firm of ICAP, the inter-dealer broker run, by then Tory Party Treasurer Michael Spencer. During 2011, in a deal referred to the competition commission, Butlers exited the market and was bought out by Sector, itself wholly owned by a company well known to Barnet Council residents, the outsourcing firm Capita. Despite serious concerns including knowledge of ‘kickback payments’ flagged up by the DCLG Iceland Committee, the Competition Commission allowed the merger to proceed, in a deal that now deserves further scrutiny, given recent ICAP LIBOR rigging admissions.

Butlers and Sector both advised Barnet on Icelandic investments in 2007/08. ICAP, Butlers parent company was then executing trades – generating profits for the firm on both sides of the trades, and creating obvious conflicts of interest in the process.

Arlingclose, the only independent advisor in the market in 2007/08 called it right on Iceland, and advised its public clients to pull their funds out 6 months before the banks collapsed. No taxpayer money was lost. Butlers was advising clients to Invest in Iceland just 7 days before the banks crashed. Despite these failures, following a series of mergers, Sector now have 70% market share, and Arlingclose (which merged with Stirling in 2012) 30%. No sense of market discipline or justice here.

The 2009 Communities and Local Government Select Committee Inquiry into the Icelandic Banking Crisis called for an urgent inquiry into the Treasury Management Advisors who had instructed local authority clients to chase high-risk returns in Iceland, identifying systemic risks and failures within the industry, including poor FSA regulation and dubious industry oversight.

The Financial Services Authority failed to act on the Committees instructions to investigate Sector and Butlers, and thus far has failed to answer Freedom of Information requests as to the exact reasons why?

Justine Greening MP who received a £3,000.00 donation from Antonios Yerolemou in 2005 was notably responsible for the DCLG local government finance post in 2009, to which the DCLG Iceland banking inquiry and fraudulent Kaupthing bank transactions relate.

MP’s Theresa Villiers and Justine Greening who received donations from Yerolemou are also known to be pro-Cyprus, which coincidentally is where money plundered via Kaupthing bank was routed, via the British Virgin Islands to a Cypriot company called Choice.

Tory Party Treasurer Michael Spencer was the leading party donor in 2009, as well as CEO of Butlers and ICAP. Michael Spencer is also the man at the centre of the ‘cash for Cameron’ lobbying scandal, who boasted of killing off a UK Robin Hood (FTT) Tax.

In 2007, Michael Spencer declared: “volatility is good for business.” ICAP specialise in interest rate hedging, so when rates are volatile (such as when LIBOR was manipulated by his own firm) ICAP directly profits as spooked clients seek the refuge of fixed interest rates.

During September 2013, Spencer’s firm ICAP were fined $87 million by US and UK regulators for rigging LIBOR, triggering criminal proceedings against three of the firms former staff.

Given both ICAP and Butlers were major players in serving public sector institutions caught up in the Iceland crisis, a natural question arises as to whether internal knowledge of LIBOR rate manipulation, and the obvious profit motive drove ICAP staff to communicate with their Butlers colleagues, using inside LIBOR information to their advantage, when advising council clients executing deals via ICAP?

This is precisely the information we would have received from an FSA inquiry in 2009 – had they bothered to investigate.

2009 evidence from Martin Hickman, then consumer affairs correspondent at the Independent to the Select Committee states: together advisers and brokers hold conference calls with local authority finance officers in which they (advisers and brokers) act in concert to give such advice.”

Hickman’s evidence suggests the so-called ‘Chinese walls’ meant to separate Butlers and ICAP staff from conflict of interest claims were effectively non-existent.

A further twist to the Butlers, Sector, ICAP tale emerged in 2013 when Joel Benjamin, local authorities campaigner with Move Your Money received an FOIA response from Barnet Council regarding the impact of LIBOR rigging on Barnet’s finances. Barnet’s response suggested LIBOR had “little or no impact” on council finances, referencing advice from their advisor – Sector.

Remember that in 2011, Sector bought out Butlers – then a subsidiary of ICAP over the period LIBOR was known to be rigged (2005 -2012), in an unravelling scandal described by Matt Taibbi as the “biggest insider trading you could possibly imagine”.

So what does all of this mean?

Sector retains liabilities for any legacy issues associated with Butlers prior conduct. Some would consider it a potential conflict of interest, that Sector is now privately advising councils regarding the impact of LIBOR market rigging, in which its former parent firm ICAP actively participated!

The situation is especially perverse when one considers Barnet’s finance department is being outsourced to Capita (Sectors parent Co), as part of the ‘One Barnet’ outsourcing deal.

Should we trust Sectors advice that Barnet Council and other public authorities it advises lost no money due to LIBOR? Has the potential conflict of interest between Sector, Capita and Butlers advisory roles and ICAP’s involvement in the LIBOR scandal been declared to Council?

A pending FOIA request to Barnet council means we may soon find out the answers…

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Iceland jails four ‘banksters’ in financial fraud case

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