“a deliberate, concerted and dishonest conspiracy between a number of senior Kaupthing executives and two favoured clients of the bank, namely Robert and Vincent Tchenguiz, to defraud and ultimately steal funds on a large scale from the Bank … There is a thread running through all areas of suspected criminality which demonstrates what appears to be a highly unusual relationship between Kaupthing Bank, its senior executives and the Tchenguiz brothers. Indeed there are reasonable grounds to suspect that this relationship was ... a corrupt one which routinely accepted and developed false or misleading information in order to present a picture of financial health for the bank and extensive lending for key clients.”
“A discussion followed on how best Grant Thornton could share information with the SFO. [GT3] thought that it should be possible to replicate the co-operative model as developed for Madoff, on which he had been in the lead for GT. The first issue however was how to get a referral to SFO so as to enable a formal investigation to be initiated. This was a “chicken & egg” situation where SFO needed to have access to S.2 powers to obtain sight of GT’s investigation report but the evidence in the report pointing to UK fraud appeared to be the best route to opening an investigation. [GT1] was reluctant to volunteer detailed documentation in case this should prejudice the civil claims. He suggested that a first step might be for WG to update the presentation material provided to the Icelandic FME & Special Prosecutor. SFO could then request this material (on an intelligence basis) direct from the Special Prosecutor. It was agreed to proceed on this basis.”
“A. Incredible, yes. Yes, apologies, my Lord. There are material documents that have been passed over from the Tchenguiz side which were wholly untrue, given their position. The way that the money was passed out of the bank was highly suspicious. It diverted the normal procedures within the bank. Just for example, instead of going through the proper procedure, the Credit Committee, these agreements of hundreds of millions of pounds were basically done across a meal in a nightclub with no paperwork at all; and they used money market loans, in one case 36 money market loans to get nearly 400 million out to Tchenguiz. As the year progressed from 2007 towards the collapse, the misrepresentations, we would say, was a conspiracy to defraud. In terms of a conspiracy to steal, there’s a wholesale – days before the collapse of the bank, when the FSA were counting KSF in London, The Icelandic Central Bank were taking over the bank in Iceland, Tchenguiz basically came in, in a final last act, and took 61 million out of the bank that basically took him 39 million over his overdraft facility, which at that time was 600 million. They did not have any money in Luxembourg, where his private account was. They contacted Iceland and just said, “Yes, no problem at all.”
“….. the Director has instructed me to review this investigation in general, and the information which was relied on in the application for warrants in particular, with a view to ascertaining whether the information was accurate in the respects complained of in your grounds. I had had no previous involvement in the investigation before this stage. He has concluded that the information was not accurate in those respects and accordingly has instructed that the items seized should be returned forthwith.”
“These Notices require the production by [VT] of documents, some of which were seized from his home and your client’s address on March 9th and 10th 2011. Given that the Director has decided not to contest the judicial review in his case and to accept that those warrants should not have been granted on the basis of the information relied upon, the documents seized from his premises fall to be returned. In the period between September and the return of these documents they have not been examined by the case team. The Director takes this position on the basis that the application for the warrants contained errors of fact, but that the information was submitted to the court in good faith. However, this is a major criminal investigation and it is not thought that errors in the obtaining of the search warrants should result in serious prejudice to it. I have now been permanently assigned to lead the case and the director remains personally closely involved. Fresh consideration has been given to what documents are necessary for the case team to obtain and consider. The first Notice (the ‘here and now’ Notice) is therefore being served on [VT] at the time of the return of some of the search material so that those items which fall within this updated list of material required may lawfully be obtained by the SFO for the purposes of this investigation. The list of what was seized during the searches of his premises will be retained and used to assess compliance with this Notice. The second Notice (the 14 day Notice) is being served on him to obtain those items within this updated list of material required which do not form part of the search material being returned.”
“The particular issue concerns the allegation made in the information about a loan made to [VT] (the ‘Pennyrock loan’ at paragraphs 114-119 of the Information). This allegation was supported by two factual contentions. The first was that the documentation submitted to Kaupthing before obtaining the loan did not disclose the existence of senior lending. In fact, the documentation seen by Kaupthing’s lending committee referred to other creditors. The second factual contention was that the value of the securities offered within the portfolio was widely overstated. In fact, information was provided about the basis of valuation. Reputable agents had been prepared to adopt a projection of rental income over 150 years and other lenders had been prepared to accept this basis. Those two factual contentions, therefore, cannot be substantiated. I am very sorry to say that the SFO had the material which undermines those allegations when we were drafting the information.”
“In my judgment, it is clear that the judge personally must be satisfied that the statutory requirements have been established. He is not simply asking himself whether the decision of the constable making the application was reasonable, nor whether it would be susceptible to judicial review on Wednesbury grounds (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn[1948] 1 KB 223 ). This follows from the express wording of the statute, “If … a circuit judge is satisfied that one … of the sets of access conditions is fulfilled”
“it was a perfectly proper course of action for the SFO to take. A judge had to approve the searches and would do so only if absolutely satisfied that it is the right thing to do.”
“Each trust is managed by Trustees and Joint Trustees appointed to operate the business of the trusts. Nominee company directors are appointed by the trustees to manage the day to day activities of the multiple holding companies and Special Purpose Vehicles (SPV) set up to perform specific activities within the structure. The brothers retain, respectively, the UK R20 and [Consensus] to advise and provide instructions to the nominee directors.”
“The Trustee companies set up to operate the TDT were: Investec Trust (Guernsey) Ltd, Bayeaux Trustees Ltd. Both above Trustee Companies acting as trustees for both TFT and TDT.”
“It is not a crime cut out”
“Alternative collateral for loans under the Agreement consisted solely of shares of intermediary holding companies within the Oscatello structure, with subsidiary companies further down the structure holding assets of value. The loan to value ratio for such collateral was initially set at not less than 87% of the outstanding loan. The loan to value ratio applies to the amount an institution is willing to advance as opposed to the value of the underlying asset or collateral. So in this case it was 87% of the value of the underlying collateral.”
“Even though the exposure on TDT is considerably underwater, it is estimated that the interest of Kaupthing is best served by keeping Oscatello alive.”
“he outlined his concerns about the insolvency of the Oscatello structure. This concern was raised with R20. In response a “Comfort letter” dated14 August 2008 drafted at R20 and forwarded to Kaupthing by a senior employee of R20, Aaron Brown in an e-mail attachment. Aaron Brown requested that the draft be placed onto Kaupthing headed paper and signed. This request was carried out by the above mentioned Gudmunder Thor Gunnarsson who signed and returned the letter as requested on Kaupthing headed paper and with the date amended to21 August 2008 . This seems at odds with the e-mail referred to above [which we have mentioned at paragraph 118.ii) above] in which Gunarsson states that Oscatello was “under water”
“The collapse of Kaupthing involved public and regulatory authorities in a number of jurisdictions. There was huge publicity. The notion that the Trustees could or would have made off with the assets so as to “defraud”
“I have considered whether this approach amounted to genuine, open and frank assistance by [RT]. In the context of the material I have viewed suggesting substantial dishonest conduct by or at the direction of [RT], I do not believe that to be the case. My belief as an experienced criminal investigator, and as the Case Manager, is that this was a tactic employed to seek to direct this investigating body. It does not diminish my belief that the suspect will not comply with service of a S.2 notice requirements or that I have reasonable grounds to believe that material under the warrants sought and of relevance to this case investigation will be located at the target premises.”
“It is believed that the value of the securities offered within the portfolio was widely overstated. Actuarial values have been included within the Financial Statements of the underlying ground rent owning companies that Kaupthing relied on for the continued lending arrangements. Whilst actuarial values are a valid way of valuing the portfolio, the basis for this particular valuation was a projection of rental income for 150 years as opposed to the accepted accounting practise of 50 years. Consequently it is believed that the Financial Statements were materially overstated.”
“In preparation of being impressed with [the case manager]’s evidence, I have signed the warrants.”
“Normally I simply grant them if I am satisfied you have made out a case for the necessity of warrants being granted and I find that there is. It seems to me that this is the only way in which you are likely to pursue the lines of enquiry that you wish to pursue.”
“[The judge] gave no reasons for her decision. With respect to her she should have done so. That is not only because generally judges should always give reasons for what they do, but here in particular because she was exercising a draconian jurisdiction.”
“Although this would have the advantage of bringing judicial scrutiny to the decision to retain the material it is thought preferable to take a completely fresh view of what is required at this stage of the investigation. A number of strands of the investigation which were live in March 2011 are no longer being pursued. Some of the material seized during the searches is no longer relevant to the investigation and therefore can be returned without any impact. Equally, there is now material which may not have been caught under the terms of the warrant and this should properly be sought by Notice. A further warrant would not be appropriate because it can no longer be suggested that any of the access grounds under s.2(4)(a) CJA 1987 are made out. There would also be the appearance, under the circumstances of the SFO, having conducted an unlawful search, of a heavy-handed attempt to have a “second bite at the cherry” if another search warrant were sought. Finally, recognising the background of a JA being sought by VT, the Director has decided that it is appropriate to offer an undertaking to VT that the material provided will not be examined by the case team for 14 days after it has been provided. This is to allow him the opportunity of seeking JR of the decision to issue this Notice.”