Iceland government falls

[Magda Hassan]

Maybe the banks strike again in Iceland with the current PM about to lose his job as the country riots demanding he explain and go.

Iceland's prime minister is this week expected to face calls in parliament for a snap election after the Panama Papers revealed he is among several leading politicians around the world with links to secretive companies in offshore tax havens.

The financial affairs of Sigmundur Davíð Gunnlaugsson and his wife have come under scrutiny because of details revealed in documents from a Panamanian law firm that helps clients protect their wealth in secretive offshore tax regimes. The files from Mossack Fonseca form the biggest ever data leak to journalists.
Opposition leaders have this weekend been discussing a motion calling for a general election in effect a confidence vote in the prime minister.
On Monday, Gunnlaugsson is expected to face allegations from opponents that he has hidden a major financial conflict of interest from voters ever since he was elected an MP seven years ago.
The former prime minister Jóhanna Sigurðardóttir said Gunnlaugsson would have to resign if he could not regain public trust quickly, calling on him to "give a straightforward account of all the facts of the matter".
The former finance minister Steingrímur Sigfússon told the Guardian: "We can't permit this. Iceland would simply look like a banana republic. No one is saying he used his position as prime minister to help this offshore company, but the fact is you shouldn't leave yourself open to a conflict of interest. And nor should you keep it secret."
Leaked papers show Gunnlaugsson co-owned a company called Wintris Inc, set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wealthy partner, later wife, Anna Sigurlaug Pálsdóttir.
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The Caribbean island of Tortola, where Wintris was set up. Photograph: Christian Wheatley/Getty Images The couple were living in the UK at the time and had been advised to set up a company in the tax haven in order to hold and invest substantial proceeds from the sale of Pálsdóttir's share in her family's business back in Iceland.
Gunnlaugsson owned a 50% stake in Wintris for more than two years, then transferred it to Pálsdóttir, who held the other 50%, for one dollar. The prime minister's office now says his shareholding was an error and "it had always been clear to both of them that the prime minister's wife owned the assets". Once drawn to the couple's attention in late 2009, the error was corrected.
Towards the end of Gunnlaugsson's time as a Wintris shareholder, having returned to Iceland, he was elected to parliament as leader of the Progressive party.
Gunnlaugsson, who became prime minister four years later, never disclosed his Wintris shares on Iceland's parliamentary register of MPs' financial interests.
Nor has he spoken about the offshore company publicly until questioned by the Guardian and other media working in conjunction with the International Consortium of Investigative Journalists.
When first asked if he had ever owned an offshore company, Gunnlaugsson said: "Myself? No. Well, the Icelandic companies I have worked with had connections with offshore companies … but I can confirm I have never hidden any of my assets."
Asked what he knew about Wintris, he initially said: "Well, it's a company, if I recall correctly, which is associated with one of the companies that I was on the board of." Shortly afterwards, Gunnlaugsson ended the interview.

Public statements

The prime minister and his wife then rushed out separate public statements in Icelandic condemning reporters' intrusions into their private business matters.
Both stressed their financial interests had always been properly disclosed to the Icelandic tax authorities. The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.
The prime minister now accepts he did jointly own Wintris with his wife. Copies of the share certificate in his name and of Wintris's share register are published today by the Guardian.
He nevertheless insists he did not have to declare his shares on the parliamentary register because Wintris was a holding company, not a "commercial company".
He was elected to parliament in April 2009 and did not transfer his Wintris shares to Pálsdóttir until the last day of that year. A copy of the transfer agreement is published here.
Asked if he had nevertheless breached the spirit of the disclosure rules, the prime minister declined to reply. He conceded there might be a case for tightening the rulebook.
Leaked Wintris documents show in detail the layers of complexity associated with such BVI companies, masking the identity of those in charge.
They also raise uncomfortable questions about how Gunnlaugsson could have remained unaware for more than two years that he was the owner of 50% of Wintris and its considerable investments.
The instruction to set up Wintris first came through agents in Luxembourg, who contacted Mossack Fonseca, an international law firm specialising in offshore secrecy. A registered office was set up in the BVI and three nominee directors recruited from Panama.

Power of attorney

Names of the Panamanian directors appear on almost all of the company's official paperwork for the first three years, but it was Gunnlaugsson and Pálsdóttir who held the authority to control the firm, having privately been granted power of attorney over Wintris's affairs.
Five months after it was set up, the company also made arrangements to open a bank account at a London branch of Credit Suisse. By then, the involvement of Gunnlaugsson and Pálsdóttir in the activities of Wintris was well hidden from the public gaze.
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A woman leaves a branch of Iceland's second largest bank, Landsbanki, in October 2008, a day after the state officially announced it had nationalised it. Photograph: Olivier Morin/AFP/Getty Images Later that year, Iceland became one of the most severe casualties of the global credit crisis. Financial meltdown meant the country was forced to seek bailout loans and impose currency controls as foreign investors rushed to sell out of the rapidly devaluing Icelandic króna.
While Wintris was shielded from some of this turmoil, it had invested in bonds issued by three Icelandic banks and was owed more than 500m Icelandic króna (£2.8m) when they all collapsed. Only a small fraction of that sum is likely to be recovered.
Revelations from the Panama Papers about Gunnlaugsson and Pálsdóttir's offshore activities are awkward for Iceland's prime minister, who has made a name for himself defending the collapse of his country's financial system against the demands of foreign creditors, whom he has repeatedly characterised as "vultures".
He has dismissed suggestions that his wife's ownership of Wintris compromised him as prime minister. On the contrary, he suggested, his consistently tough approach to foreign creditors, including Wintris, demonstrated that his wife's financial interests had never affected his decision-making.

Icelanders' suspicions

For some years many ordinary Icelanders have grown suspicious about wealthy Icelanders and their use of offshore companies, concerned such arrangements are designed to avoid tax.
To pursue investigations in this area, Iceland's tax office last year paid a whistleblower for a cache of data from Mossack Fonseca's regional office in Luxembourg. As a result, tax inspectors are said to have in their hands the private details of up to 400 Icelanders with interests in tax havens.
There is no suggestion of tax avoidance in the case of Wintris, but the prime minister said he and his wife had "always assumed" the whistleblower data could include information on Wintris. He said he supported the tax office's ongoing inquiries.
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Iceland's finance minister, Bjarni Benediktsson. Photograph: Bloomberg/Bloomberg via Getty Images A rebellion against the prime minister in parliament on Monday may depend in part on the position taken by his partners in coalition government, led by the finance minister, Bjarni Benediktsson.
But Benediktsson's name also appears in the Panama Papers as he previously owned a third of a company called Falson & Co, incorporated in the Seychelles. Benediktsson's interest in Falson was held through bearer share certificates, which do not record the name of the owner.

He told the Guardian the company had been set up with two co-investors to buy a property in Dubai, but the deal had fallen through in 2009 and he had had no dealings with the company since.
In a television interview last year, Benediktsson was asked if he had ever done business in tax havens. "No, I haven't done that," he said. "I have not had any assets in tax havens not done anything like that."
Asked why he had not mentioned Falson, Benediktsson said he had not realised it was based in the Seychelles. He had thought it was in Luxembourg.
Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins

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