The fall from grace of the Icelandic raider

At the height of his fame, Jon Asgeir Johannesson seemed untouchable, says The Daily Telegraph. The Icelandic mogul's apparently endless pots of cash allowed him to dominate Britain's high street. But now, Johannesson stands accused of leading "a sweeping conspiracy" to seize control of, and siphon $2bn from, the collapsed Icelandic bank Glitnir. The bank, it is alleged, was "robbed from the inside".

The "sensational" lawsuit, filed in New York by Glitnir's winding up committee, "paints a picture of a bank that became a personal fiefdom", says The Observer. Johannesson, whose glamorous wife, Ingibjorg Palmadottir, is named as a co-defendant in the suit, denies the allegations. He may yet prove his case.

But the "uncomfortable verdict" that has emerged from Iceland's official post-mortem into its monumental crisis was that the country's financial system was shot through with corruption. All three of Iceland's big banks Kaupthing, Landsbanki and Glitnir "were in the thrall of their major shareholders", many of whom were also customers (see below).

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At the heart of Iceland's commercial establishment was a small group of men so interconnected that "it's tempting... to think of them as partners in a single giant national hedge fund", says the New Yorker. Some likened them to the Medici family. For decades, the internecine feuds and deals were conducted mainly within the bounds of Iceland's tiny internal economy. That changed in 2003 when the country's prime minister, David Oddsson, oversaw the liberalisation of the banks "in a less than perfectly transparent manner". High interest rates brought a deluge of "hot" international money. Jon Asgeir Johannesson the entrepreneurial son of a supermarket boss lost no time seizing his chance.

Johannesson's Bonus discount chain was already well known in Reykjavik. But locals were nonetheless bemused by the conquering powers of his holding firm, Baugur. As one Reykjavik writer put it: "a guy running 20 stores in Iceland had suddenly bought half the high street in London".

This included House of Fraser, Hamleys, Iceland, Whistles, French Connection... the list stretches on. At the height of its powers, the Baugur empire had a turnover of £5bn. It seemed like "alchemy". In fact, the fuel driving Johannesson's rocket was cash from several Icelandic banks notably Glitnir, in which he had quietly built up a near-40% stake via a complex web of companies.

Feted as the "new kingmaker of British retail", the swashbuckling Icelander "threw champagne-fuelled parties and seduced business associates with trips by private jet to Reykjavik to sample a 24-hour party scene", says The Observer. The island's hippest venue was the boutique 101 hotel, run by Johannesson's wife. The couple splashed out $25m on New York real estate and a 144ft yacht.

But Baugur's fortunes were inextricably bound up with the banks and the company toppled "like a house of cards" within months of their 2008 collapse. Now the former poster boy of Iceland's boom is the most striking emblem of its bust.

The 'rotten nature' of Iceland's financial corpses

Jon Asgeir Johannesson is the biggest name connected with the collapse of Iceland's banks, but he's by no means the only big cheese facing allegations of criminal activity, says Rowena Mason in The Sunday Telegraph. For months, rumours of share-ramping, market manipulation, excessive loans to owners and unusual transfers offshore have been circling Kaupthing, Glitnir and Landsbanki. Now "the rotten nature of these financial corpses is slowly beginning to emerge".

Last week, Interpol launched an international manhunt for Sigurdur Einarsson, Kaupthing's former chairman and chief executive, on suspicion of forgery and fraud. His former co-chief, Hreidar Mr Sigurdsson, is already in police custody, accused of falsifying documents and market manipulation.

A recent Icelandic parliamentary report showed that Kaupthing "secretly owned almost half its own shares". It also cast light on the "astonishing relationship" the failed bank had with clients such as British property billionaire Robert Tchenguiz, noting a "huge increase" in loans to his companies in early 2007 when he joined the board of the bank's biggest shareholder, investment firm Exista. Rather than calling in Tchenguiz's loans when his firms were hit by margin calls in 2008, "the bank carried on lending".

Lawyers acting for Glitnir allege that Johannesson took £1.3bn in loans out of the bank in 2007-2008 to shore up his other companies. How did he get away with it? By "stacking" the bank's board, it is claimed and "hand-selecting" an inexperienced chief executive who later complained that Johannesson treated him "like a branch manager". It doesn't end there, notes The Sunday Times. The suit also accuses PricewaterhouseCoopers, the world's largest accountancy firm, of malpractice and negligence. Forget volcanic ash, there's a lot more dirty stuff still coming out of Iceland.