Arsenal News » 2009 » September » 18

Two financial stories turned up last week – both affecting the EPL but neither making it onto the football pages.

The new story concerns our old chums, West Iceland United (4 stops from Barking), and it furthered rumours that have been circulating for months and months.

First the background. When Icelandic banks went bust the UK government used the Anti-Terrorism legislation to seize Icelandic assets.  That was not just bizarre, it was a total abuse of power.   Iceland might be a lot of things (like bloody cold) but it is not a terrorist haven nor a base for any religious fundamental groups. It is in fact the country that is more free from religious involvement in its legislation and social life than virtually any other country in  the world.

Using Anti-Terror against Iceland was an absolute abuse of authority by the UK government, but something interesting did comes out of it.  As a result of this abuse, the Serious Fraud Offiice in the UK rummaged through a load of Icelandic financial stuff and started to reach the conclusion that there was something very nasty in the woodpile.

Icelandic legal authorities (including special prosecutor Olafur Hauksson) were tipped off and in return for no longer classifying Iceland as a Terror Suspect, they were encouraged by the British to dig deeper into what happened in October 2008.  The word coming out from both sides of that bit of the fish pond that separates the UK from Iceland is that

a) there was not just mismanagement and greedy over-expansion of the banks, there was fraud.

b) “a lot of roads lead to the UK”.

Now what does this have to do with our mates in the East End? WHU was bought out by one of the banking giants, Bjorgolfur Gudmundsson (who is incidentally being sued by former chairman Eggert Magnusson for breach of contract,  Sheffield United over some football transfer or other, former chairman Terry Brown, Kia Joorabchian and Alan Curbishley.  (Actually to be fair not every case has started, but everyone on that list has either sued, threatened to sue, or settled a claim with WHU).

So West Ham’s owner is already involved in a lot of disputes, but one question has never been resolved: why on earth should Bjorgolfur Gudmundsson, giant of the financial world, buy a second rate East End football club?  Was there something fishy going on (fish – Iceland geddit?)

Of course I have no evidence of fraud, money laundering or anything else at West Ham, and as far as I know it is a perfectly legit and well-run business, that just happened to be associated with a man who orchestrated the biggest financial collapse of any western country ever, and which has now utterly and totally run out of money.

Special Prosecutor Hauksson says he expects there to be around 70 cases of fraud to be brought relating to the British ends of Icelandic loan fraud, market manipulation, document fraud, embezzlement and bank fraud.  Which pretty much covers the whole list of possible frauds.  Except money laundering.   Cut that one from the list.  Can’t imagine that.

So what happened?

Iceland had banks for Icelanders.  But then at the turn of the century they started to expand into other countries, offering rates of interest that no one else could match. The banks (Glitnir, Landsbanki and Kaupthing) grew at impossible rates until they had turnovers that were nearly ten times the gross domestic product of Iceland itself.

These banks then lent money (which banks do of course) – but some of the loans were huge, and some were to people who owned the banks, which really isn’t allowed, because of the obvious corruption issues.

And they did it in such a way that rather like Notts County or Leeds United, it was impossible to find out who owned what (not that those august clubs are involved in fraud).  And lurking right in the middle is the owner of West Ham.

Apparently the serious fraud office is going to go to Reykjavik – which will be fun if they leave it much longer – it starts getting cold at this time of year.

But still the same question remains – why on earth did and Icelandic banker who was involved in such things as loan fraud, market manipulation, document fraud, embezzlement and bank fraud (if he was – he has not been tried so we don’t know, but given the Eduardo scenario I think we can now call anyone in football upon whom suspicion arises, guilty before they are charged):- why did this banker buy West Ham?

He was seemingly (and that is seemingly to me, not to the SFO) doing financial stuff, moving money, borrowing money, lending it to himself.  Why muck about with a little EPL team going nowhere fast?

I’d love to know.  Wouldn’t you?  Especially if all the fraud roads point to England.

But just to stress – what I am doing here is take the chain of events in Iceland over the past 11 months, and mixing them with the fact that one man at the centre is a) being sued by people and b) is the man who inexplicably bought West Ham, and c) while West Ham is being sued by all sorts of people.  I have no proof that anything is linked and that awfully nice Bjorgolfur Gudmundsson might have done nothing wrong whatsoever.

And what has this got to do with Arsenal?

The fact is that a lot of clubs have gone down funny financial routes these past few years.  Manchester IOU owning over half a billion pounds, Liverpool owning £350m, KGB Fulham, Manchester Arab, Portsmouth, Fulham and others being dependent on the largess and interest of one person…

These are all dodgy financial models.  At the moment the Arsenal model looks rather pure in comparison.  Dead straight, open, no oddities, no Iceland.   Seems the best approach to me.