Excerpted from ICELAND’S SECRET: The Untold Story of the World’s Biggest Con by Jared Bibler (Harriman House, 2021). All rights reserved.
Q2 2021 hedge fund letters, conferences and more
Iceland's Secret: The Dawn Raid
On a dark November morning in 2010 I get out of bed extra early. I have to report to the office of the special prosecutor at 06:30 and not a minute later. I park across the street at the same hotel where our wedding guests stayed and walk to the seaside building in a stinging rain. Friendly faces greet me. Someone holds the door open. The small cafeteria is warm and cozy, but also full of nervous energy, already jammed with uniformed and plainclothes police, and seemingly the entire 100-person staff of the prosecutor. Someone has brought some pastries but they’re mostly going uneaten. Coffee is, however, being copiously slurped. I grab a cup myself and sit at a cafeteria table, flipping idly through Morgunblaðið, waiting for the organizers to send us off.
They’ve told us this will be the largest search and seizure in Icelandic history, and it has been meticulously planned. Teams will search around 20 first targets, homes and offices, simultaneously at 08:00 in Reykjavík, Akureyri, and even tiny Hvolsvöllur, a village a few hours’ drive to the east. Following that, there will be a second and even third wave of sites.
The teams are five or six strong. I have brought a few FME investigators along for the experience, but those of us from the regulator are thankfully allocated to different crews, each headed by a seasoned officer. The head of my search squad is a lanky chainsmoking police detective, a tough-guy loner with whom I have only ever exchanged grudging nods—and always secretly feared.
Then the door frame fills, and we get a gentle pep talk from Heavy Special himself. The cafeteria empties rapidly, men and women streaming down the stairs. Outside I look for our team leader, who ushers us toward a silver Toyota Land Cruiser. The raid is so big that the police needed to requisition extra vehicles to get everyone around. The big truck, normally rented by well-heeled foreign tourists, has thankfully been running and is warm and dry inside.
Our team has been assigned to search the Reykjavík offices of Saga Capital, high in the city’s only skyscraper. It’s a short quiet ride in the dark. I try to look calm, but inside I am shaking. I can feel the same nervous energy in the others around me. The darkness is like a sixth person in the car with us. It’s nearly 08:00 now. It won’t begin to get light for another two and a half hours.
The cop driving pulls us up on the sidewalk in front of the glass high-rise. The building is still partially completed and we ride a cardboard-lined elevator in silence to the 17th floor. Arriving in the foyer, we see the glass doors frosted with the Saga Capital logo. But our entrance proves to be anticlimactic; apparently nobody works here at this early hour. The reception area is vacant.
We hear the noises of a drip coffee machine being put into service and then the receptionist appears from around the corner. She’s visibly on edge.
The slim detective breaks the silence. “We are here to speak with the head of this office.”
“Was he expecting you?” she asks, her voice trembling a little.
“No, this is a police raid,” he says, letting his badge holder drop open. I have never seen an Icelandic police badge before. It is much bigger than I would have guessed. Carried in a black leather folio shaped like a sandwich board, it seems to be about the size of a license plate. The poor woman’s face turns white.
She drops into the chair behind her desk and he shows her the search warrant. She tells us the head of the office is on his way in to work now. The detective says we will take over the boardroom while we wait for him to arrive. The receptionist seems to relax a little. I feel sorry for her.
Inside the boardroom, our leader passes out copies of the search warrant, stating the names of several shell companies on which we are seeking documents and info. It is not a case with which I am very familiar, having been run out of Binni’s team at FME, and with more work done since by the prosecutor’s people. I read over the list of inscrutable names, trying to memorize as much as possible. Then I notice the man named as the head of this office on the warrant. In my excitement over the raid, I have completely forgotten who the local office head of Saga Capital is: the old head of asset management at Landsbanki, the one who wouldn’t let me go until the cakes came.
And here he comes into the conference room now. Smooth and calm, with a long black cashmere overcoat hiding his pot belly, the office chief is a model executive. Unlike his receptionist, he doesn’t seem at all nervous. He notices me right away and nods without surprise. The detective lays out the parameters of the raid. One policeman, an IT specialist, will go to the server room and start an immediate extraction of the emails of several employees. The rest of the team will search the desks of staff, looking for material on the companies listed in the warrant.
The executive says he will need to go and call the CEO of the firm, his high school friend in Akureyri, to let him know of the raid.
“Trust me, he knows,” says our detective.
The guy keeps inventing reasons to go to his office and make a phone call.
“You can make any call you need to from here,” says our lead cop.
All at once the raid is moving fast: the detective has to take a call on his cell, the cops are all in the server room and suddenly I am there alone in the boardroom with my old boss. “How do you like it at FME?” he asks. The attempt at chit-chat surprises me and I don’t know how to answer. I keep my replies monosyllabic.
Luckily, our leader appears again, framed by the conference room door, staring directly at the office head. “We will go into the main offices now, so maybe it’s a good idea to get your people out of there.” Turning to me, “OK, Jared, you know what you are looking for, go get it.”
The exec leads us down to the other end of the building, where most of the desks are located. The open-plan office is walled on three sides by floor-to-ceiling glass. Beyond, it’s pitch-black. The endless rainy night of winter Iceland.
Since our arrival, a few employees have trickled in, unaware they’ve walked into a raid. Their boss goes ahead of us, turning the corner into a partitioned area. I can’t hear what he says, but three vacating workers come past us with puzzled looks on their faces.
I recognise the third one. He’s my old direct supervisor from Landsbanki. Skinny-tie man! The one who threw me under the bus over the mysterious cash wires. The one I quit rather than be fired by. Recognizing me walking past him, still clad in my black raincoat, flattened cardboard boxes and packing tape in hand, it’s like his face is suddenly made of rubber. I have of course heard of someone’s jaw dropping, but this is the only time I have ever seen the thing really happen. Then I am past him and into the large four-person office space.
Inside, it’s just another office in an Icelandic financial firm: an outward sense of sparse organization that belies the dusty, chaotic jumble of binders and loose papers tucked out of sight. I start with the bookcase behind one desk, while my colleagues seize and tag a laptop. I go through each binder, looking for any of the names on the search warrant. It’s stressful work, as it needs to be done with perfect accuracy yet with thousands of pages of documents in this messy collection of binders. I can also feel the edginess in the cops working nearby.
I find one binder that appears to refer to a different kind of financial crime, and one that was popular post-crisis: using falsified invoices to cheat the Icelandic central bank out of its meager supplies of foreign currency, in effect stealing again from an already-gutted Icelandic society. This blatant fraud became a popular money-making scheme among many ex-bankers in the Land, some of whom even set up consulting companies to exploit it. I call our leader over and ask if we can take this evidence as well. “Do you want it, Jared?” he asks. “Yes,” I say. “Then take it.”
After about an hour, we have gone through everything. We leave most of it behind. The majority of the contents consisted of junk like slideshow decks for investment ‘opportunities’ run by other dodgy firms. We do, however, find three or four binders referring to companies listed in the warrant. These we log on inventory sheets and place inside a cardboard box that we seal onsite. By this time Thorvaldur Ludvik, the CEO of Saga Capital, has arrived. He wasn’t in Akureyri after all. He strides into the room as we are wrapping up, his face bright red. I am standing at the front with my hand on top of the sealed evidence boxes, waiting for the all-clear to carry them outside. ‘Lulli’ stands across the boxes from me, veins in his forehead bulging. He looks like he might punch me in the face and grab the evidence.
But then we roll out. Our leader asks the CEO to come with him separately. He arrests him in the elevator as they descend.
