Iceland’s Secret: The Untold Story Of The World’s Biggest Con

By Jared Bibler

During the global financial crisis of 2008, the three largest banks in Iceland failed within days of each other: Glitner on October 6, Landsbanki on October 7, and Kaupping on October 9. Iceland’s Secret: The Untold Story of the World’s Biggest Con—part memoir, part investigative journalism—chronicles the financial collapse, the history of the banks, and the investigation to establish accountability. Author Jared Bibler states, “The Icelandic crisis is a cautionary tale for the world, a saga of the high level of crime that follows unregulated Wild West capitalism. Don’t think your own country is any better or worse than Iceland.”

A nation of 350,000 residents, Iceland is an island slightly larger than Ireland and smaller than England. “In the U.S., its size is sometimes compared to the state of Kentucky,” Bibler writes. “I prefer to think of the place as a floating New England.” Bibler was a Wall Street analyst who tired of the culture of overwork and moved in 2004 to Iceland, where he’d earlier visited as a tourist. He learned the language, changed his citizenship, and later married an Icelandic woman.

Bibler worked at Landsbanki until the week before it failed. He resigned to avoid being sucked into the irregularities he was warning his bosses against. “The Icelandic crisis of 2008 was an earthquake that leveled the financial fortunes of a whole country,” he explains. The nation’s stock market lost 97% of its value, compared to a 55% loss in the United States during the same period. Bibler describes the years 2009-2011 as “very difficult for the Icelandic public. Much of daily life became a struggle. People lost most or all of the equity they had in their homes. Their salaries barely covered basic necessities.”

During his first years in Iceland, he’d been amazed by the number of private jets routinely flying over his modest neighborhood. “For a guy from New England, it feels a bit like living in a small Maine fishing town that has its own fleet of private aircraft,” he writes. “My Icelandic friends are surprised when I point out how strange I find it to see so many private jets, after so few in 30 years of living near one of America’s wealthiest cities.”

Six months after the collapse, Fjarmalaeftirlitid (FME), the financial supervisory authority of Iceland, hired Bibler to lead an investigation of the collapse. His two-year effort uncovered their similar activities, with similar mindsets. For years, the three banks had been buying back their own stock to keep the prices high. To create the appearance of viable sales, they created bogus companies to “buy” the shares. These companies borrowed money with no collateral except the banks’ own shares. No money changed hands. The hollow shells eventually had to collapse, Bibler concluded.

“Why keep sending the bank’s cash out the door, buying up shares, and then stuffing them into dodgy companies in Iceland and overseas,” Bibler asked himself during the Kaupping investigation. “Why keep hastily arranging junk loans to these new firms?” Then he realized: “I was so focused on understanding the machinery of share laundering, I forgot to ask who owned the laundromat!” It was Kaupping’s top executives, many of whom possessed private jets. After looking at their salaries and stock options, Bibler writes, “As long as the Kaupping share price stayed high, its executives could claim a healthy bank, and their lifestyle could continue. . ..”

Bibler does an excellent job of explaining these financial machinations in layman’s terms, as he takes the reader along on his search and discovery missions. When the banks ignore his requests for data, he goes to their offices and stays until they print the information for him. One person told him the only man who could access their systems was at home that day. Bibler asked, “Doesn’t he have a phone?” Another time he was told not to come because the woman who held the necessary information was home with a sick child. He showed up anyway, and she was working in an office down the hall.

He compares the miniscule FME investigation staff to the Enron Task Force in the United States, which contained hundreds of seasoned investigators from various governmental agencies. “And that was to investigate only one firm,” he says. “We have three collapsed firms of that size, as well as dozens of smaller savings banks and investment companies, and only 16 people.”

His frustration with FME’s lack of diligence in bringing the white-collar criminals to trial is palpable. Bilber left FME in 2011, after having his staff cut to three people. When he asked his boss about the promises she’d made the previous day, she insulted him by saying, “Perhaps next time we should have the discussion in English so you understand better.” The Icelandic general counsel told him, “We don’t need you or this kind of team anymore. Don’t be naïve, the financial crime that happened here, that was all back in 2008. It won’t ever happen again.” Bibler wonders, “What can I possibly reply to that head-in-the-sand view of the world, after world-class financial crime tore this country to its very core? I am stunned and silent.”

Iceland’s Secret concludes with a summary of the court cases and prosecution of bank executives. Most of those sent to prison didn’t stay there long. When they returned to their offices, the money they had stashed offshore before the collapse was still there. “Some of these convicts are free to slowly repatriate the money, buying up hotels, real estate, and other assets in Iceland,” Bibler writes with disgust.

My one complaint about the book was the use of present tense. Continually switching between present tense story and past tense background was a major distractor. The book would have been smoother if written in past tense. Still, I enjoyed Bibler’s solving-the-mystery experiences and the memoirist touches.