Former Billionaires Unmourned

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jerrym
Former Billionaires Unmourned

Iceland has no sympathy for the six billionaires it had in its $13 billion economy before the 2008 financial crisis.

"Five of the men -- including former West Ham soccer team owner Bjorgolfur Gudmundsson and Baugur Group hf founder Jon Asgeir Johannesson -- have lost all, or most of, their fortunes after building empires on loans from banks that used the island’s investment bubble to stretch their assets to 10 times the size of gross domestic product.

At least three of Iceland’s ex-billionaires are, or have been, the subject of financial misconduct probes. Johannesson, who once flew around in a pin-striped private jet and owned luxury apartments in New York and London, received a suspended one-year jail sentence in February for violations including accounting fraud. He and Gudmundsson, who filed for bankruptcy in 2009, personified the boom-to-bust cycle that dragged Iceland away from fishing and tourism and turned it into a center for high finance.

“Greed can’t again lead the way,” said Prime Minister Johanna Sigurdardottir, 70, whose Social Democrat-led government took over from the coalition that led Iceland into the crisis just over four years ago. “We’ve taken that route before with terrible consequences for this nation and its people.”

After gaining fame for its debt bubble and the havoc that ensued when it burst, Iceland now is purging itself of the values that brought it to the brink of ruin. The only country to take a former prime minister to court for failing to prevent the crisis has since forced banks to forgive foreign-currency mortgage debt. And in a move to prevent speculation, the Interior Ministry this year proposed limiting land ownership by offshore investors after repeatedly rejecting approaches by Chinese billionaire Huang Nubo.

Iceland’s collapse -- which sent average disposable incomes plunging 20 percent between 2008 and 2010 after the banks defaulted on $85 billion -- even prompted the pro-deregulation Independence Party to pledge its commitment to welfare over investor rights.

Sigurdardottir, whose coalition faces elections in April, says the result is greater economic stability. Her party’s goal is to continue “shielding those groups in society that need it most,” she said in an interview.

As for the former billionaires, their pre-crisis rise and post-crisis fall is an apt analogy for Iceland’s coming of age, according to Stefan Olafsson, a professor of sociology at the University of Iceland.

He’s studied the effect that Iceland’s economic boom had on the nation’s attitudes toward wealth. One year before everything collapsed, Icelanders bought more Range Rovers than the citizens of Denmark and Sweden combined. Now, Olafsson says his countrymen are wary of extravagance.

Before the crisis, billionaires “were the personification of what people believed in: materialism,” he said in an interview. “Since the collapse, their image has been tarnished, and what they were considered to be a symbol of -- successful business and financial genius -- is no longer valued.” ...

The only Icelandic billionaire to keep the title through the crisis has left the island. Bjorgolfur Gudmundsson’s son and partner in Russia, Bjorgolfsson, who also resides in the U.K., was worth $5.1 billion as of May 2007, according to broadcaster Stod 2. Two years later, his wealth had slipped to $1 billion. Bjorgolfsson, who is rarely seen in Iceland these days, declined to be interviewed. ...

Wernersson lost much of his fortune when his investment company, Milestone ehf, failed in 2009. ... Wernersson predicts Iceland will never again become a breeding ground for billionaires -- and that’s not bad thing, he said. “Although this era won’t return, there will still be growth in the Icelandic economy,” he said. “This time around, it’s more likely that it will be reasonable and moderate, which should be a positive thing for everybody.”

http://www.businessweek.com/news/2013-03-18/iceland-s-lost-billionaires-...