Tchenguiz's loans under microscope

Iceland's Kaupthing calls in forensic accountants

• Simon Bowers
• The Observer, Sunday 12 April 2009
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Bad loans to property entrepreneur Robert Tchenguiz, one of the biggest losers from the credit crunch, are among those under forensic investigation by accountants and lawyers acting for failed Icelandic bank Kaupthing, the Observer has learned.

The two sides are separately locked in a legal dispute over how to split proceeds from the sale last month of Somerfield, in which both Tchenguiz and Kaupthing held stakes alongside Apax Partners and Barclays Capital. The convenience store chain was sold to the Co-operative Group for £1.56bn.

Kaupthing has already seized control of much of Tchenguiz's business empire, taking ownership of assets posted as loan collateral as part of the bank's attempt to avoid collapse in October last year. It now owns two private companies behind the La Tasca tapas chain, and high street pub brands Yates and Slug & Lettuce. It also took over and sold down major stakes in J Sainsbury and pub group Mitchells & Butlers, as well as seizing a holding in Lara Croft computer games publisher SCi Entertainment, and smaller, undisclosed interests in brewers Marston's and Greene King.

Kaupthing's resolution committee, acting on behalf of the bank's creditors, is determined to probe all aspects of the relationship between former management and certain large customers including Tchenguiz, who was connected to the bank as its largest customer, a major investment partner, and through his interest in Kaupthing shares.

While no accusations of wrongdoing have been made, investigators have placed dealings with Tchenguiz under the microscope to rule out any conflict of interest.

"On the face of it, it looks very uncomfortable," a source familiar with the situation said, referring to the bank's various connections to Tchenguiz. However, the source added he did not believe any improper dealings had been identified.

Tchenguiz has previously told the Icelandic media: "Claims that companies related to me had received preferential treatment from Kaupthing are unsubstantiated and completely untrue." He declined to comment when contacted by the Observer, but is believed to be relaxed about the investigation.

An independent PricewaterhouseCoopers report to the resolution committee highlighted transactions in the run-up to Kaupthing's collapse in October, earmarking them for further scrutiny. Investigators have been asked to "prepare and commence legal proceedings against parties that might be in debt to Kaupthing due to those transactions".

Last summer, Kaupthing loans to the Tchenguiz empire amounted to 230bn krona (£1.47bn) - equivalent to 46% of bank deposits. But, by October, efforts to recall them urgently in Iceland's banking meltdown failed to recoup anything close to the £1.47bn.

A later lawsuit made clear Oscatello Investments, the holding company to which the Tchenguiz loans had been made, still owed Kaupthing £644m.

The bank now owns Oscatello and the amount outstanding is expected to fall as Kaupthing continues to liquidate remaining collateral.