Iceland's Secret

The Untold Story of the World's Biggest Con

Jared Bibler

• Publisher: Harriman House
• Year: 2021
• ISBN:
  9780857199003
• Topic: Economics
• Subtopic: Economic Conditions
• Index: Economics

Born in Massachusetts, Jared Bibler relocated to Iceland in 2004 only to find himself in the middle of an unprecedented financial crisis a handful of years later.Personally wiped out and seeking to uncover the truth about a collapse that brought the pastoral country to its knees, he became the lead investigator into some of the largest financial crimes in the world. This work helped Iceland to famously become the only country to jail its bank CEOs in the wake of the 2008 crisis.But the real story behind that headline is far more complex — and sinister.A decade after the investigations, the story can be told at last and in full. The crisis, barely understood inside or outside of Iceland even today, is a cautionary tale for the world: an inside look at the high crimes that inevitably follow Wild West capitalism.With the next global financial meltdown just around the corner, this untold tale is as timely as ever.

PART I—The Land

1

Lava fields

The journey that took me to the heart of the biggest financial fraud in history began in a parking lot next to a lava field.

It’s November 2003 and I am standing outside a perfectly clean office building perched in the middle of jagged fields of lava on the outskirts of the city of Reykjavík. The fresh Icelandic air is cold in a way that penetrates to my bones. Standing next to me is a soft-spoken shaven-headed Viking. We are looking north across the ragged black expanse at a blue monstrosity, Iceland’s largest shopping mall. He’s just walked me downstairs and outside. His next words are unexpected: “Well, if you want a job here, it’s yours.”

I don’t know how to answer. I met Pétur the evening before in Vegamót, a downtown bar, on the advice of some new friends. We talked securities software for an hour. I explained the vagaries of trade settlements in the U.S. mortgage-backed market as well as the Japanese system of jikko before the conversation took a more personal turn. We realized we really got along. And then this morning he picked me up at my hotel and brought me here for a follow-up. His deputy, a hard-driving woman the same age as me, gave me a reasonable grilling, and then he good-copped her and showed me a presentation about his vision for his small software firm in a top-floor office. Now this: a job offer out of the blue.

In my surprise, I hesitate. It’s true, I sent around 20 résumés out to companies in Iceland a few months before, a sort of Hail Mary pass to escape the increasingly oppressive world of mortgage-boom Wall Street where I’d been spending days, nights, and weekends for the better part of five years, but I never expected this kind of luck. Do I have a chance to uproot my life and move to Iceland? I’m suddenly scared.

So I tell him I will think it over and come back to him on Monday. It’s a Saturday in November around noon. Which means the light is just about enough to see to walk in relative safety over the jagged rocks and pulverized black gravel that make up the parking lot. The Reykjavík sprawl does this, I’m learning: at its edges it stops abruptly and one is confronted with the harsh reality of life on the rock.

I make it to the mall entrance and my friend Heiða picks me up. It’s my fourth time as a tourist in Iceland these past 18 months, and I have fallen in love with the place. I met Heiða and some of her friends on my first visit: a three-night stopover on my way home to Boston from Stockholm in May of 2002, courtesy of Icelandair’s generous ticketing policies. The nearly endless light, the nearly endless late-night crowds on Laugavegur, and the nearly endless national soul all pretty much hooked me that first time.

Plus a drunken Icelandic sailor on shore leave came up to me in a bar, unbidden, took my hand in his coarse iron grip, and told me, “You are my brother. You are an Icelander.”

Was he right? Could I really live here? Work here?

Nine months of wrangling with visas and paperwork later, it’s the middle of August 2004 and I am finally in my first week of work at Zodiac, the small software company owned by Pétur. I wake up on the top floor of Heiða’s family’s house in Kópavogur. Last night I was up studying until midnight. My new Icelandic teacher handed me a CD yesterday and gave me her orders: “Listen to these dialogues and follow along in the book until you understand every word. Every word.”

I followed her instructions to the letter. At first the conversations were impenetrable. One has a family sitting around the breakfast table, and the little boy Guðni doesn’t want to eat anything. He reluctantly agrees after his pabbi tells him: “Fótboltamenn verða nú líka að borða!”—footballers have to eat something too! Wrapping my head around these new words—and all the others too—took me hours. And I had to be up again at six.

My new life is chaos and confusion, with nothing solid to grab onto. After many months of waiting offshore for all the employment and visa paperwork to come through, I finally touched down in the Land on 9 August. I need to settle on a new apartment, and I am still awaiting a small shipment of housewares and my mom’s old car from the States. So for a few weeks, my friend Heiða and her family have given me an extra room to stay in.

I come downstairs and Heiða’s mom has already laid out breakfast. I am so happy to have these wonderful people to host me, but everything is so foreign. There are a bunch of things laid out in the middle of the table: something labeled smjör, cheese, sliced cucumbers, and other mysterious things in plastic tubs.4 By watching the others, I learn I should toast a slice of bread and then put all of these things on top of it. Even the milk tastes different. There is nothing familiar here. The announcer on the radio is speaking ultra-fast. The language feels hermetic, despite the studying.

Thankfully, Heiða and her family all speak excellent English after having lived and worked for many years in southern Massachusetts. But one of the conditions Pétur laid out for hiring me was that I would become fluent in Icelandic as quickly as possible. Zodiac, his company, are even paying for part of my lessons.

I have to hurry from breakfast because another friend will drive me to the university for my morning language lesson and I have to walk to meet him at his house. It’s cold and raining lightly—autumn weather for me, though ten days ago I was in the midst of a muggy Boston summer. We crawl through the Reykjavík morning traffic to the university, and I hope I won’t be late again.

The lesson lasts from 8 to 10 and my teacher Guðrún, in her early 40s with short steely blond hair, is tough as nails. She’s the best friend of Pétur’s wife, thus the connection, but her work and passion is teaching Icelandic to foreigners. This is still a pretty new idea, as is the idea of emigrating to Iceland at all. Guðrún is the best teacher of the Icelandic language in the whole country, she hints. I believe her. She pushes me hard: we are doing a chapter or two of a basic textbook each day. (She wrote it.) Even the coffee breaks are no break: she flips through the morning paper, but stops at each headline and teaches me the words.

In one of the papers, the Icelandic banks are starting to advertise mortgages. To me this doesn’t seem out of the ordinary at all, but she shakes her head disapprovingly. I can’t figure out why: it’s yet another way everything here feels upside-down.5 My only reprieve is when we go outside so she can huddle for a cigarette against the leeward side of the drab grey university building. But then she piles on the homework. Each night I am pulling three or four hours.

After the lesson I need to take a taxi all the way back out to Kópavogur, to my new job. The work is not at all what I expected: programming in a new language, one I feel slow and dumb at. And it’s hardcore programming. On the Street I’d been both an analyst and a coder. Here it’s all coding, all the time: eight hours or more a day. Staring at a screen: the development environment, the bug reporting system. No phone calls from crazed NY guys to break things up.

I was warned that cars are super expensive in Iceland so I have schemed what I thought was a way around that. I bought my mom’s trusty seven-year-old silver Toyota RAV4 and the day she handed me the keys, I drove it to the docks in Everett, Massachusetts for shipment up to the Land. It is a reliable car, four-wheel drive, perfect for the harsh reality of Icelandic driving that I already learned a bit about in my tourist days.

What I don’t quite realize is why cars are so expensive in the Land. It has to do with a combination of import duties, value-added tax, and steep registration fees, all on top of the shipping costs themselves. Even importing the old car costs me about as much again as I’ve already paid to buy it. It’s also a real hassle involving an opaque bureaucracy spread across three entities: the shipping company, Icelandic customs, and the registry of motor vehicles.

At the shipping company, I’ve been going back and forth with a young girl, perhaps 20, who runs my customs paperwork. Today is my fifth visit to Reykjavík harbor to sort out delivery since the car was unloaded ten days ago. This girl seems to be a summer intern, and to not really know the importation process at all. She gives me the title to the car but then calls me at work to ask that I bring it back in. As I see her interact with the other ladies there, I realize that nobody else in this office seems to have a firm grasp of how to import a vehicle either. It seems like the very first time anyone there has imported a car.

We go back and forth again, papers stapled and unstapled, the girl conferring with her co-workers at each step. I pay them a fee from my new Icelandic debit card. Then they run some numbers again and tell me they need to refund part of the fee. The final i...