Geir Haarde, Iceland’s ousted leader, awaits trial over role in financial crisis

January 18, 2012

In a small, borrowed office a block from where he once led Iceland, Geir Haarde skips the small talk and gets right to the point.

“This is not the kind of situation I want to be in,” says the 60-year-old former prime minister, dressed in a tidy gray suit and blue tie. “I am getting famous for all the wrong reasons.”

The first world leader to face criminal charges related to the financial crisis, he has seen his face plastered in print across the globe, not in flattering profiles but in stories weighing whether he deserves blame for an entire country’s economic collapse.

Haarde is on trial for what he didn’t do, rather than what he did. In a matter of weeks a special court created to prosecute high-ranking government officials but never before convened in Iceland’s history is scheduled to decide whether he deserves up to two years in prison for failing to take proper action to avert financial catastrophe.

In late 2008, as a credit crunch swept the globe, Iceland’s once-thriving banks folded under the weight of their massive and risky financial bets. The country’s currency collapsed. Thousands of furious citizens protested in the streets, demanding accountability. They kicked Haarde out of office and swept his party, the Independence Party, from power. Haarde, who has an economics degree from Brandeis University and a master’s from the Johns Hopkins School of Advanced International Studies in Washington, had spent decades rising through the political ranks, only to leave in disgrace.

By September 2010, a fiercely divided Parliament voted to file formal charges against him. The indictment claims he displayed “serious malfeasance of his duties as prime minister in the face of major danger looming over Icelandic financial institutions and the state treasury, a danger that he knew of or should have known of.” Lawmakers chose not to charge three other former cabinet ministers on similar allegations.

“This is a political trial,” Haarde says, sounding equal parts weary and indignant. “Political opponents and enemies of mine decided to use the court system to get at me and my political party. ... It reminds me of uglier things in times past from other countries.”

But many lawmakers continue to push for the trial.

“Of course, there were many, many more people responsible,” said Margret Tryggvadottir, a member of Parliament who voted to prosecute all four former accused ministers. “It´s not fair, but the collapse was not fair to regular Icelanders who thought they were living in a normal and just society. ... He was prime minister, and he was the captain of the boat.”

As this small island country prepares to try its former leader, he remains a polarizing figure. A case meant to provide justice and closure has instead sparked renewed debate about whether one man should be held accountable for the sins of many.

“This is something we are struggling with. It threatens to rip the fabric of the society,” said Eirikur Bergmann, director of the Center for European Studies at Bifrost University in Iceland.

Bergmann said Haarde certainly deserves some blame for helping to set up a flawed financial system, both during his tenure as prime minister and during an earlier stint as finance minister, “but he’s in no way the greatest villain in this story.”

That distinction, some argue, belongs to David Oddsson, who served as prime minister through 2004, oversaw the privatization of Iceland’s banks and later became chairman of the Icelandic Central Bank. Oddsson, who was named three years ago to a Time magazine list of 25 people to blame for the global financial crisis, has defended his role, saying he did spot problems in Iceland’s financial system but that his warnings gained little traction.

“I guess my blame lies in the fact that we did not see it coming,” Haarde acknowledges, though he is quick to add that many leaders suffered a similar failing. If anything, he argues, he helped salvage the Icelandic economy by refusing to put taxpayers on the hook for rescuing the nation´s biggest banks and by forcing foreign investors to swallow huge losses.

Haarde might be the only government official facing prison, but he’s far from the only citizen facing criminal liability. A mile east from Haarde’s office, in a low-slung building near the bay, a heavy-set man named Olafur Thor Hauksson is three years into his role as Iceland’s special prosecutor in charge of investigating white-collar crime behind the banking crisis. The government created the post after the 2008 collapse but soon found that many potential candidates were ineligible because they had ties to the major banks. Hauksson, an amiable 47-year-old former police commissioner in the nearby town of Akranes, applied for the job when no one else did.

His staff has grown to an investigative team of 90, made up of police detectives, former bankers, auditors and economists. About 100 cases remain under investigation, he said, including instances of insider trading, stock-price manipulation and questionable loans to large shareholders. Hauksson has raided the offices of financial firms, detained former top banking executives and publicly named more than 150 people as suspected offenders.

So far, convictions have been slow in coming, and angry Icelanders eager to punish those behind the country’s collapse have mocked Hauksson’s lack of experience and criticized him for moving too cautiously. “The public wants to have the court rulings now, or even yesterday,” Hauksson acknowledged. But he said cutting corners or rushing to prosecute won’t lead to justice. “This is a big test of our judicial system, and we have to pass the test by doing this all by the book.”

For his part, Haarde is eager for his trial in early March. Prosecutors intend to call dozens of witnesses to testify against him, but Haarde and his attorneys have compiled a lengthy list themselves — bankers, bureaucrats, elected officials — that he believes will reveal he acted in good faith.

He won a small victory when a court dismissed two of the six charges against him in the fall. A new proposal before Parliament would seek to rescind the case altogether. And many ordinary Icelanders, once bloodthirsty for someone to blame for the economic calamity, now say they see little usefulness in prosecuting only their former leader.

But simply avoiding prison isn’t good enough for the former prime minister. Haarde wants something more than freedom. “I used to be considered an able man,” he says. “I want to get my name back.”

Brady Dennis is a national reporter for The Washington Post, focusing on food and drug issues.
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