May 11, 2010 / 9:40 PM / 9 years ago

Iceland's Glitnir sues ex-officials for $2 bln

* Defendants allegedly conspired to defraud bank

* Glitnir taken over in October 2008

NEW YORK, May 11 (Reuters) - A committee overseeing the remains of Icelandic lender Glitnir Banki Hf has sued several former bank officials and affiliated investors in the United States to recover more than $2 billion.

The complaint filed in New York State Supreme Court in Manhattan accused the defendants of conspiring to wrest control of Glitnir, and drain the $2 billion to “fill their pockets and prop up their own failing companies.”

It was filed a little over 18 months after Icelandic regulators took control of Glitnir and that country’s two other largest banks in the wake of the global economic crisis.

According to the complaint, seven defendants led by investor Jon Asgeir Johannesson “engaged in a sweeping conspiracy” to siphon more than $2 billion from Glitnir.

It said the defendants financed the scheme by relying on funds that Glitnir raised in September 2007 selling $1 billion of medium-term notes to investors in New York and elsewhere in the United States.

The defendants also include: Johannesson’s wife Ingibjorg Stefania Palmadottir, investor Palmi Haraldsson, former Chairman Thorsteinn Jonsson, former Chief Executive Larus Welding, former directors Jon Sigurdsson and Hannes Smarason.

Former Glitnir auditor PricewaterhouseCoopers hf was also named as a defendant. The Glitnir committee said it was complicit in the other defendants’ alleged fraudulent scheme.

Efforts to reach the individual defendants were not immediately successful. A PricewaterhouseCoopers spokesman had no immediate comment.

Regulators in Iceland took over Glitnir in October 2008 and put the bank into insolvency proceedings the next month.

Last month, the Glitnir committee said it had begun a lawsuit against six defendants including Johannesson, Haraldsson and Welding, in proceedings before the Reykjavik Provincial Court [ID:nLDE63620D].

The case is Glitnir Banki Hf v. Johannesson et al, New York State Supreme Court, New York County, No. 601217-2010. (Reporting by Jonathan Stempel)

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