Tchenguiz brothers arrested in Kaupthing probe

The pair are being questioned by police in London after a string of dawn raids across the city.

In total, seven men have been arrested in the UK in connection with the fall of Kaupthing, one of three Icelandic banks that failed at the height of the credit crunch in October 2008.

We were arrested earlier this morning and are being questioned with regard to matters relating to our relationship with Kaupthing bank. Tchenguiz brothers

Two men aged 42 and 43 were also arrested in Reykjavik, Iceland in a joint operation, the Serious Fraud Office (SFO) said.

The Tchenguiz brothers are the highest profile businessmen to be arrested in connection with dealings before the credit crunch so far.

The SFO has been looking into the collapse of Kaupthing for more than a year. When its investigation was launched, in December 2009, it said the aim was to: “seek to identify whether misrepresentations or false representations were communicated by the bank in the push to attract UK investors.

“Another focus for the SFO investigation will be the decision making processes, which appear to have allowed substantial value to be extracted from the bank in the weeks and days prior to its collapse.”

Raids

A team of 135 police officers and Serious Fraud Office investigators were involved in the arrests. Two business properties and eight residential addresses were also searched in London, and City of London Police officers remained outside the brothers’ multimillion-pound offices near Hyde Park throughout the morning.

In a statement, the Tchenguiz brothers said: “We were arrested earlier this morning and are being questioned with regard to matters relating to our relationship with Kaupthing Bank.

“Both of us are co-operating fully with the investigation and are confident that, once concluded, we will be cleared of any allegation of wrongdoing.”

Entrepreneurs

The Tchenguiz brothers made their fortunes investing in property and leisure, and are among the UK’s highest profile entrepreneurs, featuring regularly on the Sunday Times Rich List. Robert dated the model Caprice, and the pair were famous for their flamboyant parties aboard their yacht (pictured) at the top property event, Mipim, in Cannes.

Vincent owns the boat “Veni Vidi Vici” – Latin for “I came, I saw, I conquered”, while his younger brother owns the “Little Violet” yacht.

It’s a really sobering reminder that the real estate sector has still got huge problems. Giles Barrie, Property Week Editor

While Vincent built up a big residential property portfolio in the boom of the nineties and 2000s, Robert was better known for major corporate deals.

Before the credit crunch, Robert Tchenguiz bought stakes in high profile companies including pub group Mitchells & Butlers and supermarket group Sainsbury’s – backed by Kaupthing. He was forced to sell these shares, with others, when the bank collapsed into state ownership, which was reported to have lost him up to £1bn in 24 hours.

Editor of Property Week magazine, Giles Barrie, told Channel 4 News their arrest was a “sobering reminder” that all was still not well in the property sector.

“Robert and Vincent Tchenguiz are among the biggest names in property and actually also business. They really symbolised the ‘noughties’ boom,” he said.

“Robert was a financial engineer par excellence, he took big positions in Sainsbury’s and Mitchells and Butler. At one point he was rumoured to be taking over Sainsbury’s – that’s just the scale of businessman he is. He’s been dragged down just recently by his problems with his debts and the credit crunch, and his problems with Kaupthing, but these were amongst the biggest names in business and property during the boom.

“It’s a huge shock for property just as the market was scrambling to its feet – it’s a really sobering reminder that the real estate sector has still got huge problems, those huge problems surround debt and debt incurred with the likes of Kaupthing alongside.”

Kaupthing connections

The SFO and Icelandic officials have been looking into what happened at Kaupthing for more than a year. The Icelandic bank had a significant UK operation in business lending, as well as for savers.

Trusts connected to the Tchenguiz brothers are reportedly trying to file a £2bn lawsuit against Kaupthing, and to be recognised as creditors of the bank, despite owing it millions when it collapsed.

Mr Barrie added: “We can’t prove anything dodgy was done at all – these are only allegations and it’s early days. I wouldn’t be surprised if Robert and Vincent came out fighting with a stern and robust defence. They’ve been knocked down before, they’ll have the world’s best lawyers behind them and the other thing is, it is so complicated. The whole myriad of arrangements and dealings surrounding Kaupthing that anything the SFO tries to prove might be very hard to make stick.”