Iceland jails bank officials for Kaupthing fraud

Three former directors of the collapsed Icelandic bank Kaupthing were convicted for fraud by a Reykjavik court Thursday and sentenced to between three a half and five and half years in prison.

The three men were convicted for hiding the fact that a Qatari investor used money loaned from Kaupthing to buy a 5.1 percent stake in the bank right in the middle of the 2008 financial crisis.

Hreidar Mar Sigurdsson, the bank's former CEO, was sentenced to five and a half years, while the former chairman of the bank, Sigurdur Einarsson, was given a five year sentence and the former head of its Luxembourg subsidiary, Magnus Gumundsson -- who played a key role in granting the loan -- was given a three and half year sentence.

A major shareholder in the bank, Olafur Olafsson, who approved the loan, was also convicted and sentenced to three years in prison.

All four were found guilty of violating their ethical obligations and of manipulating the country's stock exchange.

The cash injection from Qatari investor, Mohammed bin Khalifa al-Thani, in late September 2008 -- when Iceland's banking system was in free fall -- was hailed by the management as a sign that the bank was on a sound financial footing.

But just weeks later the bank collapsed as a wave of financial panic triggered by the fall of the American commercial bank Lehman Brothers swept the country.