Stigtryggur Johannsson / Reuters People demonstrate against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik, Iceland on April 4, 2016

Arctic Mutiny

How the Panama Papers Upended Icelandic Politics

Two weekends ago, 143 politicians were implicated in wrongdoing detailed in leaked documents from a Panamanian law firm, Mossack Fonseca, which had created offshore tax havens for wealthy patrons. Included in the mix were Russian President Vladimir Putin, Syrian President Bashar al-Assad, Saudi Arabia’s King Salman, and someone who, until then, was less well known: Icelandic Prime Minister Sigmundur David Gunnlaugsson. On April 6, Gunnlaugsson became the first politician to resign as a result of involvement with Mossack Fonseca. Now that he has left office, the future of Iceland, still feeling the sting of the global financial crisis, which caused the nation’s banking institutions to collapse, is up for grabs. And a band of pirates may ride the tide all the way to parliament.

FIRED AND ICED

The leaked Mossack Fonseca documents showed that Gunnlaugsson’s wife, Anna Sigurlaug Pálsdóttir, kept shares from the sale of her family’s Toyota dealership in an offshore company located in the British Virgin Islands. Gunnlaugsson himself owned 50 percent of the company, selling his shares to his wife months only after he was elected to parliament in 2009. The leak indicated that Pálsdóttir’s company, Wintris Inc., also held claims on Icelandic banks that had collapsed during Iceland's 2008 financial meltdown worth about $3.95 million. Before the Panama Papers went public, Gunnlaugsson had developed a reputation for being tough on foreign creditors that sought to recover assets from Iceland’s failed banks. But his credit vanished almost instantly after he delivered an embarrassing performance during a TV interview in which he denied ever owning an offshore company. Gunnlaugsson stormed out of the interview after being confronted with documents that contradicted his statements.

From the start, Gunnlaugsson has consistently denied any wrongdoing. He maintains that Wintris was taxed in full and his wife’s business interests did not interfere in his government’s dealings with foreign creditors. Even though there has been no indication that Gunnlaugsson's or Pálsdóttir’s financial dealings violated Icelandic

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