Sweden's Carnegie CEO: law broken unintentionally

STOCKHOLM — Twenty-four hours after the Swedish state announced it would take control of troubled investment bank Carnegie for illegal trading, the company's chief executive finally faced media Tuesday, saying his firm had not intentionally broken the law.

At a news conference in Stockholm, Carnegie's CEO Mikael Ericson said he was disappointed about the bank's destiny, but that in the current situation, state ownership was the better option for both its clients and shareholders.

"We accept the criticism the Financial Supervisory Authority has directed toward us. It has never been our intention to circumvent the rules," he said.

On Monday, the Swedish government announced it would take control of Carnegie and sell it off after the country's financial watchdog revoked its banking license due to what it called illegal trading activities.

The new state ownership means Carnegie will be able to continue its banking operations and clients won't be affected by changes. The board was sacked, but executive management will remain.

In its report, the Financial Supervisory Authority slammed the bank, saying it had taken "exceptional risks" by lending large amounts of money to a single customer — leading to a 1 billion kronor (US$128 million) writedown — and that it broke the law by acting as a guarantor for the same funds it also managed.

Carnegie is the first Swedish financial institution to fold amid the global credit crisis.

Ericson said his company had tried to reach a private solution for the company for months, but that "we just weren't able to make it the whole way."

Ericson also criticized the company's large bonus payouts to staff.

"One of the problems with Carnegie's bonus system is that it has been too short-term. It has been an incentive for short-term actions," Ericson said.

Ericson was joined at the news conference by Peter Norman, chief executive of one of Sweden's national pension funds and who is set to take over as Carnegie chairman after an extraordinary general meeting.

Norman said his immediate goal was to find a new owner for the company — whether for the whole or its parts — as soon as possible.

Founded in 1803 as a trading company, Carnegie's operations today include brokerage services, equity analysis, equity trading, asset management and advice on corporate acquisitions.

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