Man charged in city housing scandal

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UPDATED: Norway’s economic crime unit Økokrim has launched an investigation of its own into the City of Oslo’s questionable purchases, at inflated prices, of residential housing units. A man who’s been buying apartment buildings for the city since 2014 has been arrested and charged with misappropriation of funds and breach of trust.

A unit in this building in Oslo’s Frogner district was among those bought by the city in deals that generated huge, and questionable, gains for the sellers. PHOTO: newsinenglish.no

Newspaper Dagens Næringsliv (DN) broke the news last week of what one city politician has called an “emerging scandal.”  State investigators have now acted on a complaint filed by the city’s real estate unit Boligbygg, which manages billions of kroner worth of real estate on behalf of the City of Oslo. Boligbygg has been responsible in recent years for buying residential property on Oslo’s affluent west side to house people needing welfare assistance, with many of those purchases now under probe.

Asked whether Boligbygg itself was under investigation, Økokrim prosecutor Håvard Kampen told both DN and state broadcaster NRK that “this (case) is being investigated as serious misappropriation of funds and breach of trust, and in this case, Boligbygg is the offended party.” Kampen added that Boligbygg was being “fully cooperative” with the police investigators  “in support of its own complaint.”

City’s purchases generated huge gains for the sellers
DN revealed, after an extensive examination of the city’s purchases, that numerous condominiums in west Oslo were sold outside the market and directly to the city by two men who had long histories of filing bankruptcies of various ventures. The city nonetheless paid prices that were hundreds of thousands, if not millions, of kroner higher than what the men had paid for the properties themselves just a few weeks earlier.

DN reported on October 14 that police and tax authorities had raided the homes of the two men, Swedish carpenter Carl Thomas Andersson of Asker and real estate developer Øyvind Hornnæss of Oslo, the day before. DN reported that Andersson was directly involved in 51 of the questionable sales to the city that totalled NOK 220 million, and generated as much as NOK 60 million in gains for Andersson and his partners.

Boligbygg was unable to produce appraisals, emails or other documentation tied to its purchases from Andersson, Hornnæs and several other so-called “middlemen.” No one could explain why the city had agreed to pay the high prices that generated such large gains for the sellers.

City worker ‘can’t understand’ charges against him
DN reported in its initial “documentary” on Boligbygg, (external link to DN, in Norwegian) however, that police and tax authorities also showed up on Friday the 13th of October at the home of Geir Fredriksen, who had been working for Boligbygg as a consultant since 2014. Fredriksen, who formerly worked for several large real estate firms and also runs his own firm Norand Eiendom, was responsible for buying residential buildings for the city. DN reported he had handled 16 of the transactions involving Andersson’s direct sales to Boligbygg.

Fredriksen and Andersson were also reported to have had an unusual meeting at a parking lot in Asker, photographed by DN, while each sat in their expensive cars and talked through open windows. When Boligbygg itself first started its own probe into its questionable purchases, the 46-year-old Fredriksen failed to mention that meeting, according to DN. He has now been identified as the man arrested last week.

Fredriksen’s defense attorney, Trond Eirik Aansløkken, told DN on Wednesday that his client can’t understand why he’s been charged in the case: “He has undergone three rounds of questioning and has clarified his role in Boligbygg,” Aansløkken told DN. “We have not received any case documents from Økokrim yet, so it’s difficult for me to comment further.”

DN, meanwhile, reported that Fredriksen was never employed by Boligbygg on a permanent basis. Instead he worked as a consultant and billed the city for his services on an hourly basis at a rate, according to DN, of NOK 1,100 per hour plus Norway’s 25 percent VAT, which brings his fee up to NOK 1,375 (USD 172) per hour. The city reportedly received an invoice from Fredriksen for NOK 182,875 (nearly USD 23,000) for his work in September alone.

‘Positive’ to Økokrim’s investigation
Boligbygg’s own chief executive, Jon Carlsen, wrote in an email to DN that the city-owned real estate operation had delivered its complaint to Økokrim last Monday, two days after DN published its initial 17-page documentary on the suspicious real estate sales and purchases by the city in its Saturday newspaper.

“Boligbygg asked police to commence an investigation to clarify whether there had been any misappropriation of funds,” Carlsen wrote. “There has been close contact between Økokrim and Boligbygg since charges were filed.” Fredriksen was arrested on Monday October 16, according to Økokrim’s Kampen, who initially refused to identify the defendant. Fredriksen was released from custody last Wednesday but remains charged with what the Norwegians call grov økonomisk utroskap (serious economic offense committed in breach of trust).

“We are committed to get to the bottom of this case, and are positive that an investigation is underway by Økokrim,” Carlsen told DN.

City’s real estate venture lacked control
Boligbygg itself has come under harsh criticism for failing to have control over its real estate purchases. City government leaders who are ultimately responsible are also under pressure, after the city appears to have paid much more for public housing units than was necessary. The questionable transactions at high prices that lack documentation seem to have begun in early 2016 and continued until this past summer.  Carlsen has admitted that routines aimed at ensuring control broke down.

Now the top city politician responsible for Boligbygg, Geir Lippestad of the Labour Party, has replaced the chairman of Boligbygg, Jan-Erik Nielsen, with Stig L Bech, who will be responsible for Boligbygg’s own investigation into the questionable purchases of housing units that amounted to NOK 220 million (USD 27.5 million).

“The reason is to ensure objectivity in the work that the board of Boligbygg now must do to lead an investigation,” Lippestad told DN. Bech is an attorney specializing in real estate and served as chairman of Boligbygg from the early 2000s until 2008 and therefore is familiar with the organization. Lippestad also appointed another real estate expert, Steinar Maningen, to Boligbygg’s board.

“The two new board members know the city and the business model well,” Lippestad said. Nielsen told DN he had “full understanding” for the move and saw “nothing dramatic” in it. He said he viewed it as “natural” that a new chairman assume responsibility for the investigation, to avoid any conflicts of interest.

newsinenglish.no/Nina Berglund