Industrial holding company Aker accepted a NOK 51 million (USD 8.5 million) penalty on Friday after Norwegian economic crime unit Økokrim found the business had taken part in insider trading. Chairman of the board and the company’s largest shareholder Kjell Inge Røkke, listed as Norway’s second wealthiest man last year, apologized for the company’s behaviour and explained it as a case of “good intention, bad execution.”
Aker has a controlling share in oil and gas engineering company Aker Solutions. Aker entered a total return swap (TRS) agreement in April last year involving 1.5 million shares in Aker Solutions, reported newspaper Dagens Næringsliv (DN). A TRS agreement involves one party taking on the financial exposure of the shares from another party for interest payments. In a press release, Aker said it was part of the company’s plan to increase its long-term investment in Aker Solutions.
A short time after Aker extended the TRS agreement at the start of November, Aker Solutions announced quarterly results with twice the number of orders than were expected, and the sale of a business worth NOK four billion. Aker had insider information on the upcoming sale, but said in the release that “the oversight resided in the fact that no connection was made between the insider list and the TRS extension.”
The Norwegian Financial Supervisory Authority (Finanstilsynet) took up the case, and handed it to Økokrim at the end of January this year. The economic crime unit fined Aker NOK 34 million for one count of insider trading and one count of breach of confidentiality, and confiscated another NOK 17 million based on the theoretical gains made on the TRS agreement.
“Based on an evaluation of the alternatives, Aker has concluded that it is sensible to reach an agreement with Økokrim and accept the penalty notice,” said Røkke in the statement. “This has not been an easy decision. We at Aker have always acknowledged the facts of the case. Aker has chosen to take the consequences of Økokrim‘s opinion.”
“The TRS case is one of the most dismaying incidents I have experienced at Aker, aside from accidents that have resulted in the loss of human life or injuries,” said Røkke. “On behalf of Aker, I can only say that we apologise to shareholders and all other stakeholders, and that this is a case of “Good intentions, bad execution.” We’ve been faced with a situation that we could have done without.”
Økokrim said it regards such cases as serious, and that the fine must be high enough to have a real deterrent effect. It said mitigating circumstances around the case included that Aker never tried to hide the facts, and cooperated with the investigation.