The world’s largest offshore rig company, Transocean, and three of its tax advisers were celebrating this week after being acquitted of tax evasion by an Oslo court on Wednesday. A nine-year investigation into alleged underpayment of taxes left Norwegian prosecutors with a crushing defeat that they refused to acknowledge.
Tax authorities first became suspicious of Transocean’s Norwegian operations after an internal rig sale in 2000, reported newspaper Dagens Næringsliv (DN). The offshore giant is headquartered in Houston, Texas, and has offices in Stavanger on Norway’s west coast. Economic crime unit Økokrim began investigating the company in 2005, and in 2011, three Transocean companies and three tax advisers were indicted for gross tax fraud.
Tax authorities and Økokrim claimed the company and advisers had used incomplete and misleading information to evade taxes on more than NOK 11 billion (USD 1.7 billion). In 2013 the claim was adjusted to NOK 7 billion. The case began in December 2012 with the advisers facing between three- and six-year jail terms and a compensation claim of NOK 1.8 billion if found guilty.
After almost a year of deliberations, the Oslo city court (Oslo Tingrett) threw out all the charges on Wednesday. “After this, all the accused will be acquitted of all the facts they are accused of, and of the compensation claims which are directed against them,” the judgement read.
Lawyer Berit Reiss-Andersen represented one of the accused advisers, auditor Klaus Klausen of Ernst & Young (EY), who faced four years in jail. She told DN on Wednesday her client had been dogged for nine years even by the fear of being recognized “as the one who was accused,” and said she’d never spoken to a happier man.
“The judgment shows that the case raises many, sometimes complicated and very interesting questions, and some of them need clarification,” said Reiss, who heads Norway’s bar association and is a member of the Norwegian Nobel Committee. “My client was convinced that his view of the tax law was right. The verdict has confirmed this. But it has cost dearly. He has found it insulting to stand accused in a criminal trial.”
“No one can imagine what this was like for nine years,” said Klausen through Reiss-Andersen. “It’s affected everything; work, social life, friends, everything. I have had days where I couldn’t bear to go out.” He was awarded reimbursement for legal costs of NOK 2.1 million.
Sverre E Koch was a partner at law firm Thommessen and one of Norway’s most respected tax lawyers with 40 years experience when he was accused of complicity of gross tax fraud in his advice to Transocean. He faced three years imprisonment. He told DN from his summer cabin at Tjøme that the judgement was “as expected. Now I’m going swimming.”
“I have a low pulse,” he said. “That’s how I kept it together. But I am happy with the result. It means a lot to family, friends and Thommessen who have fully supported me on this long road. Purely professionally, it’s also good that this judgment gives support for the advice given.” He was awarded costs of NOK 14 million.
EY tax lawyer Einar Brask faced the heftiest sentence of six years. His lawyer Erik Keiserud said Brask was thrilled with the result, but it was absolutely terrible that the case had dragged on for nine years.
“You can just imagine what it means to have such a case hanging over you for so long,” Keiserud said. “It’s obvious that it is an enormous personal burden. He got a letter in the post demanding payment of NOK 1.8 billion in 14 days. Now the defendants are instead covered for their legal costs of over NOK 40 million.” He would not say if Brask planned to sue the state for significant loss of income. Brask was awarded costs of NOK 8.7 million.
“The accused Transocean companies believe the court’s conclusion is correct,” said lawyer Hanne Kaarberg Holen, who represented American branches Transocean Inc, Transocean Offshore Deepwater Drilling Inc, and Norwegian subsidiary Arcade Drilling AS. The US companies were awarded costs of NOK 4.5 million and NOK 11.8 million respectively.
Not a failure
Økokrim spend nine years on the case which was its most comprehensive ever, spanning the tenure of three top prosecutors. Chief prosecutor Morten Eriksen said he did not want to go into the details of the judgement before the unit had carefully read it, but he did say they did not view the acquittals as a failure.
“For me this is a job,” he told DN. “There are many opportunities to try all the procedural questions, and that is done here. Such is our justice system, and you must accept the rules. Otherwise you can not work in prosecution.”
“We note that there are several decisions in the civil questions that are not compatible,” Eriksen said. “But we are going to make a statement later when we have got an overview, where we’ll also say if we’ll appeal or not.”