Kongsberg Gruppen, one of Norway’s many state-owned companies to face corruption charges in recent years, has avoided indictment while one of its former sales executives must defend himself in court against charges of fraud, money laundering and tax evasion. He denies any wrongdoing, claiming his contested transactions with Romanian contacts were in Kongsberg’s best interests and approved by the company.
Kongsberg, a major industrial firm founded as a Norwegian weapons producer in 1814, has been under a cloud since it was first charged with corruption in February 2014, just as the company was celebrating its bicentennial. Both the parent company and its Defence & Aerospace division were suspected of paying bribes in connection with its sales and deliveries of communications equipment to Romania between 2000 and 2008. Its director of Eastern European sales for Kongsberg Defence Communications was arrested when the Norwegian police’s white-collar crime unit, Økokrim, raided Kongsberg’s offices in Asker and Kongsberg.
The dramatic action occurred when several other major Norwegian companies including Yara and Telenor’s VimpelCom unit were also faced with fending off corruption charges, raising questions about how the state was overseeing its own investments and enforcing its anti-corruption rhetoric. Newspaper Dagens Næringsliv (DN) reported Wednesday that now, in the Kongsberg case, the company’s board and top management have so far survived the scandal while the former sales director will be fighting charges on his own. The sales director allegedly paid out a total of NOK 150 million (USD 22 million at current exchange rates, more when the alleged transactions occurred) to a Romanian general and a Romanian bureaucrat. Another NOK 30 million was allegedly paid to various other agents and sub-contractors.
Employee believed to have acted alone
Økokrim claims the payments were made through two companies based in the tax havens of Saint Vincent and the Grenadines that were registered by the former general working in Romania’s state intelligence agency and a former assistant director for a state telecommunications agency.
Økokrim officials believe Kongsberg’s former sales director thus embezzled the company for a total of NOK 180 million, enriching not only his Romanian contacts but himself as well. The money came from both Kongsberg’s Defence and Aerospace company and its Defence Communications unit. Based on Økokrim’s findings, the sales director was fired by Kongsberg last year.
“The investigation that’s gone on since 2014 has been extremely comprehensive and demanding,” Økokrim prosecutor Marianne Djupesland told DN. Djupesland, who also has handled several of the other major corruption cases in Norway, said it had been “difficult” to “create a picture of what happened,” but added that “we have no reason to suspect that any others in the company (Kongsberg) have been involved. The sales chief has cooperated with players abroad.” Økokrim claims he acted alone.
That’s contested by his defense attorney, Hans Christian Hjort, who told reporters that his client denies liability regarding fraud against his former employer. “The agreements he made in Romania on behalf of the Kongsberg companies were made to take care of Kongsberg’s interests,” Hjort told both DN and state broadcaster NRK. “All the payments made to consultants were approved by the Kongsberg companies.” Hjort said his client did not want to comment on the other charges against him regarding alleged money laundering and tax evasion.
Kongsberg officials appeared relieved that Økokrim was dropping its initial charges against the company, which meant they avoided being taken to court themselves. DN has previously reported, though, that Kongsberg executives have been criticized for initially failing to sufficiently act on their own suspicions of possible corruption within the company.Management did end up commissioning an internal investigation in 2013, after questions were raised in 2012 over the transfers of money to Romania. The investigation, conducted by accounting and consulting firm PwC, found that the money was sent to companies in tax havens but that’s where their trail ended. Kongsberg’s management, headed by CEO Walter Kvam, decided it was not necessary to look further into the tax havens or to forward the PwC report either to Kongsberg’s board or to the police, opting instead to simply monitor the situation.
Someone aware of the report’s contents clearly disagreed with management’s decision to sit on the report of the internal investigation and leaked it to Økokrim, which is what prompted the subsequent raid on the company and Økokrim’s own investigation.
Kongsberg’s board defends management
Kongsberg Chairman Finn Jebsen continued to defend Kongsberg’s management’s decision not to send its internal report to the police for their evaluation. “There was a decision that the management had sought two legal opinions on whether it was was defensible not to go to Økokrim, but to continue to monitor the situation,” Jensen told reporters. “They received two affirmative responses.” Jensen said that the board had later raised questions over whether management made the right decision, “and the conclusion was ‘yes,'” also based on external legal advice.
Jebsen said it was easier to see that management could have acted differently in hindsight, adding that the board and management have since agreed that the threshold for taking such issues to the board should be lower. Guro Slettemark of Transparency International in Norway remained skeptical, telling DN that management’s handling of the report from PwC was still “quite worthy of criticism.” She said that a new investigation should have begun when PwC’s trail ended with payments made to tax havens: “That’s when the work begins,” Slettemark said.
“The case has been a burden, but we have, throughout this entire period of investigation, had focus on our partners, customers and deliveries,” Jebsen stated in a press release after the authorities announced they were dropping the case against Kongsberg itself. “We are satisfied that the corruption case has been dropped and that we can put it behind us.”
Jebsen stressed that Kongsberg had cooperated with Økokrim’s investigators. “In our opinion this has been a thorough process where all relevant facts around the case have been brought forward,” Jebsen said. He noted that Kongsberg has also, independent of the investigation and even before it began, implemented an anti-corruption program and reviewed its compliance with the program.
Djupedal of Økokrim declined comment on how Kongsberg’s management handled its own investigation. She noted, though, that the extent of the money paid out to tax havens wouldn’t have been uncovered if Økokrim hadn’t launched it own case. Jebsen, meanwhile, said he didn’t know how Økokrim came to receive PwC’s report and that the board “hadn’t put any resources” into trying to find out who leaked it.
Jebsen said the indictment of Kongsberg’s former sales director was being taken very seriously, adding that “we will follow this process closely” as his case goes to trial. Jebsen said the entire case has given Kongsberg “special insight into the potential for being rammed by criminal acts.” He said lessons learned from the case prompted the company to “further improve” its anti-corruption compliance program.