Trustor affair
Encyclopedia
The Trustor affair was a corporate raid
and financial fraud
in the summer of 1997. It targeted Trustor
, a Swedish investment company listed on the Stockholm Stock Exchange
. It was initially believed that 600 million SEK
had disappeared from the company's accounts. Later when all assets had been counted and the company had been liquidated, ironically it turned out that the shareholders had doubled the value of their shares as an indirect result of the take over. It is the largest financial crimes
in Swedish history.
or a company which could quickly be turned into one. The company needed to have either large funds or undervalued assets, which could be easily liquidated, and A-class stocks with stronger voting rights available for sale. The plan was to gain control of the company and ultimately pay for the company with its own funds.
The problem was that Posener presumably needed to pay for the stocks before getting control of the company and that he had no money on his own. To manage this he needed a short term loan in order to finance the acquisition of the investment company, but he could not let the people he did business with know how the venture would be financed in the end.
Peter Mattson was working in the finance industry, and had a lot of connections. Since they still needed a person who could make the offer credible, Mattsson introduced Jisander to an English Lord
by the name Jonathan Guinness (member of the famous brewery family) aka Lord Moyne. Mattson had a company together with Moyne and suggested that the Lord would be the perfect front figure. Even though Lord Moyne was in fact broke, his background made claims of wealth sound reliable. Moyne also involved Lindsay Smallbone, a businessman from New Zealand
, as his advisor.
. Mattson and Jisander met with EPFC and presented the story that an English investor was interested in buying a Swedish investment company. They showed some information that convinced EPFC that Moyne had money to invest. Jisander and Mattson presented the criteria for the target company and after a series of discussions Trustor was found to be the best alternative.
The A-stocks of Trustor were owned by Per-Olov Norberg. They constituted 17% of the share capital but 52% of the voting rights. Norberg also happened to be in a need to sell. It was not known to most that Norberg had deliberately undervalued assets in the company to suit his own purposes. Norberg wanted to buy these companies at the book value (priced below market value) and reap the profit. Posener and his companions saw the opportunity to make a deal.
In February Posener was released from prison but still remained as a background figure. During the spring of 1997 negotiations took place, resulting in a deal on May 20 where Moyne would buy the company from Norberg for 241 million SEK. The contract contained two important clauses. First, the contract gave Norberg the right to buy Trustor's stocks in the most valuable company Kanthal, below market value. Second, the contract also gave Moyne a few days respite for the payment, which eliminated the need for a short-term loan.
On the 10th of June Sandvik
made an offer to buy Kanthal
for 827 million SEK, altering the deal with Norberg. A new deal was reached a few days later where Norberg was compensated for not being able to buy Kanthal. Trustor now had the funds needed in order to complete the plan. On the 13th of June an extra shareholders' meeting was held, where Lord Moyne was appointed president and Lindsay Smallbone CEO.
to Trustor's new account in England.
Moyne still had not paid for the Trustor stocks, and therefore owed Norberg 241 million SEK. For some reason the initial plan of letting Trustor buy the off shore companies was not carried through. Instead 600 million SEK of the money in Trustors account was then transferred to Jisanders account in the same bank of which 585 million was then sent directly to Lord Moyne.
Team Moyne now disposed of the money necessary to pay for Norberg's stocks. On the 25th of June they transferred the 241 million which had been agreed upon with Per-Olof Norberg. Hence, Team Moyne bought Norbergs stocks with Trustor's money.
. In the article Lindstedt wrote about Lord Moyne, Mattson and Smallbone and their questionable history in the financial industry. The scandal was blossoming and the same day a preliminary investigation started to look into the acquisition
and the group of people behind it. The same morning the Stockholm stock exchange stopped the trading in Trustor. The Swedish Economic Crime Authority made an investigation into all transactions to see how much and where to the money had gone. They later concluded that 478 millions had disappeared from Trustor.
The legal aftermath had started and on December 23 Stockholms Tingsrätt
decided that a compulsory liquidation
should be carried through. Because of Smallbone and Moyne this was a long process since they wanted a share of the salvage value. However the stocks Moyne bought where distributed among the shareholders. Trustor's assets were sold and in the end of the year there was 1.5 billion SEK to be distributed among the minority shareholders. When trade in the stock was resumed the stock price rose to 58,50 from 34 SEK before the scam. Because of the scam the undervaluation of the assets was exposed.
Joachim Possener disappeared after the disclosure. Lord Moyne was declared bankrupt and later prosecuted along with Jisander and Mattson. Moyne was acquitted and after appeal so were also Jisander and Mattson. However Jisander was later prosecuted and convicted in 2009 for embezzlement
related to Trustor. Smallbone was never prosecuted but was sued in a civil law suit by Trustor, together with Jisander, Moyne and Posener.
Corporate raid
A corporate raid is an American English business term for buying a large interest in a corporation and then using voting rights to enact measures directed at increasing the share value...
and financial fraud
Financial crimes
Financial crimes are crime against property, involving the unlawful conversion of the ownership of property to one's own personal use and benefit...
in the summer of 1997. It targeted Trustor
Trustor
* In law a trustor is a person who settles property on express trust for the benefit of beneficiaries. See settlor.* In social sciences and in information technology, trustor is an entity that trusts the other entity...
, a Swedish investment company listed on the Stockholm Stock Exchange
Stockholm Stock Exchange
The Stockholm Stock Exchange is a stock exchange located in Stockholm, Sweden. Founded in 1863 it is the primary securities exchange of the Nordic Countries....
. It was initially believed that 600 million SEK
SEK
SEK may stand for:*Swedish krona, the currency of Sweden*Federation of Swiss Protestant Churches *SEK Studio, a North Korean animation studio* Stagecoach in East Kent...
had disappeared from the company's accounts. Later when all assets had been counted and the company had been liquidated, ironically it turned out that the shareholders had doubled the value of their shares as an indirect result of the take over. It is the largest financial crimes
Financial crimes
Financial crimes are crime against property, involving the unlawful conversion of the ownership of property to one's own personal use and benefit...
in Swedish history.
Course of events
In the fall of 1996 Joachim Posener, a 32 year old former law student, was in prison serving a six year sentence for raiding several companies in Denmark in the so called Thul affair. While in prison Posener was planning on how to redo the scam in a better, maybe even legal, way.The plan
For Posener's new plan he needed to find an investment companyInvestment company
An investment company is a company whose main business is holding securities of other companies purely for investment purposes. The investment company invests money on behalf of its shareholders who in turn share in the profits and losses....
or a company which could quickly be turned into one. The company needed to have either large funds or undervalued assets, which could be easily liquidated, and A-class stocks with stronger voting rights available for sale. The plan was to gain control of the company and ultimately pay for the company with its own funds.
The problem was that Posener presumably needed to pay for the stocks before getting control of the company and that he had no money on his own. To manage this he needed a short term loan in order to finance the acquisition of the investment company, but he could not let the people he did business with know how the venture would be financed in the end.
Team Moyne
Posener realized that his name had been seriously blemished because of his criminal background, so he needed help to set his plan in motion. Posener needed a person that he trusted and who could act on his behalf and also a way to convince people they had enough financial power. Posener contacted his cousin Thomas Jisander in the fall of 1996 and shared his idea. Jisander suggested that his childhood friend Peter Mattsson could be of help.Peter Mattson was working in the finance industry, and had a lot of connections. Since they still needed a person who could make the offer credible, Mattsson introduced Jisander to an English Lord
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
by the name Jonathan Guinness (member of the famous brewery family) aka Lord Moyne. Mattson had a company together with Moyne and suggested that the Lord would be the perfect front figure. Even though Lord Moyne was in fact broke, his background made claims of wealth sound reliable. Moyne also involved Lindsay Smallbone, a businessman from New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
, as his advisor.
The acquisition
Posener had identified a couple of companies which matched the criteria from his plan, of which Trustor was one. In January 1997 Posener contacted Erik Penser Fond Commission (EPFC)Erik Penser
Nils Wilhelm Erik Penser is a Swedish financier and businessman.After having studied law at Lund University, Erik Penser commenced a career as a stock broker at Bankirfirman Langenskiöld, which later became Carnegie Investment Bank...
. Mattson and Jisander met with EPFC and presented the story that an English investor was interested in buying a Swedish investment company. They showed some information that convinced EPFC that Moyne had money to invest. Jisander and Mattson presented the criteria for the target company and after a series of discussions Trustor was found to be the best alternative.
The A-stocks of Trustor were owned by Per-Olov Norberg. They constituted 17% of the share capital but 52% of the voting rights. Norberg also happened to be in a need to sell. It was not known to most that Norberg had deliberately undervalued assets in the company to suit his own purposes. Norberg wanted to buy these companies at the book value (priced below market value) and reap the profit. Posener and his companions saw the opportunity to make a deal.
In February Posener was released from prison but still remained as a background figure. During the spring of 1997 negotiations took place, resulting in a deal on May 20 where Moyne would buy the company from Norberg for 241 million SEK. The contract contained two important clauses. First, the contract gave Norberg the right to buy Trustor's stocks in the most valuable company Kanthal, below market value. Second, the contract also gave Moyne a few days respite for the payment, which eliminated the need for a short-term loan.
On the 10th of June Sandvik
Sandvik
Sandvik is a Swedish company founded in 1862 by Göran Fredrik Göransson in Sandviken. It is a high-technology engineering group and a world-leader in tooling, stainless steel alloys and materials technology, mining and construction...
made an offer to buy Kanthal
Kanthal
Kanthal is the trademark for a family of iron-chromium-aluminium alloys used in a wide range of resistance and high-temperature applications. Kanthal FeCrAl alloys consist of mainly iron, chromium and aluminium . The first Kanthal FeCrAl alloy was developed by Hans von Kantzow in Hallstahammar,...
for 827 million SEK, altering the deal with Norberg. A new deal was reached a few days later where Norberg was compensated for not being able to buy Kanthal. Trustor now had the funds needed in order to complete the plan. On the 13th of June an extra shareholders' meeting was held, where Lord Moyne was appointed president and Lindsay Smallbone CEO.
The payment
Team Moyne now only had a few days to sort out the payment to Norberg, so on the 18th of June Moyne, Smallbone, Jisander and Mattsson met with two clerks at Barclays Bank in London. At the meeting they set up several accounts for Trustor as well as for Lord Moyne and Jisander and in the following days they transferred a total of 730 million SEK from Trustors account in Swedish SEBSeb
Seb is a diminutive of the given name Sebastian. "Seb" may also refer to:*A god in Egyptian mythology also known as Geb*Sebastian 'Seb' Coe , British athlete and politician*Seb Fontaine, DJ with English dance/electronica outfit Reflekt...
to Trustor's new account in England.
Moyne still had not paid for the Trustor stocks, and therefore owed Norberg 241 million SEK. For some reason the initial plan of letting Trustor buy the off shore companies was not carried through. Instead 600 million SEK of the money in Trustors account was then transferred to Jisanders account in the same bank of which 585 million was then sent directly to Lord Moyne.
Team Moyne now disposed of the money necessary to pay for Norberg's stocks. On the 25th of June they transferred the 241 million which had been agreed upon with Per-Olof Norberg. Hence, Team Moyne bought Norbergs stocks with Trustor's money.
Covering the tracks
The 30th of June was the last day for the financial statement and mostly because of the payment to Norberg, Trustor now lacked almost 300 million SEK. To solve the problem team Moyne decided to use a method called "Window dressing". Lord Moyne took a loan of 293 million SEK from Van Lanschot Bankiers, based in Luxemburg, and the money was then transferred to Trustors account in the same bank. This made it look like Trustor in fact had all the money. Then the following day the money was transferred back to Lord Moyne who then repaid the loan. The team had avoided exposure for the time being.The disclosure and aftermath
October the 31st an article about Trustor, written by Gunnar Lindstedt, was published in Svenska DagbladetSvenska Dagbladet
Svenska Dagbladet is a daily newspaper in Sweden. The first issue appeared on 18 December 1884. Svenska Dagbladet is published in Stockholm and provides coverage of national and international news as well as local coverage of the Greater Stockholm region...
. In the article Lindstedt wrote about Lord Moyne, Mattson and Smallbone and their questionable history in the financial industry. The scandal was blossoming and the same day a preliminary investigation started to look into the acquisition
Acquisition
Acquisition may refer to:* Takeover, the acquisition of a company* Mergers and acquisitions, strategy of buying and selling of various companies to quickly grow a company...
and the group of people behind it. The same morning the Stockholm stock exchange stopped the trading in Trustor. The Swedish Economic Crime Authority made an investigation into all transactions to see how much and where to the money had gone. They later concluded that 478 millions had disappeared from Trustor.
The legal aftermath had started and on December 23 Stockholms Tingsrätt
Tingsrätt
Tingsrätt , käräjäoikeus or tingrett is a term used for district courts in Sweden, Finland and Norway...
decided that a compulsory liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
should be carried through. Because of Smallbone and Moyne this was a long process since they wanted a share of the salvage value. However the stocks Moyne bought where distributed among the shareholders. Trustor's assets were sold and in the end of the year there was 1.5 billion SEK to be distributed among the minority shareholders. When trade in the stock was resumed the stock price rose to 58,50 from 34 SEK before the scam. Because of the scam the undervaluation of the assets was exposed.
Joachim Possener disappeared after the disclosure. Lord Moyne was declared bankrupt and later prosecuted along with Jisander and Mattson. Moyne was acquitted and after appeal so were also Jisander and Mattson. However Jisander was later prosecuted and convicted in 2009 for embezzlement
Embezzlement
Embezzlement is the act of dishonestly appropriating or secreting assets by one or more individuals to whom such assets have been entrusted....
related to Trustor. Smallbone was never prosecuted but was sued in a civil law suit by Trustor, together with Jisander, Moyne and Posener.