EU-DIGEST

For Denmark's Entrepreneur of Year, Something Was Rotten - by Andrew Higgens

At a banquet in Copenhagen late last month, accounting firm Ernst & Young feted a Danish software company for runaway growth under Stein Bagger, its dynamic chief executive. About a thousand guests, including Denmark's tax minister and leading business people, were there to applaud.But Mr. Bagger, the night's big winner, wasn't there to pick up the accolade of "Entrepreneur of the Year" and two other awards. He was busy fleeing from what investigators now describe as Denmark's biggest business scam in decades. Shortly before the banquet began, Mr. Bagger, 41 years old, vanished from a hotel in Dubai. He flew to New York, drove across America and then surrendered to police in Los Angeles. In the meantime, his award-winning company, IT Factory, declared bankruptcy. A liquidator has taken over IT Factory and is sifting through its affairs. Sent back to Denmark Tuesday, Mr. Bagger cried and pleaded guilty before a Danish court to charges of aggravated fraud and forgery, crimes that could land him in jail for eight years, according to his court-appointed lawyer, Jesper Madsen.

The saga has fascinated and appalled a nation that takes pride in its Nordic rectitude. The chief investigator estimates the swindle amounted to around $185 million, a modest sum next to the alleged fraud of America's Bernard Madoff but enough to fuel a jet-set lifestyle of sports cars and French Riviera holidays sharply at odds with the Danish norm.KPMG audited IT Factory's accounts from 2005 through 2007. Deloitte did the same in the previous two years. From 2003 through 2007, IT Factory reported that its revenue grew 69 times and its profit rose 288 times, to 121 million kroner ($22 million). This year, says Mr. Jensby, the chairman, IT Factory expected to roughly quadruple its profit. KPMG in Denmark says it is "shocked" and "cooperating with police." Deloitte's Danish unit said it has double-checked its 2003 and 2004 audits and found no problems.

Labels: Denmark, EU, Fraud, IT Industry

The Vote Grab: How the Republicans stole the 2004 election - by Peter Tatchell

Will next week's US presidential vote be free and fair? Based on the conduct of the last election, possibly not. The 2004 election was marred by vote-fixing that would disgrace a banana republic. Four years later, few new safeguards have been implemented to prevent a re-run of the voter exclusion and ballot tampering of 2004.This is the conclusion of Robert F Kennedy Jr, civil rights lawyer and nephew of JFK. In one of the most important pieces of investigative journalism in recent years, published in Rolling Stone magazine in 2006, he revealed how voting irregularities in 2004 were enough to steal the presidency for the Republicans.

Labels: Fraud, John McCain, Republicans, US elections

UK - The mad world of shadow bankers -by Ian Macwhirter

The madness of the shadow banking system became apparent over a year ago when Northern Rock was nationalised, but regulators ignored the implications. The Treasury minister Yvette Cooper discovered to her dismay that Northern Rock didn't own half of its own mortgages: £50bn had been hived off to a Jersey-based company, Granite, registered as a charity benefiting Down's syndrome children in the north-east of England. Needless to say, the charity didn't get any cash - this was a special-purpose vehicle that allowed the Rock to trade in complex securities without having to meet the stringent capitalisation requirements of a normal bank. But it wasn't just the Rock. Most banks and other financial institutions did exactly the same, setting up "orphan companies", often under charitable trusts, that did not appear on their published balance sheets. This is one reason why such apparently well-capitalized and solvent institutions as Royal Bank of Scotland collapsed so suddenly. Their true liabilities had been hidden for years in the shadow system while they made huge profits from lending.

How did they get away with it? If you or I set up fictitious offshore identities to evade tax and conceal high-risk financial activities, we would end up in jail. But the regulators turned a blind eye, partly because they didn't fully understand structured finance, and partly because the government believed that it must be a good thing, as it generated so much profit and tax revenue. This was the regime of "light-touch regulation" of the City that turned the British economy into a cross between a Liechtenstein tax haven and a giant hedge fund.

Labels: Banking system, Britain, EU, Fraud

Europe: Credit Card Fraud Ring Funnels Data From Cards to Pakistan - by Siobhan Gorman

European law-enforcement officials uncovered a highly sophisticated credit-card fraud ring that funnels account data to Pakistan from hundreds of grocery-store card machines across Europe, according to U.S. intelligence officials and other people familiar with the case. Specialists say the theft technology is the most advanced they have seen, and a person close to British law enforcement said it has affected big retailers including a British unit of Wal-Mart Stores Inc. and Tesco Ltd. The account data have been used to make repeated bank withdrawals and Internet purchases, such as airline tickets, in several countries including the U.S. Investigators haven't pinpointed the culprits. Early estimates of the losses range of $50 million to $100 million, but the figure could grow, said the person close to British law enforcement.

Labels: Credit Cards, Europe, Fraud