“I am Stein Bagger. I am a fugitive from Europe and I’m here to turn myself in.”

This was how the former chief executive of IT Factory, who was wanted by Interpol for aggravated fraud and forgery, handed himself into the Los Angeles Police Department (LAPD) on 6 December 2008, nine days after he went missing from his hotel in Dubai.

He was extradited to Denmark the following week and was immediately arrested.

Over the past decade, 42-year-old Stein Bagger, a former bodybuilder and protein-shake salesman, had rapidly become a Danish technology superstar.

Between 2003 and 2007, Bagger was responsible for growing IT Factory’s revenue 69 times, and its profit by an even more impressive 288 times, to reach DKK121 million (€16.2 million) in 2007.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

View profiles in store

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

Submit

UK USA Afghanistan Åland Islands Albania Algeria American Samoa Andorra Angola Anguilla Antarctica Antigua and Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bermuda Bhutan Bolivia Bonaire, Sint Eustatius and Saba Bosnia and Herzegovina Botswana Bouvet Island Brazil British Indian Ocean Territory Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Islands Central African Republic Chad Chile China Christmas Island Cocos Islands Colombia Comoros Congo Democratic Republic of the Congo Cook Islands Costa Rica Côte d"Ivoire Croatia Cuba Curaçao Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Falkland Islands Faroe Islands Fiji Finland France French Guiana French Polynesia French Southern Territories Gabon Gambia Georgia Germany Ghana Gibraltar Greece Greenland Grenada Guadeloupe Guam Guatemala Guernsey Guinea Guinea-Bissau Guyana Haiti Heard Island and McDonald Islands Holy See Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Isle of Man Israel Italy Jamaica Japan Jersey Jordan Kazakhstan Kenya Kiribati North Korea South Korea Kuwait Kyrgyzstan Lao Latvia Lebanon Lesotho Liberia Libyan Arab Jamahiriya Liechtenstein Lithuania Luxembourg Macao Macedonia, The Former Yugoslav Republic of Madagascar Malawi Malaysia Maldives Mali Malta Marshall Islands Martinique Mauritania Mauritius Mayotte Mexico Micronesia Moldova Monaco Mongolia Montenegro Montserrat Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands New Caledonia New Zealand Nicaragua Niger Nigeria Niue Norfolk Island Northern Mariana Islands Norway Oman Pakistan Palau Palestinian Territory Panama Papua New Guinea Paraguay Peru Philippines Pitcairn Poland Portugal Puerto Rico Qatar Réunion Romania Russian Federation Rwanda Saint Helena, Ascension and Tristan da Cunha Saint Kitts and Nevis Saint Lucia Saint Pierre and Miquelon Saint Vincent and The Grenadines Samoa San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa South Georgia and The South Sandwich Islands Spain Sri Lanka Sudan Suriname Svalbard and Jan Mayen Swaziland Sweden Switzerland Syrian Arab Republic Taiwan Tajikistan Tanzania Thailand Timor-Leste Togo Tokelau Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Turks and Caicos Islands Tuvalu Uganda Ukraine United Arab Emirates US Minor Outlying Islands Uruguay Uzbekistan Vanuatu Venezuela Vietnam British Virgin Islands US Virgin Islands Wallis and Futuna Western Sahara Yemen Zambia Zimbabwe Kosovo

Industry * Academia & Education Aerospace, Defense & Security Agriculture Asset Management Automotive Banking & Payments Chemicals Construction Consumer Foodservice Government, trade bodies and NGOs Health & Fitness Hospitals & Healthcare HR, Staffing & Recruitment Insurance Investment Banking Legal Services Management Consulting Marketing & Advertising Media & Publishing Medical Devices Mining Oil & Gas Packaging Pharmaceuticals Power & Utilities Private Equity Real Estate Retail Sport Technology Telecom Transportation & Logistics Travel, Tourism & Hospitality Venture Capital

Tick here to opt out of curated industry news, reports, and event updates from Leasing Life.

Submit and download

Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Bagger was charged with forging the signature of IT Factory’s chairman, Asger Jensby, as well as fraudulently selling and leasing back non-existent software products to some of Scandinavia’s biggest banks and lessors, including Nordea Finans, SEB, Hewlett-Packard Financial Services, Siemens Financial Services, De Lage Landen and others (see below).

In total, Bagger admitted to defrauding companies of DKK831 million and of funnelling millions to his own companies abroad.

Bagger was also charged with fraudulently changing some of the details on contracts – for example, changing five-year contracts to three-month contracts, then either forging signatures or signing on behalf of his management board to confirm the amendments.

Last month, Bagger finally appeared in court to answer to 61 counts of forgery and falsifying signatures on contracts. Following a short three-day trial, Bagger was sentenced to seven years in prison.

‘Best IT Company’

Before the company was exposed as fraudulent, it had been reporting extremely healthy results, with Ernst & Young naming Bagger ‘Danish Entrepreneur of the Year 2008’, and Danish magazine Computerworld describing the business as the ‘Best IT Company’ for two consecutive years.

According to Asger Jensby, this year IT Factory’s profit was expected to “roughly quadruple”.

But speaking to Leasing Life, Boris Frederiksen, IT Factory’s state-appointed liquidator, said that the company was mostly hot air.

“Most of activities in IT Factory have turned out to be fraudulent,” Frederiksen said. “It simply wasn’t real.”

But IT Factory did have some genuine software on offer, specifically platform-as-a-service software, which Frederiksen managed to sell to an undisclosed German company last March, after the bankruptcy.

Yet lessors should not expect their money back anytime soon, Frederiksen said.

“The winding up of the rest of the bankruptcy estate and its liquidation is ongoing, and will take at least a couple of years, I’m afraid,” he added.

Of the total DKK831 million that Bagger admitted to defrauding, there is still around DKK220 million that needs to be accounted for, Frederiksen continued.

“We still have problems accounting for around DKK220 million. The rest was spent on things that we know about – paying wages, instalments to the leasing companies, rent, developing software, as well as paying for some of Stein Bagger’s personal expenses.”

However, many commentators believe that Bagger may have sent the money offshore, to be accessed once he is free.

“We just don’t know where it is – we are still working on it,” Frederiksen said.

“We might be able to retrace some of it, probably a small amount, but it could be gone entirely.

“Bagger could have already spent it or it might be sitting in an account, or invested in assets, somewhere outside of Denmark.”

To claim some of their capital back, most lessors have pitted their hopes on claims against KPMG, IT Factory’s auditors, rather than against the company’s estate, which
has entered bankruptcy.

‘Issuing a writ’

The claim against KPMG will be led by Frederiksen who, as liquidator of the estate, will represent all of IT Factory’s creditors.

“We will be issuing a writ of summons through the court at the beginning of July,” said Frederiksen. “But the court case itself will most likely take a couple of years.”

The lessors’ main claim against KPMG is that the accountants had not picked up on any irregularities at IT Factory.

“That is where the main fault is, as we see it,” explained Nicolai Thornemann Østergaard, a lawyer at Denmark’s fifth-largest law firm, Lett, which, among other creditors,
represents an international lessor.

“KPMG audited the financial accounts for IT Factory, but did not pick up any of the obligations the company had towards the leasing companies.”

According to Østergaard, the accountancy firm claims that IT Factory’s agreements do not actually constitute leasing and this explains why it had
not made any notes about the problem.

Yet Østergaard said he believes KPMG cannot win the argument.

“The bottom line is that we have tons of evidence that shows that: one, they were aware that IT Factory had leasing obligations; and two, if they didn’t know it, then,
according to all Danish accounting standards, they should have asked follow-up questions, or should at least have noted it down if they were to do the job properly,” Østergaard said.

Frederiksen, too, is confident he has a strong case.

“It is obviously up to the court, but we wouldn’t initiate these legal proceedings unless we had an optimistic view of the outcome,” he commented.

“It is a fact that KPMG was aware that IT Factory had entered into a number of leasing agreements, but they did not show the debt connected to those leasing agreements in IT Factory’s 2005, 2006 and 2007 annual accounts.”

According to Østergaard, lessors are not just looking at litigation against KPMG, but are also considering taking action against other lessors.

“There is a case against KPMG, but I can’t rule out that, among the creditors, more cases will arise – a lot of the creditors are telling the same story, but some of them have
been broking these lease agreements between themselves too,” he said.

Indeed, Østergaard added that some leasing companies were very proactive in landing leasing contracts with IT Factory, but would broker the agreement out to other lessors to receive a commission.

“This is not part of the official case against IT Factory or the case against KPMG, but, if you ask me, when a leasing company brokers a contract, they can be held responsible if the subject to the leasing contract does not exist,” he said.

“People are talking about it at the moment and no-one is ruling out anything.”

According to Bagger’s testimonial during his court case last month, he never had any problems borrowing money from lessors and banks for his fraudulent dealings.

“I never contacted the banks myself,” he told the court. “They contacted me to hear whether the company wanted to borrow any money.”

Asked by his defence attorney whether the banks were eager, Bagger said they were – he said that the banks conned by the leasing scheme were “throwing” money at him.

“That is putting it mildly,” Bagger insisted.

“The banks and leasing companies were contacting me. Already in 2004 and 2005, many wanted IT Factory as a client. They said there must have been something we could use loans and financing for.”

Bagger also explained why the ‘leasing carousel’ began.

“Asger Jensby had a great interest in building up his empire and he had a need for money all the time. That is why there was constant pressure from the outside world,” he said.

Swedish businessman Mikael Ljungman was named as Bagger’s partner in the scam. According to Bagger, after meeting in Stockholm in 2007, Ljungman helped Bagger run the ‘leasing carousel’.

He told the court that he received almost €2 million in cash from Ljungman between September 2007 and July 2008.

“This was a clear scam and we were both aware of it,” Bagger said, speaking of Ljungman.

Ljungman was also the person who gave Bagger his credit card and lent him his Audi when Bagger fled from Dubai to the United States.

According to Frederiksen, IT Factory’s liquidator, Ljungman is tied to six out of the 12 foreign companies that Bagger used for the scam.

“To the best of our knowledge, these are tied to Mikael Ljungman,” Frederiksen said. “It is our belief, and also based on what Stein Bagger stated during the criminal case, that these companies were just front companies.”

Full confession

On 12 June this year, Bagger, who had provided a full confession and had helped the police in their investigations, received his seven-year prison sentence from the
Danish National Court in Lyngby, just outside of Copenhagen.

The prosecutor, Per Justesen, had asked that Bagger receive a sentence of between eight and 12 years. Indeed, Justesen argued that Bagger’s fraud should be judged under a special paragraph in criminal law that enables magistrates to add 50 percent to a sentence.

“Seven years is one of the harshest verdicts ever given in this kind of case,” Lars Bo Langsted, professor of law and head of department at Aalborg University, told Leasing
Life.

“The verdict is quite sensible. Taking into consideration that Bagger had helped the police, seven years is a proper sentence.”

Mikael Ljungman, charged with being Bagger’s associate, was arrested in Sweden at the end of April, but continues to deny all charges.

Although every effort was made to contact the lessors affected by the IT Factory fraud, none chose to comment.

However, Jesper Koefoed, a senior partner at KPMG in Denmark, said: “We believe that we, through fictitious evidence and erroneous information, also have been deceived in this case.

“Furthermore, there are at least seven fictitious documents involving the deceitful use of KPMG’s name vis-à-vis the leasing companies – also documents carrying the
forged signatures of KPMG employees.

“With the trustee’s decision, we see no other solution than bringing the case before the courts. We have considered whether we should have acted differently, but do not
think there is evidence to suggest that we should have detected the fraud in this case or that there are significant deficiencies in our work.

“No matter how much we would have enjoyed detecting the criminal acts and regardless of the fact that fraud of this kind is unpleasant for all parties concerned, it is our
view that the fraud was planned and conducted in a manner which cannot place any liability on the auditors.

“This is especially the case when fictitious documents, supplementary agreements and confirmations are part of the fraud, which is supported by the fact that the other executives and employees apparently did not suspect any misconduct in the company.”

IT Factory: leading players

Name: Allan Vestergaard
Role: Long-time friend and business partner of Stein Bagger; former Nordea banker; owned half of Agios United SA (which owned half of IT Factory); was brutally attacked with a sledgehammer in November 2008.

Name: Anette Uttenthal
Role: Stein Bagger’s wife; claims she was not aware of the fraud; was in Dubai with Bagger when he fled to the United States.

Name: Asger Jensby
Role: Chairman of the board at IT Factory; board member of JMI Invest (which owned half of IT Factory); discovered Stein Bagger’s secret office; he has not been charged.

Name: Boris Frederiksen
Role: State-appointed liquidator for IT Factory; represents all of IT Factory’s creditors against KPMG.

Name: Erik Ove
Role:Director of public relations at IT Factory; responsible for telling the world that IT Factory was a fraud and was bankrupt.

Name: Mikael Ljungman
Role: Swedish businessman and associate of Stein Bagger; linked to six out of the 12 foreign companies that dealt in IT Factory’s ‘leasing carousel’; charged with being Bagger’s associate and aiding the fraud.

Name: Stein Bagger
Role: CEO of IT Factory; mastermind behind the ‘leasing carousel’ fraud, sentenced to seven years in prison.

Source: Leasing Life

IT Factory: claimants

The ‘leasing carousel’: How it works

• IT Factory (as a lessee) finances the equipment with a lessor over a fixed period

• The leasing company, paying for the equipment that IT Factory has ordered, wires the funds (DKK51 million) to Bagger’s foreign partner

• The foreign partner then buys DKK20 million of (fictional) software licences from IT Factory, thus inflating IT Factory’s sales

• Bagger’s ‘leasing carousel’ is akin to a Ponzi scheme because the model enables it to keep going round and round, until the fraud is discovered

• In this example, the foreign partner has gained DKK31 million (DKK51 million for the equipment less DKK20 million it paid to IT Factory for fake software); IT Factory has
gained DKK20 million (that the foreign company has paid to IT Factory for fake software); and the leasing company has a contract to receive DKK51 million. Bagger would honour the lease contract so as not to raise suspicions, while boosting the company’s sales.

Source: Leasing Life

IT Factory timeline: November 2008

Source: Leasing Life