Madoff Upstaged in Denmark by Bodybuilding Software Fraudster
By Christian Wienberg and Bo Nielsen
Dec. 18 (Bloomberg) -- The world is fascinated with Bernard Madoff and his alleged $50 billion fraud case -- except in Denmark -- where he is being upstaged by the countrys own corporate crime story.
Stein Bagger, chief executive officer of bankrupt software company IT Factory A/S, was placed in custody on Dec. 16 after pleading guilty at a preliminary court hearing outside Copenhagen to charges of fraud and forgery in a scheme where he invented contracts worth as much as $175 million. More than a dozen prosecutors will work on the final indictment in the biggest fraud case in Danish history.
Bagger ran a scam from a secret office a few hundred yards from the Copenhagen-based headquarters of IT Factory, police said. Forging the signature of Chairman Asger Jensby, hes charged with having sold and leased back non-existing software products to the biggest banks in Scandinavia and funneled millions of kroner to his own companies abroad.
Its is a story of a very charismatic man who was able to pull this off at a time when banks should have been at their most risk averse, said Caspar Rose, an assistant professor at the Copenhagen Business School. Everyone seems to have been asleep at the wheel.
The revelations of the fraud charges have shocked the Scandinavian nation of 5.4 million, which ranked least corrupt of 180 countries in the 2008 Transparency International Corruption Index.
Hells Angels
Danske Bank A/S, Denmarks biggest lender, said on Dec. 2 it may lose as much as 350 million kroner ($66 million) as a result of IT Factorys bankruptcy. Nordea Bank AB, the Nordic regions biggest, has 23 million kroner at risk, while SEB AB, Swedens third-largest bank, may lose 68 million kroner.
Through the course of the fraud, Bagger bought protection from Hells Angels bikers, signed a sponsorship deal with a Tour de France winning cycling team and saw his firm named Denmarks entrepreneur company of the year by Ernst & Young a week before he fled to the U.S. from a hotel in Dubai.
IT Factory was also an official partner of IBM, Carsten Groenning, spokesman for the Danish unit of the worlds largest provider of computer services, said by telephone. When IT Factory went bankrupt, it owed IBM 125 million kroner ($24 million) for outstanding software contracts, he said.
Broken Man
He wants to cooperate with police and has answered questions put to him, Jesper Madsen, Baggers court-appointed lawyer, said in an interview broadcast live by TV2 News after the hearing. Hes a broken man. Hes both very tired and very sad.
The fraud was uncovered after Bagger disappeared during a vacation in Dubai. On Nov. 27 he took his passport from his wife Anette Uttenthals handbag and boarded a plane to New York. His wife returned to Denmark and reported him missing. She also made a call to chairman Jensby, telling him about the disappearance, according to her family blog.
Why Bagger fled to New York hasnt yet been established. When he got there, he borrowed an Audi and a credit card from a business partner and drove across the U.S. to Los Angeles.
Back in Denmark, Chairman Jensby and other associates at IT Factory searched Baggers office on Nov. 30 hoping to find clues to the executives disappearance. Jensby found keys to the secret office where separate accounts revealed the scam. At a press conference the next day, Jensby announced the company was bankrupt and that at least 90 percent of all revenue was invented.
Super Intelligent
Stein Bagger is super intelligent, with psychopathic traits, Jensby said at the press conference, adding he had considered Bagger a trusted business partner.
Bagger was born in Norway in 1967 to journalist parents and grew up in Frederiksvaerk, 25 miles from Hamlets castle in Helsingoer. He was a bodybuilder and hired Brian Sandberg, a Hells Angel and a former professional boxer, as his bodyguard for the past year, Joern Joenke Nielsen, Danish spokesman for the biker group told Danish broadcaster TV2.
Jensby hired Bagger in 2001 improve the profitability of IT factory in 2001. They bought the company in 2003 after it went bankrupt earlier that year
IT Factory was in January due to pay 40 million kroner to become co-sponsor of cycling team CSC Saxo Bank, whose rider Carlos Sastre won this years Tour de France. After the bankruptcy, Denmarks Chief Prosecutor for Serious Economic Crime, Jens Madsen, sent out an international warrant for Baggers arrest on Dec. 4 via Interpol.
Bagger turned himself in at a downtown Los Angeles police station on Dec. 6 and was extradited to his homeland 10 days later, where he now faces as much as eight years in jail.
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