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CBS Responsibility Day 2010
                   Teaching Case
    Fraud in IT Factory A/S: Who is responsible?

           ...
IT Factory A/S


From honest beginnings to bankruptcy
     • Started in Copenhagen in 1997, growth
     • Relocation to th...
IT Factory A/S
                                Fraud

Largest fraud case in Danish corporate history
     • Over 900 mln D...
Erik Dybdahl


Erik Dybdahl (as an auditor of KPMG Denmark) audited IT
Factory’s documents in 2005, 2006 and 2007
    • Fo...
KPMG Denmark


KPMG Denmark
    • Received criticism from the media
    • Not legally responsible in the fraud since they ...
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RD part 1 KPMG Case

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RD part 1 KPMG Case

  1. 1. CBS Responsibility Day 2010 Teaching Case Fraud in IT Factory A/S: Who is responsible? LECTURER(S) Copenhagen Business School 1
  2. 2. IT Factory A/S From honest beginnings to bankruptcy • Started in Copenhagen in 1997, growth • Relocation to the U.S. in 2000 • Assets sold off in December 2001 From bankruptcy to a success story • Consolidated the remains in CPH – Stein Bagger joins as CEO • Reported soaring Revenue and Profit figures • Ernst & Young gives Mr. Bagger the 2008 Denmark Entrepreneur Of The Year Award (removed 3 days later) 2
  3. 3. IT Factory A/S Fraud Largest fraud case in Danish corporate history • Over 900 mln DKK defrauded Stein Bagger orchestrated the fraud • Forged signatures in a scheme of leasing contracts • Became instantly famous while wanted by the authorities • Sentenced to 7 years in prison with confiscation of 50 mln DKK 3
  4. 4. Erik Dybdahl Erik Dybdahl (as an auditor of KPMG Denmark) audited IT Factory’s documents in 2005, 2006 and 2007 • Found no signs of wrongdoing • Audited firms owned by Mr. Bagger – common practice in Denmark for affiliated businesses to share auditors • Resigned from KPMG Denmark in August 2008 citing personal reasons – possibly to focus on family business 4
  5. 5. KPMG Denmark KPMG Denmark • Received criticism from the media • Not legally responsible in the fraud since they audited forged documents • Did not experience client outfall, had new clients coming Problems may not be over yet • Boris Frederiksen, IT Factory insolvency administrator, building a case against KPMG Denmark and IT Factory’s Board of Directors over their alleged negligence in the fraud 5

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