1. CBS Responsibility Day 2010
Teaching Case
Fraud in IT Factory A/S: Who is responsible?
LECTURER(S)
Copenhagen Business School
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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)
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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
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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
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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
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