Customs suspects Outokumpu of involvement in international steel fraud

CEO Rantanen: Nothing wrong with using companies in tax haven

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Finnish Customs suspects steel maker Outokumpu and its management of serious financial crimes.
     Documents acquired by Helsingin Sanomat show that the customs authorities suspect Outokumpu Stainless of having the forwarding company Saimaa Lines draw up incorrect and forged export documents. In addition, Outokumpu is suspected of using bookkeeping forgeries to cover up the crimes.
     A number of Outokumpu employees are suspected of aggravated bookkeeping crime and aggravated forgery. Both crimes carry a punishment of up to four years imprisonment. The actions under investigation took place between May 2005 and March 2006.
     
The case is likely to go from Finnish Customs to prosecutors in late May. A possible trial could begin in the autumn at the earliest.
     The state is the overwhelmingly largest owner of Outokumpu, whose main business is in the manufacture and refining of stainless steel. Outokumpu Stainless is a subsidiary, which is fully owned by the Outokumpu Group.
     Suspicions fall on eight employees of Outokumpu Stainless working in Tornio in the north of Finland. The suspects include some of the company's top management. Two employees of Saimaa Lines are suspected of forgery.
     
Customs suspects that Outokumpu sold stainless steel to dummy companies registered in tax havens.
     According to the company's bookkeeping, Outokumpu Stainless does not engage in trade with Russian companies, even though it exports steel to Russia. In Lappeenranta, forged documents have been used to circumvent Russian import duties and taxes through double billing.
     During the investigation, authorities have confiscated a number of documents, notes, flash drives, and CD ROM discs.
     
The suspicions against Outokumpu are among the most extensive criminal matters ever to be investigated by customs authorities. During the investigation, a number of state officials have been asked for assistance. The office of the Prosecutor General has been brought into the investigation because of the social significance of the matter.
     The case is legally very complicated, because of the lack of precedents on issues of double billing.
     
The aim of double billing is to avoid paying customs duties and import VAT of the receiving country. In practice the content of a load in a lorry of goods can change from stainless steel, as reported at the Finnish checkpoint on the border, to ping pong balls, when reported to the Russian inspectors. The driver carries two different sets of documents to be shown to the Finnish and Russian officials.
     Previously Finnish officials have taken a fairly relaxed view of forwarding companies involved in trade with Russia and in double billing.
     Now a tougher line appears to have taken effect. Writing false or misleading information is prosecutable if it takes place in Finland.
     Previously the crimes were seen to have taken place in Russia, as they did not deprive Finland of any tax revenues or duty fees.
     
Also exceptional in the matter is that it is being investigated by Finnish Customs officials. Usually economic crimes such as the ones under investigation are handled by the police. During its investigations, Finnish Customs has asked the National Bureau of Investigation (NBI) for assistance.
     The investigators say that the suspects in the case had not sought economic gain for themselves, but rather for their employers. No public officials are suspected of any crimes.
     Last spring Russia enacted punitive duties for the import of stainless steel. The duties are aimed at preventing the import of underpriced refined steel.
     Last spring Outokumpu commissioned an internal investigation on the suspected illegalities, using the services of the Roschier law firm.
     "On the basis of the report, there was no indication that any crime had been committed. We have full confidence in these people, and we have no need to move them to other tasks", says Outokumpu CEO Juha Rantanen.
     However, the report did not include the material that the customs authorities had seized in connection with the investigations.
     
Rantanen feels that using the services of companies based in tax havens is not unusual.
     "A normal practice in trade with Russia is that goods are sold through a handling agent. It is completely legal."
      Helsingin Sanomat has information that Outokumpu has probably become involved in a number of activities currently being investigated by Russian officials.
     Russia's main prosecutors' office announced in the spring that it had arrested people suspected of smuggling billions of dollars worth of metals into Russia.
     Forged papers were used for the export of scrap metal from Russia, which was to be refined in Finland and Sweden and brought back to Russia. Consequently, no export or import duties were paid.
     Prosecutors believe that the scrap metal from Russia was sold on the international market, and refined metal from other sources were delivered to Russia - without the payment of import duties.


Previously in HS International Edition:
  Customs authorities detain several Outokumpu employees (16.3.2007)

Links:
  Outokumpu website
  Finnish Customs

Helsingin Sanomat