FSN Capital wins €87 million arbitration ruling after Procuritas was found liable for fraud and wilful misconduct

Copenhagen, June 23rd, 2020

FSN Capital (“Buyer”)* awarded €87 million in compensation after Procuritas (“Seller”)** was found liable for fraud and wilful misconduct by the international arbitral tribunal in Denmark today. The ruling is final and cannot be appealed. 

Today, the international arbitral tribunal in Denmark ruled in accordance with Northern European private equity firm FSN Capital’s claims of fraud and wilful misconduct and sanctioned Swedish private equity firm Procuritas to pay €87 million in compensation to FSN Capital. The tribunal ruled that Procuritas in January 2018 sold its former Danish portfolio company, Gram Equipment, an ice cream equipment manufacturer, based on fraudulent financial reporting and therefore was liable to pay damages to FSN Capital. The ruling is final and cannot be appealed.

It should be noted that:

• The compensation will help Gram Equipment create additional growth and jobs, building on significant progress under FSN’s ownership.
• FSN safeguarded Gram Equipment from bankruptcy and injected €23 million in additional funds to the company.

“The crux of the matter is that the financial information provided to the Buyer on behalf of the Seller at least from June 2017 and onwards was systematically manipulated through fictitious write-ups and cut-off misstatements and with the intention that the Buyer should not discover the underlying facts,” the arbitral tribunal wrote in its 430-page ruling today.

“I am very pleased with the outcome of the arbitration. The compensation will greatly improve Gram Equipment’s operational and competitive situation and help its employees and management team in their outstanding efforts to rebuild the company,” said Thomas Broe-Andersen, partner at FSN Capital Partners (Investment Advisor to the FSN Capital Funds).

“I am also very content on behalf of our investors and their beneficiaries. Workers, pensioners, and educational institutions have now been given right to compensation for the losses initially inflicted on their pension savings,” he added.

Shortly after the acquisition in January 2018, Gram Equipment’s statutory auditors, EY, uncovered accounting irregularities in the company’s books and records. This led FSN Capital to initiate legal and forensic investigations and to file for arbitration against Procuritas in September 2018, claiming revenues and profits had been deliberately manipulated through fraudulent accounting such as fake revenue recognition on projects, fake invoices and backdating of orders leading up to the sale.

“The Buyer has produced comprehensive and meticulous evidence on acts of alleged fraud and wilful misconduct,” said the arbitral tribunal in today’s ruling.

For more information, please contact FSN Capital Partners (Investment Advisor to the FSN Capital Funds):

Thomas Broe-Andersen, Partner
tba@fsncapital.com
+45 33 13 48 00

*FSN Capital GP V Limited acting in its capacity as general partner for and on behalf of each of FSN Capital V L.P., FSN Capital V (B) L.P. and FSN Capital V Invest L.P (“FSN Capital”). The Claimant in the arbitration case was a subsidiary of FSN Capital.
**Procuritas Capital Investors IV GP Limited acting as General Partner to Procuritas Capital Investors IV A, LP (“Procuritas”). The Respondent in the arbitration case was a subsidiary of Procuritas.