Terra Securities scandal
Encyclopedia
The Terra Securities scandal was a scandal
Scandal
A scandal is a widely publicized allegation or set of allegations that damages the reputation of an institution, individual or creed...

 that became public in November 2007. It involved highly speculative investments by eight municipalities of Norway
Municipalities of Norway
Norway is divided into 19 administrative regions, called counties , and 430 municipalities...

 in various hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...

s in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 bond market
Bond market
The bond market is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and...

. The funds were sold by Terra Securities
Terra Securities
Terra Securities ASA was a Norwegian security company that sold various financial instruments, index options, hedge funds and other investment securities through 78 local savings banks that are members of Terra-Gruppen. In 2006 it had a market share of 1.92 % on Oslo Stock Exchange, rating it as...

 to the municipalities, while the products were delivered by Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

. The municipalities involved were Narvik
Narvik
is the third largest city and municipality in Nordland county, Norway by population. Narvik is located on the shores of the Narvik Fjord . The municipality is part of the Ofoten traditional region of North Norway, inside the arctic circle...

, Rana
Rana, Norway
Rana is the second largest municipality in Nordland county – and the third largest in North Norway – by population. By area, Rana is largest in Norway south of Finnmark , taking in large areas of mountains and forested valleys. It is part of the Helgeland traditional region...

, Hattfjelldal
Hattfjelldal
Hattfjelldal is a municipality in Nordland county, Norway. It is part of the Helgeland traditional region. The administrative centre of the municipality is the village of Hattfjelldal. Other villages include Grubben, Svenskvollen, and Varntresk...

 and Hemnes
Hemnes
Hemnes is a municipality in Nordland county, Norway. It is part of the Helgeland traditional region. The administrative centre of the municipality is the village of Korgen.- Municipality history :...

 in Nordland
Nordland
is a county in Norway in the North Norway region, bordering Troms in the north, Nord-Trøndelag in the south, Norrbottens län in Sweden to the east, Västerbottens län to the southeast, and the Atlantic Ocean to the west. The county was formerly known as Nordlandene amt. The county administration is...

, Vik
Vik
Vik is a municipality in the county of Sogn og Fjordane, Norway. It is located in the traditional district of Sogn. The administrative center of Vik is the village of Vikøyri.-General information:...

 and Bremanger
Bremanger
Bremanger is a municipality in the county of Sogn og Fjordane, Norway. Bremanger is the only municipality in Sogn og Fjordane, which is located in two districts. The north-eastern parts comprising Oldeide, Berle, Rugsund, Davik, Isane and Ålfoten is located in Nordfjord, while Bremanger, Kalvåg,...

 in Sogn og Fjordane
Sogn og Fjordane
is a county in Norway, bordering Møre og Romsdal, Oppland, Buskerud, and Hordaland. The county administration is in the town of Hermansverk in Leikanger municipality while the largest town is Førde....

, Haugesund
Haugesund
is a town and municipality in the county of Rogaland, Norway.-Location:Haugesund was separated from Torvastad as a town and municipality of its own in 1855. The rural municipality of Skåre was merged with Haugesund on January 1, 1958. Haugesund is a small municipality, only 73 km²...

 in Rogaland
Rogaland
is a county in Western Norway, bordering Hordaland, Telemark, Aust-Agder and Vest-Agder. It is the center of the Norwegian petroleum industry, and as a result of this, Rogaland has the lowest unemployment rate of any county in Norway, 1.1%...

, and Kvinesdal
Kvinesdal
Kvinesdal is a municipality in the county of Vest-Agder, Norway.Kvinesdal was established as a municipality on 1 January 1838 . Feda was separated from Kvinesdal on 1 January 1900 but again merged with Kvinesdal on 1 January 1963. Fjotland was also merged with Kvinesdal on that date...

 in Vest-Agder
Vest-Agder
In the 16th century, Dutch merchant vessels began to visit ports in southern Norway to purchase salmon and other goods. Soon thereafter the export of timber began, as oak from southern Norway was exceptionally well suited for shipbuilding...

, all large producers of hydroelectricity
Hydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...

.

The investments were very complicated in nature. They were geared, and they involved high risk
Financial risk
Financial risk an umbrella term for multiple types of risk associated with financing, including financial transactions that include company loans in risk of default. Risk is a term often used to imply downside risk, meaning the uncertainty of a return and the potential for financial loss...

 through a small upside but a very large downside. Terra Securities, now bankrupt, was a subsidiary of Terra Markets
Terra Markets
Terra Markets AS is an Norwegian investment banking firm in the Terra Group. Terra Markets employs 75 professionals in brokerage, equity research, market making and corporate finance. The equity research team consists of 15 analysts who cover approximately 150 listed companies in Norway...

, which is owned 66.73% by Terra-Gruppen
Terra-Gruppen
Terra-Gruppen, branded as Terra is an alliance between 77 Norwegian savings banks. Terra-Gruppen is a strategic alliance of local Norwegian savings banks, and co-ordinates work within the areas defined as falling within the alliance. The group supplies competitive products and services to banks and...

, an alliance
Business alliance
A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer. Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project...

 and co-branding
Co-branding
Co-branding refers to several different marketing arrangements:Co-branding, also called brand partnership, is when two companies form an alliance to work together, creating marketing synergy...

 company owned by 78 local savings banks
Sparebank
Sparebank is a Norwegian savings bank without external owners. The Norwegian sparebanks are a separate type of juridical entity that differ from commercial banks. There are a total of 123 savings banks in Norway.- History :...

 in Norway. The remaining 33.27% was owned by the management of the company. Citigroup is the world's largest bank, based in the United States.

Background

In 2001, Vik municipality found a loophole in the Municipality Act and invested borrowed money in the stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...

, by first investing and then seeking permission later. This utilization of the loophole was confirmed by the Norwegian Ministry of Local Government and Regional Development
Norwegian Ministry of Local Government and Regional Development
The Royal Norwegian Ministry of Local Government and Regional Development is a Norwegian ministry established in 1948. It is responsible for the housing and building, regional and rural policy, municipal and county administration and finances, and the conduct of elections...

 in 2002, because the money borrowed was secured in future income. Vik had borrowed through DnB Markets
Den norske Bank
Den norske Bank or DnB was a Norwegian bank that existed between 1990 and 2003 when it merged with Gjensidige NOR to form the present DnB NOR...

 based on annual payments of NOK 10M, secured through income from hydroelectric power production. This money was then invested in bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

s through Terra Securities in 2001 and 2002.

In the same year, in 2001, the four Nordland municipalities Narvik, Rana, Hemnes and Hattfjelldal borrowed money to invest in complicated bonds issued by Citigroup and sold through Terra Securities. The municipalities also signed a confidentiality clause
Confidentiality
Confidentiality is an ethical principle associated with several professions . In ethics, and in law and alternative forms of legal resolution such as mediation, some types of communication between a person and one of these professionals are "privileged" and may not be discussed or divulged to...

 with Terra, which ensured that no independent third party could evaluate the quality of the investments. It has been questioned if such a clause, under the circumstances, was legal.

In Narvik's case, part of the capital came from the municipal sale of 50% of Narvik Energi
Narvik Energi
Narvik Energi is a power company that serves Narvik in Norway. It operates seven hydroelectric power stations and Nygårdsfjellet wind farm. The company is owned by the City of Narvik , DONG Energy and HelgelandsKraft...

, the municipal power company, in 2002 to DONG Energy
DONG Energy
-History:The Danish state company Dansk Naturgas A/S was founded in 1972 to manage resources in the Danish sector of the North Sea. After some years, the company was renamed to Dansk Olie og Naturgas A/S . At the beginning of 2000s, DONG started to extend itself into the electricity market by...

 and HelgelandsKraft
HelgelandsKraft
HelgelandsKraft is a power company that serves Helgeland in Norway. It owns eight hydro electric Power Plants with average annual production of 678 GWh as well as the power grid in the fourteen municipalities of Helgeland, that also own the company...

. The other three municipalities had ownership in HelgelandsKraft (Rana 26.8%, Hemnes 7.0% and Hattfjelldal 2.5%) as well as property tax
Property tax
A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...

 income from power stations owned by Statkraft
Statkraft
Statkraft is a Norwegian state owned electricity company. With a total energy production of 44.9 TWh in 2007, the Statkraft Group is the third largest energy producer in the Nordic region, as well as the largest energy producer based on renewable energy sources in Europe,consisting of 40% of the...

. These municipalities were investing future income from these sources.

The main advisors in Terra were Knut Anders Opstad
Knut Anders Opstad
Knut Anders Opstad is a Norwegian broker and salesperson that worked for Terra Securities from 1997 to 2007.From 2001 to 200-References:...

 and Harald Norberg
Harald Norberg
Harald Norberg is a Norwegian broker, who has several times misled investment clients to make highly speculative investments.In 1991 Norberg was fined by the Norwegian National Authority for the Investigation and Prosecution of Economic and Environmental Crime for illegal sale of bonds to private...

,. The latter had been previously fined by the Norwegian National Authority for the Investigation and Prosecution of Economic and Environmental Crime in the early 1990s for the illegal sale of bonds to private individuals. They had tried to sell the investments to all municipalities with income from power production by contacting the Association of Norwegian Power Municipalities, but had been rejected by the organization.

Nature of the investments

After the reinvestment in 2007, the municipalities gained a potential upside on their investments of between 0.5% and 3.0% above risk-free placements, but instead risked losing not only their entire investment, but in a worst case scenario twice what they invested. A total of NOK 451 million was invested, but was 'geared' by borrowing an additional amount corresponding to ten times the investment, so that - in reality - the municipalities were actually investing between NOK 4 and 5 billion. In a worst case scenario the municipalities could lose NOK 900 million. Tor Sydnes in Wassum Investment Consulting claimed in an interview with Dagens Næringsliv
Dagens Næringsliv
Dagens Næringsliv, commonly known as DN, is a Norwegian tabloid specializing in business reporting with a claimed daily circulation of 82,775 copies in 2008, making it the 8th largest newspaper in Norway. The editor in chief is Amund Djuve. Its name is Norwegian for "Today's Business".Originally...

 that the risks involved were hugely disproportionate and the difference in the vast risk and minimal upside was unacceptable: "It is completely incomprehensible that they said yes". When translating the prospectus
Prospectus (finance)
In finance, a prospectus is a document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements,...

 from English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...

 to Norwegian, Terra chose to systematically omit any warnings of risks involved. These warnings were included in the original Citigroup prospectus.

The investment model was so complex that the CEO of Terra Securities could not confirm that even he actually understood how it worked. The deficit from the investment came in late 2007 caused by a credit bubble in the United States.

The investments made by Haugesund involved a placement of NOK 227.5M as a security for Citigroup, in case loans to United States municipalities were defaulted
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...

 beyond 3.32%; Haugesund would have to pay this to Citigroup. The mayor of Haugesund, Petter Steen jr.
Petter Steen jr.
Petter Steen jr. is a Norwegian politician for the Conservative Party and mayor of Haugesund since 2001.Steen was educated at Stavanger Teacher College after which he worked in the public schools in Sveio until he was elected mayor in 2001.-References:...

 claims that he thought the municipality was buying a bond in Statkraft
Statkraft
Statkraft is a Norwegian state owned electricity company. With a total energy production of 44.9 TWh in 2007, the Statkraft Group is the third largest energy producer in the Nordic region, as well as the largest energy producer based on renewable energy sources in Europe,consisting of 40% of the...

. Instead they were selling such a bond as security for the hedging they were performing for Citigroup.

Total investments in Terra/Citigroup scheme:
  • Bremanger: NOK 170 million
  • Hattfjelldal: 103M
  • Haugesund: 220M
  • Hemnes: 84M
  • Kvinesdal 32M
  • Narvik: 52M
  • Rana: 297M
  • Vik: 38.5M

Reaction to the scandal

After the financial newspaper Finansavisen
Finansavisen
Finansavisen is a Norwegian business newspaper with six weekly issues and published in Oslo by Hegnar Media. It had a circulation of 23,274 in 2006. It was established in 1992 by Trygve Hegnar, who is also Editor-in-Chief....

 began reporting the case, and the municipalities suspected that they had been misled, they hired expertise from the law firm Lund & Co. as well the financial advisory firm Pareto
Pareto Group
Pareto Group is a Norwegian holding company that owns several financial brokers, including 75 % of Pareto Securities and the shipbroker Bassøe. In 2008 Pareto will start its own bank, Pareto Bank. In 2006 it had 5.1 % of the trade on the Oslo Stock Exchange...

. The Financial Supervisory Authority of Norway
Financial Supervisory Authority of Norway
The Financial Supervisory Authority of Norway is a Norwegian government agency responsible for supervision of financial companies within Norway based on law and regulations from Storting, the Norwegian Ministry of Finance and international accounting standards...

 announced that they would perform an investigation of the case, regarding the legality of the products sold and the information provided by Terra. Minister of Local Government and Regional Development
Minister of Local Government and Regional Development (Norway)
The Minister of Local Government and Regional Development is a Norwegian minister that is head of the Norwegian Ministry of Local Government and Regional Development...

 Magnhild Meltveit Kleppa
Magnhild Meltveit Kleppa
Magnhild Meltveit Kleppa is a Norwegian politician for the Centre Party. She was the Minister of Social Affairs from 1997 to 2000 and was appointed Norwegian Minister of Local Government and Regional Development on 21 September 2007. On 20 October 2009, she swapped departments and became Minister...

 asked the County Governor of Nordland
County Governor
County Governor is a Norwegian government agency represented in 18 of the Norwegian counties responsible for a number of supervision and management duties. The Governor is the representative of the King and Government of Norway in each county, functioning as the connection between the state and...

 to investigate whether the agreements made were legal according to the Municipality Act.

Terra-Gruppen started an internal investigation, but has since only relocated the two advisors, claiming that top management could not be held responsible for any issues in connection with the products. However, Sverre Leiro
Sverre Leiro
Sverre Leiro is a Norwegian businesspersonHe was the Chief Executive Officer in NorgesGruppen until 2011, when he retired. He instead became chair of Moelven Industrier. From 2006 to 2007 he was a board member of Terra-Gruppen, but withdrew on 23 November 2007 due to the Terra Securities...

, CEO of NorgesGruppen
NorgesGruppen
NorgesGruppen ASA is a Norwegian corporation that operates as wholesaler and retailer within grocery stores and kiosks. It is the largest trading company in Norway, with a 36,7% market share within groceries. In 2006 it had 1,898 stores and 766 kiosks...

 and one of the two independent members of the board
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...

 of Terra-Gruppen resigned on 23 November 2007, claiming that remaining as a board member could tarnish his and NorgesGruppen's reputation
Reputation
Reputation of a social entity is an opinion about that entity, typically a result of social evaluation on a set of criteria...

.

On 26 November 2007, Terra announced that they were willing to take the downside of the investments made in 2007 by the four Nordland municipalities, a total loss of NOK 150M. This would result in a net loss for the municipalities of NOK 150M. By 27 November the municipalities had rejected the offer. Local politicians in Narvik feared that they would be forced to sell the remaining stake in Narvik Energi if they could not extract themselves from the agreement with Terra.

On 28 November 2007, the Financial Supervisory Authority of Norway
Financial Supervisory Authority of Norway
The Financial Supervisory Authority of Norway is a Norwegian government agency responsible for supervision of financial companies within Norway based on law and regulations from Storting, the Norwegian Ministry of Finance and international accounting standards...

 announced that they would withdraw all operating licenses held by Terra Securities. Director of the authority, Bjørn Skogstad Aamo
Bjørn Skogstad Aamo
Bjørn Skogstad Aamo is a Norwegian economist and politician for the Labour Party. He was State Secretary for three non-consecutive terms between 1973 and 1993, and served as Director of the Financial Supervisory Authority of Norway from 1993 to 2011.-Political career:Born in Oslo, Aamo grew up in...

 said the reasons were "numerous and serious breaches of requirements for good and correct information to clients". Subsequently, the company filed for bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 and the CEO of Terra-Gruppen, Ola Sundt Ravnestad
Ola Sundt Ravnestad
Ola Sundt Ravnestad is a Norwegian businessperson, banker and entrepreneur. He was Chief Executive Officer of the bank alliance Terra-Gruppen, that he founded along with a number of savings banks in 1997....

, announced his resignation. Ravnestad will receive NOK 5.5 million in remuneration after he retires from the job.

Due to the bankruptcy of Terra Securities, Citigroup announced, on 30 November 2007, that they would sell the funds on the open market, essentially inflicting a cost of approx. NOK 350M on the municipalities.

On 7 December 2007 Tønsberg District Court gave the eight municipalities arrest
Arrest
An arrest is the act of depriving a person of his or her liberty usually in relation to the purported investigation and prevention of crime and presenting into the criminal justice system or harm to oneself or others...

 in all personal property of the broker Knut Anders Opstad
Knut Anders Opstad
Knut Anders Opstad is a Norwegian broker and salesperson that worked for Terra Securities from 1997 to 2007.From 2001 to 200-References:...

, including his private holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...

, Opstad Invest AS. Representatives for the municipalities indicated they would also seek arrest of the other involved parties' property.

On 17 June 2008, the municipality of Rana dismissed their Chief Municipal Officer, Jan Reitehaug, and the Financial Director. This was the result of an independent consultant report that concluded that the municipality had breached four paragraphs of the Municipality Act as well as the municipalities' own financial policies. Furthermore, it revealed that the Chief Municipal Officer did not realise that the representatives were brokers — but thought they were merely advisors. The administration also failed to obtain political approval for several of the transactions, and failed to register broker fees because they did understand what they were.

In August 2008, several of the municipalities announced they were considering taking legal action against Citigroup, in either the United Kingdom or the United States, to hold Citigroup responsible for the losses. On 8 September, the eight municipal councils involved unanimously voted to hold DnB NOR and Depfa Bank liable for their losses, by issuing loans that were illegal according to the Municipality Act. The municipalities will no longer honour the loan commitments, and stop payments. Kjell-Idar Juvik claimed he hoped the banks would be willing to negotiate the matter, and hoped to avoid legal proceedings, but said that municipalities would not hesitate to bring the matter to court. DnB Nor announced that following day that they are considering taking legal action against the municipalities to force them to continue payments.

Press coverage

The incident has been subject to extensive press coverage with headlines and entire first pages in both local and national newspapers, as well as in-depth research articles in the financial press. TV coverage has involved both news and debate programs on several channels, along with the inevitable ironic comments by comedians in various satirical TV shows.

Parties involved

  • Eight municipalities, which, it is claimed, were inadequately informed by Terra Securities representatives of the high risks involved. Also, the legality of furnishing "future expected income" as security for loans has been questioned. The municipalities risk huge losses from their speculative investments. The municipalities have been represented by their mayors:
    • Asgeir Almås
      Asgeir Almås
      Asgeir Kåre Almås is a Norwegian politician for the Norwegian Labour Party and mayor of Hattfjelldal.In 2007 he was one of the eight mayors that led the municipalities in their accusations against Terra-Gruppen in the Terra Securities scandal, where Hattfjelldal risked losing NOK 103...

       (Labour
      Norwegian Labour Party
      The Labour Party is a social-democratic political party in Norway. It is the senior partner in the current Norwegian government as part of the Red-Green Coalition, and its leader, Jens Stoltenberg, is the current Prime Minister of Norway....

      , Hattfjelldal
      Hattfjelldal
      Hattfjelldal is a municipality in Nordland county, Norway. It is part of the Helgeland traditional region. The administrative centre of the municipality is the village of Hattfjelldal. Other villages include Grubben, Svenskvollen, and Varntresk...

      )
    • Karen Margrethe Kuvaas
      Karen Margrethe Kuvaas
      Karen Margrethe Kuvaas is a Norwegian politician for the Norwegian Labour Party and since 2007 mayor of Narvik.Kuvaas took over as mayor succeeding her party colleague Olav Sigurd Alstad following the 2007 election. In November she was one of the four Nordland mayors who fronted the municipalities...

       (Labour, Narvik
      Narvik
      is the third largest city and municipality in Nordland county, Norway by population. Narvik is located on the shores of the Narvik Fjord . The municipality is part of the Ofoten traditional region of North Norway, inside the arctic circle...

      )
    • Kjell-Idar Juvik
      Kjell-Idar Juvik
      Kjell-Idar Juvik is a Norwegian politician for the Norwegian Labour Party.Born in Hemnesberget, Helgeland, Kjell-Idar Juvik has been a member of Hemnes municipality council since 1987, and served as mayor since 2003...

       (Labour, Hemnes
      Hemnes
      Hemnes is a municipality in Nordland county, Norway. It is part of the Helgeland traditional region. The administrative centre of the municipality is the village of Korgen.- Municipality history :...

      )
    • Erik Lidal (Centre
      Centre Party (Norway)
      The Centre Party is a centrist and agrarian political party in Norway, founded in 1920. The Centre Party's policy is not based on any of the major ideologies of the 19th and 20th century, but has a focus on maintaining decentralised economic development and political decision-making.From its...

      , Vik
      Vik
      Vik is a municipality in the county of Sogn og Fjordane, Norway. It is located in the traditional district of Sogn. The administrative center of Vik is the village of Vikøyri.-General information:...

      )
    • Odd Omland (Labour, Kvinesdal
      Kvinesdal
      Kvinesdal is a municipality in the county of Vest-Agder, Norway.Kvinesdal was established as a municipality on 1 January 1838 . Feda was separated from Kvinesdal on 1 January 1900 but again merged with Kvinesdal on 1 January 1963. Fjotland was also merged with Kvinesdal on that date...

      )
    • Petter Steen jr.
      Petter Steen jr.
      Petter Steen jr. is a Norwegian politician for the Conservative Party and mayor of Haugesund since 2001.Steen was educated at Stavanger Teacher College after which he worked in the public schools in Sveio until he was elected mayor in 2001.-References:...

       (Conservative
      Conservative Party of Norway
      The Conservative Party is a Norwegian political party. The current leader is Erna Solberg. The party was since the 1920s consistently the second largest party in Norway, but has been surpassed by the growth of the Progress Party in the late 1990s and 2000s...

      , Haugesund
      Haugesund
      is a town and municipality in the county of Rogaland, Norway.-Location:Haugesund was separated from Torvastad as a town and municipality of its own in 1855. The rural municipality of Skåre was merged with Haugesund on January 1, 1958. Haugesund is a small municipality, only 73 km²...

      )
    • Kåre Olav Svarstad (Labour, Bremanger
      Bremanger
      Bremanger is a municipality in the county of Sogn og Fjordane, Norway. Bremanger is the only municipality in Sogn og Fjordane, which is located in two districts. The north-eastern parts comprising Oldeide, Berle, Rugsund, Davik, Isane and Ålfoten is located in Nordfjord, while Bremanger, Kalvåg,...

      )
    • Geir Waage
      Geir Waage
      Geir Norten Waage is a Norwegian politician for the Norwegian Labour Party.Since 2007 he is the mayor of Rana. Waage was one of the four mayors that fronted his municipality and seven others in the Terra Securities scandal....

       (Labour, Rana
      Rana, Norway
      Rana is the second largest municipality in Nordland county – and the third largest in North Norway – by population. By area, Rana is largest in Norway south of Finnmark , taking in large areas of mountains and forested valleys. It is part of the Helgeland traditional region...

      )
  • Lund & Co. (judicial) and Pareto Group
    Pareto Group
    Pareto Group is a Norwegian holding company that owns several financial brokers, including 75 % of Pareto Securities and the shipbroker Bassøe. In 2008 Pareto will start its own bank, Pareto Bank. In 2006 it had 5.1 % of the trade on the Oslo Stock Exchange...

     (financial)—have acted as advisors for the municipalities.
  • Terra Securities
    Terra Securities
    Terra Securities ASA was a Norwegian security company that sold various financial instruments, index options, hedge funds and other investment securities through 78 local savings banks that are members of Terra-Gruppen. In 2006 it had a market share of 1.92 % on Oslo Stock Exchange, rating it as...

     (now bankrupt) - sold the funds to the municipalities, allegedly without informing of the true nature of the risk.

  • Terra Securities IS—an "inner company". The owners received almost 200 million NOK from this company last year. The role of this company and its relation to the now defunct company Terra Securities ASA is not fully known.
  • Harald Norberg
    Harald Norberg
    Harald Norberg is a Norwegian broker, who has several times misled investment clients to make highly speculative investments.In 1991 Norberg was fined by the Norwegian National Authority for the Investigation and Prosecution of Economic and Environmental Crime for illegal sale of bonds to private...

     and Knut Anders Opstad
    Knut Anders Opstad
    Knut Anders Opstad is a Norwegian broker and salesperson that worked for Terra Securities from 1997 to 2007.From 2001 to 200-References:...

    —The two brokers who actually sold the funds to the municipalities.
  • Owners of Terra Securities (Terra-Gruppen
    Terra-Gruppen
    Terra-Gruppen, branded as Terra is an alliance between 77 Norwegian savings banks. Terra-Gruppen is a strategic alliance of local Norwegian savings banks, and co-ordinates work within the areas defined as falling within the alliance. The group supplies competitive products and services to banks and...

     owned by 78 savings banks
    Sparebank
    Sparebank is a Norwegian savings bank without external owners. The Norwegian sparebanks are a separate type of juridical entity that differ from commercial banks. There are a total of 123 savings banks in Norway.- History :...

     as well as the executive managers Ola Sundt Ravnestad
    Ola Sundt Ravnestad
    Ola Sundt Ravnestad is a Norwegian businessperson, banker and entrepreneur. He was Chief Executive Officer of the bank alliance Terra-Gruppen, that he founded along with a number of savings banks in 1997....

     and Odd Arne Pedersen)—Have received hundreds of million NOK from Terra Securities since the illegal transactions were initiated. They risk legal action from involved parties, and loss of goodwill
    Social capital
    Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...

    .
  • DnB NOR
    DnB NOR
    DNB ASA is Norway's largest financial services group with total combined assets of more than NOK 2.0 trillion and a market capitalisation NOK 102 billion as per December the 31st. The Group includes brands such as DNB, Vital, Nordlandsbanken, Cresco, Postbanken, DnB NORD and Carlson...

    — Gave loans to the municipalities to make the investments. Legality of loans are questioned.
  • Depfa Bank
    Depfa Bank
    Depfa Bank plc is a Dublin-based German-Irish bank. It provides financial services to the public sector and also provides financing for larger infrastructure projects. The name derivates from Deutsche Pfandbriefbank.- History :...

    — Gave loans to Haugesund and Narvik.
  • Citigroup
    Citigroup
    Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

    — Issued the bonds to Terra, who sold on the securities to the Norwegian municipalities. While "the risks were clearly conveyed by Citigroup to Terra" (according representatives from Citigroup), the risks of the prospects were allegedly not communicated to the final buyers. The scope of commissions and other remunerations from the purportedly illegal transactions is not known. The letter dated November 27, 2007 from The Financial Supervisory Authority of Norway to Terra Securities ASA, states that "The Supervisory Authority contends that Terra Securities ASA's presentation appears inadequate and misleading, as central elements such as the possibility of potential extra payments and losses, together with the size of these, has been omitted. (...) The material from Citigroup is significantly more detailed than the material from Terra Securities ASA. However, this document also lacks information about crucial risk issues for the municipalities, namely the risk of having to furnish additional security in the form of cash. (...) The Supervisory Authority contends that Citigroup's presentation, as well as the presentation from Terra Securities ASA, appears inadequate and misleading because central elements such as information about potential extra payments and the scope of these are omitted." (translated)
  • SEB Merchant Bank
    Skandinaviska Enskilda Banken
    Skandinaviska Enskilda Banken AB is a Swedish financial group for corporate customers, institutions and private individuals with headquarters in Stockholm, Sweden. Its activities comprise mainly banking services, but SEB also carries out significant life insurance operations and also owns Eurocard...

    — Acted as a broker
    Broker
    A broker is a party that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal...

     between Citigroup and Terra Securities, and was initially opposed to the Citigroup funds scheme.
  • Financial Supervisory Authority of Norway
    Financial Supervisory Authority of Norway
    The Financial Supervisory Authority of Norway is a Norwegian government agency responsible for supervision of financial companies within Norway based on law and regulations from Storting, the Norwegian Ministry of Finance and international accounting standards...

    — Control authority that withdrew Terra Securities' licence. The Authority is making further enquiries concerning the legality of the conduct of certain persons and parties involved in Terra.
  • Norwegian National Authority for the Investigation and Prosecution of Economic and Environmental Crime— The police unit that will eventually charge any parties deemed to have violated Norwegian law.
  • County Governor of Nordland
    County Governor
    County Governor is a Norwegian government agency represented in 18 of the Norwegian counties responsible for a number of supervision and management duties. The Governor is the representative of the King and Government of Norway in each county, functioning as the connection between the state and...

    — Investigating whether the municipalities have breached the Municipality Act during the investment process.

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