Fraud squad targets Swedish state

Did the Swedish state know about OM's bid for LSE?

Sweden's fraud squad has launched an insider dealing investigation into shares OM Gruppen shares bought by the Swedish ministry of finance on behalf of the Swedish state.

The economic crimes authority, which operates under the Swedish ministry of justice, suspects that the state secretly bought shares in OM Gruppen just ahead of its hostile takeover bid for London Stock Exchange - even though it knew that a bid was forthcoming.

The share price of OM Gruppen, the company that runs the stock exchange in Stockholm, shot up following the bid, but fell back again when it became clear that it would fail.

The revelation about the state's share buying came following a recent investigation by the country's financial services regulator into a variety of trades in OM Gruppen shares during the period prior to the bid.

Fraud squad called in

A report from the regulator was handed over to the fraud squad.

"The circumstances that have appeared in [the financial services watchdog's] investigation indicate that there are reasons to presume that a crime has been committed," the chief prosecutor of the fraud squad, Alf Johansson told Swedish journalists on Wednesday.

During June, July and August, the State bought OM Gruppen shares for 650m Swedish kronor, boosting its stake in the group from 7.6% to 9.4%.

The state is represented on OM Gruppen's board because it is one of its largest owners.

The watchdog found that the state's representative on OM Gruppen's board knew that a bid was forthcoming during the period when it bought shares in OM Gruppen.

This individual is not suspected of any wrong doing and neither are any other individual at this stage.

The fraud squad must decide whether or not a crime has been committed, and if the answer is yes; whether or not any individuals could be charged for that crime.

A decission on whether or not to close the case or to prosecute is expected to be taken in February, said Johansson.