R: Hi, I'm Valeria from ”Mission Investigate”. I have a receipt here... Abacus, what's that?
X: Abacus, it's those clothes.
Tonight on ”Mission Investigate”: the luxury lives of Arla's management, at the expense of the farmers.
Jonas Karlsson, former milk farmer
JK: It seems like, for anyone who reaches that level this is what happens.
R: What do you sell?
X: Golf clothes?
R: Do you sell anything else?
X: No, just golf things.
Mission Investigates: Milk giant Arla made headlines, after deciding to come clean. In an article, Arla's VP revealed how employees waste company money on golf, dinners, and other luxuries.
But without the report you're about to see tonight neither the public nor the struggling farmers would have found out what was happening at Arla. We have had access to company documents which reveal much more than simply a waste of money.
”WE'VE BEEN WASTEFUL”
Arla has ties to more milk farmers than any other dairy in Sweden. The motto is: buy Arla's products and you support milk farmers because it's the farmers who co-operatively own Arla.
But times are tough for the owners of Arla. The company is trying to calm the farmers with promises showing that costs are under control.
Anonymous voice:
– We're always reviewing costs...
– Arla controls costs….
Arla continually controlled costs...
From an internal infomercial of Arla, August 2015.
Peder Tuborgh, chief executive officer Arla Foods
PT: Structural changes in the company, lean management and other measures. Less travelling, less projects. There's not one coin that isn't investigated here.
Spending is closely monitored, according to the company's executive chief officer. But we've accessed internal documents which show this not to be true. Invoices show how Arla's employees have used company credit cards. Thousands of transactions since 2014, one of the worst years for farmers. But from the invoices you can't tell times are tough for the milk industry.
Gold watches and jewellery worth over half a million SEK are given as gifts, as well as gift vouchers for alcohol.
Receptions are held at trendy bars and Michelin-starred restaurants. When it comes to conferences and team building, no corners are cut. At this racetrack, for instance, to coincide with a conference, 50 employees partook in driving practice and went high-speed driving with professionals. In total, it cost over half a million SEK.
At Kulla Gård in Vimmerby we meet Johanna and Jonas Karlsson. We've come to show them some of the expenses we've discovered.
Jonas and Johanna took over the farm eight years ago, focusing on milk production. But after seven years, plummeting milk prices forced them to give up, sell their milk cows, and quit Arla. Instead of milk cows, they now focus on animals for slaughter.
Jonas Karlsson, former milk farmer
JK: Arla said they were sad we were going to leave but mainly they seemed to agree that this was how things are going.
It was their own decision and they don't want to be viewed as victims. But the fact remains that each week four to five Swedish milk farmers are forced to give up, or change the focus of their farming.
Jonas and Johanna Karlsson, former milk farmers
Jonas Karlsson: The two remaining milk farmers round here gave up this autumn.
Johanna Karlsson: So in this area it's over. There are some further afield, but not here.
When I go through the invoices, one in particular catches my eye. It's a return plane journey to Paris, costing 12,000 SEK. The name of the passenger piques my interest: the MD's wife. Have the Arla farmers paid for her to travel to Paris?
I speak to the MD, who is on holiday in Spain, and ask him.
Henri de Sauvage Nolting, MD Arla Sweden
HS: Yes, but it was work related, for me and my wife. I'm on the board of DLF and we were all invited, with spouses, husbands and wives, on a four day study trip to Paris.
But each board member could choose whether to bring their spouse according to the organiser, DLF, Grocery Manufacturers of Sweden.
Jörgen Friman, MD DLF
JF: Those who wished to pay to bring their partners were welcome to do so.
R: So there was no request from your side for partners to come?
JF: It was up to the individual. Not everyone brought a partner.
R: I see that you needed to attend, but what do the farmers gain from paying for their wives to attend?
HS: Maybe because I don't get paid to be in DLF. But I'll be happy to tell you more when I'm back in the country.
R: Then we'll speak later.
HS: Ok.
But when I contact Arla's MD again he won't take my calls. It's not just the Paris trip I query. There are several odd purchases which don't seem at all relevant to Arla's business. It seems Arla's employees have used company credit cards for personal purchases.
Christer Stenström, regional Chief of sales, Västra Götaland
R: I was wondering about some expenses, for instance a visit to a golf club? What were you doing for Arla when you were there?
CS: A golf club?
R: Yes, in Gothenburg.
CS: I can't say off the top of my head. I'll have to check.
R: This purchase from Brothers, do you often buy clothes using company cards?
CS: I'll get back to you.
But he doesn't get back to me.
Someone else stands out. An IT worker at Arla, given company cards as he does some work abroad. We find what looks like several personal monthly purchases. TV sport channels, items from Hugo Boss, local grocery and alcohol shopping. And he spends thousands of SEK at Stockholm event venues at weekends.
R: Hi, I'm calling from ”Mission Investigate”.
XX: Hi.
R: I have details of Arla Sweden's expenses here. I'd like to speak with you about some expenses I don't understand. For instance, Globen event venue in Stockholm? Can you recall what Arla business you were handling there?
XX: Erm, no, I can't.
R: You can't?
XX: No.
R: Then there are your local grocery store expenses?
XX: OK.
R: How come they were paid for by Arla?
XX: I don't have time to talk now.
R: But I need answers about this. What has this got to do with Arla?
XX: I don't have time right now. Bye.
It's hard to see what golf, clothes and TV sport channels have to do with Arla. The more we call, the fewer answers we get.
XXX: You can contact our PR department for details.
R: You don't want to talk to me?
XXX: No, I don't want to talk to you.
We can't even find out who the 49 alcohol gift vouchers were meant for.
XXXX: Call our PR department.
R: But they aren't answering...
XXXX: Thanks, goodbye.
We've spent weeks trying to contact the PR department, without getting answers. They tell us Arla has started their own investigation into how we've obtained our info.
Finally, we get an interview with the MD provided we submit our questions in advance.
10 hours after sending them, this happens.
“WE HAVE WASTED”
Arla's MD speaks out, admitting that Arla has been irresponsible with farmers' money, spending it on golf, dinners and expensive presentations.
Henri de Sauvage Nolting, MD Arla Sweden
HS: Hi, I'm Henri.
SD: Sophia, hi.
HS: Shall we sit here?
R: When we sent you our questions, you spoke out in a newspaper, admitting some of the wrongs we had identified. How come?
HS: I used the debate article to show our owners that we're taking action. We realised that you had our cost report plus a lot of the attachments, so I felt it was important to talk to our owners and show that we are doing something here to help them in these difficult times.
Henri de Sauvage refers to Arla's own expenses investigation which he started in 2014, soon after becoming MD. It revealed that farmers' money had been misappropriated.
Already, then, it was clear that farmers' money had been used wrongly, for events and conferences. But only now have we learnt that Arla is informing its owners and the public.
Many of my questions remain unanswered. For instance, about the IT worker who shopped at Globen and his local grocery store.
He appears to have spent thousands on private purchases. A driving theory test, toy store purchases, even a plane ticket to London, for a family member. I find cash withdrawals and a restaurant receipt from a Turkish holiday resort.
Henri de Sauvage Nolting, MD Arla Sweden
HS: Unacceptable. We have taken care of that. I know what you're talking about. I'm not going into details because I'm also the employer of people...
R: But how have you dealt with this?
HS: This was poor cost culture. We weren't fast enough in addressing things. Why not earlier? That's a good question. It's a broader question: why did Arla have a poor cost culture. I'm not going to reflect back, I'm only going to reflect forward.
Henri de Sauvage Nolting claims Arla had a system where employees could use company cards for private purchases and then repay the company each month. But he admits this system has failed.
Henri de Sauvage Nolting, MD Arla Sweden
HS: As of 1st May 2015 we have zero tolerance on private purchases, but I'm also responsible for the period beforehand, so we went back, and said all the people who've used this privately, and it's a handful of people, have to pay back for these private purchases.
R: So you've located all the purchases?
HS: If the example you mention is a private purchase, I don't know. But you can rest assured the money has come back to Arla.
But when we ask which private purchases the employee had to repay – and when, before or after we started investigating, Arla refuses to share any supporting evidence.
It wasn't only the IT worker's expenses I queried. There were the clothes purchases, like the one from Brothers.
Henri de Sauvage Nolting, MD Arla Sweden
HS: For their 50th or 60th birthday, managers can choose up to a certain amount of money, to buy a present. That can be many things. For these occasions, they have bought clothing or something like that.
R: OK, so the purchase for 2,793 SEK from Brothers that was a gift for someone?
HS: Excuse me, I don't know all the invoices, but there are very strict policies. I can reassure our owners that gifts we've given to people turning 50 or 60 have all been checked and are within the policy. As from 1st January we don't give gifts when people are turning 50 or 60.
R: First you say it's a present, then that you don't know what it is, then that it's under control?
HS: Valeria, you throw in a few invoices... I'm the MD of Arla. You can't expect me to know each single invoice of this company.
R: Of course not.
HS: That's a bit unfair.
R: But we told you what we were going to ask you.
After the interview, Arla tells us that the purchase from Brothers was a man's suit, which was given as a 60th birthday gift. As was a 3,000 SEK golf store gift voucher. The golf club expenses were for a business meeting.
The alcohol gift vouchers were 'summer gifts' for employees. Both the gold watches and the banquet at Grand Hotel were gifts for employees who had been with Arla for 25 years. Arla says it has now changed its gift policy.
I notice a lot of taxi travel to and from the main office.
Taxi appears to be the usual method of travel within Stockholm, which is where the head office is,
as well as many employee homes. When I speak with former Arla employees, they confirm that the company has a taxi culture, regardless of the distance involved.
I also note that several of those taking cabs have a company car paid for by Arla, including one of the bosses who took Stockholm cabs costing over 30,000 SEK a year.
Monica Sander, strategic Chief of sales
R: 30,000 SEK on cabs, even though you have a company car?
MS: I'll call the PR department and they'll get back to you.
R: They won't.
MS: Thanks, goodbye!
Henri de Sauvage Nolting, MD Arla Sweden
HS: I'm the first one to agree that there are parts in the organisation where we still haven't achieved the cost culture that you should expect from a dairy-owned company.
R: But she's taken up to four cabs a day. She's driven her company car into town, parked at Arla's expense, gone to a meeting, and got a cab home. Why not use her company car?
HS: When somebody has a leased car but takes so many taxis that's clearly a sign of poor cost consciousness. When I talk about creating a cost culture where we understand that we handle farmers' money this is a very good, or let's say, a poor example of what you don't expect from people.
Jonas and Johanna Karlsson, former milk farmers
Jonas Karlsson: It seems that, at this level, wherever you are in society there appears to be a never-ending flow of money.
Johanna Karlsson: It's so alien, it's another world. We can't relate to it at all.
Jonas Karlsson: We don't live on the same planet.
Johanna Karlsson: No.
And then there's the wife's Paris trip.
Henri de Sauvage Nolting, MD Arla Sweden
HS: In 2014, DLF invited board members and their spouses for a board meeting in Paris. My initial judgement was that since it was work related, I represent Arla over there. There was an official invitation from DLF. The cost of the ticket – the rest was paid by DLF, the ticket for my wife was work related so Arla bought the ticket.
R: But there was no demand for spouses to attend?
HS: No, but there was an official invitation from DLF for all board members plus spouses for a board meeting in Paris.
R: Each board member could choose whether to bring a partner or not.
HS: My initial judgment was that this was work related. I work a lot for DLF, and there was a long meeting on both Friday and Saturday morning, but you made me realise, after you called, this could be misinterpreted by people. That is something I don't like, so I decided to pay this myself.
R: About it being work-related... Isn't your monthly salary as MD of half a million SEK not enough to enable you to pay for your wife's Paris trip?
HS: I agree that my salary is very high, it's a lot of money. That was something I didn't decide myself. Arla offered it to me in order to come to Arla. So I think that is a different question.
R: You speak of cost culture, but you think it's reasonable for Arla's farmers to pay for your wife's Paris trip and you don't pay it back until I call and query it?
HS: My initial judgement was that since it was work related, that is was Arla who paid for it. You made me realise this could be misunderstood, thank you for that, Therefore I decided, without being asked, to pay this money back. A reduction of my salary has been done somewhere to pay for this.
Jonas and Johanna Karlsson, former milk farmers
Jonas Karlsson: If Arla only had 100 members...
Johanna Karlsson: They'd have had more contact and seen how those on the ground are suffering. It's too big. We don't feel we have any connection with them, and they probably feel the same about us. The milk farmers have to pay, by giving up their farms. They have to give up, go to auction.
In the very same month when Arla tells its distressed farmers that milk prices are once again dropping, a golf event is being organised here. A small tournament for 26 people – golfing, eating, and drinking, courtesy of Arla. It costs around 116,000 SEK. The invoice shows tournament costs, but doesn't mention a work-related conference or similar.
R: Hi, I'm Valeria from ”Mission Investigate”. I have a receipt here...
The tournament pack includes accommodation, dinner, lunch and the so-called green fee. But there are also purchases listed for something called Abacus.
R: Abacus, what's that?
X: Abacus, it's those clothes.
R: It's this store?
X: Yup.
R: What do you sell? Golf clothes?
X: Amongst other things.
R: What else?
X: Abacus only sell clothes, nothing else. And hats...
R: So if it says Abacus on a receipt...
X: They've bought some clothes.
R: Golf clothes?
X: Yes.
R: Nothing else is sold there?
X: No.
R: No office supplies or anything?
X: No.
R: That's all?
X: Yes.
R: Thanks, great. Now I know.
As well as the tournament trip, participants have received golf clothes. From the restaurant receipts it's clear they could order freely.
R: Could this be anything other than cigarettes?
XX: No. That's cigarettes.
R: OK.
Arla has paid for golf, wine, beer, spirits, sweets, and even cigarettes, for a total of around 4,500 SEK per person. Why, and for whom?
Hans Engberg, Arla's former account manager for the cheese market, is the tournament's reference. I call him to find out what went on and who was involved.
Hans Engberg, former account manager for the cheese market Arla
HE: Engberg.
R: Hi, Valeria Helander, ”Mission Investigate”. You were the referee for a golf tournament. Do you remember it?
HE: Yes.
R: As I understand it, 26 people took part?
HE: Why do you want to know?
R: I want to know what the money was used for.
HE: Why should you know about that?
R: Why? Because it's my job.
HE: No, we're not doing this. If you need info you can contact Arla.
R: But they don't know what you've used your credit card for.
HE: Listen to me, don't call me, call them. Bye.
R: But aren't you responsible for your purchases?
There are also two charges to Engberg's company card, totalling 4,000 SEK, which appear to be from the day of the golf tournament. To see if there's a connection, I call the seller.
R: If a purchase was made in August from a card machine for two sums, one for 1,500 SEK and one for 2,500 SEK...
XXX: Yes, this is Arla isn't it?
R: What do you mean?
XXX: It's Arla.
R: How do you know?
XXX: Arla called me. The guy in charge. They have those kinds of golf tournaments. For clients. A golf tournament for clients. As he knows me, everyone got some new putter grips. He called me. Right.
R: So it was golf grips he bought?
XXX: Yes, it was a company event, you know... It was a company tournament. He bought... they bought putter grips.
The seller got the impression it wasn't just Arla employees, but also Arla clients who played golf. If that's true, it puts things in a very different light.
It may be inappropriate to treat employees to green fees, alcohol, cigarettes and clothes, but companies are allowed to do so, provided they make the employees pay tax on the items.
But giving such gifts to clients, not in conjunction with a conference, but as a pleasure trip with food, alcohol and gifts, that's something altogether different. Swedish bribery law dictates what companies can and can't give clients.
The Institute Against Bribery knows all about these rules.
Helena Sundén, secretary general The Institute against Bribery
HS: Events need an obvious connection to the type of work being done. If it's just private socialising, having a generally nice time, that's dubious from a bribery point of view. The focus should be on the business and doing the best for the investors. Everyone should be able to compete fairly. You shouldn't get a contract because you organised the best golf tournament or car race.
We finally get hold of the list of tournament participants. As well as some Arla employees, we find the then head buyer at Scandic hotels, buyers from wholesalers Kobia and Menigo, and celebrity chefs.
Peter Johansson MD/Chef B.A.R.
PJ: I partook in company golf.
R: Did Arla pay, or did your company?
PJ: I was invited by Arla.
R: So they paid for everything?
PJ: Yes.
R: So it was just a nice golf trip. Nothing else?
PJ: Yes, exactly.
R: Yes.
Everyone we speak to agrees there was no conference or Arla-related presentation. It was all about golfing and socialising. This raises alarm bells with the Institute Against Bribery.
In the code of conduct developed by the Institute, it says how important it is that the companies whose employees are invited to events are made aware of the event and exactly what is on offer.
Helena Sundén, secretary general The Institute against Bribery
HS: It should be open and moderate. It should be agreed by the company. Everything should be transparent, there should be an obvious reason. If a specific person is invited without company knowledge or approval, that's not allowed.
We contact the companies whose employees attended the golf. Menigo says participation was approved. They see no reason why they should have paid for the golf, or any of what Arla offered.
But the MD at bakery wholesalers Kobia says the opposite. He was not aware that two company heads were invited. If he had been, he would not have allowed them to attend, as it's against company policy.
Hotel chain Scandic also had an attendee at the event: a buyer who had retired by the time of the tournament but who was still employed when invited.
Per-Erik Runvik, then purchasing manager Scandic
R: Did you do anything except eat, sleep and play golf?
PER: No.
R: You never considered it might be inappropriate to let a supplier pay?
PER: No, I didn't.
R: You think it's normal?
PER: I can't say if it's normal.
R: Do suppliers often invite you for golf?
PER: Yes, sometimes, it happens.
Scandic have informed us that they were not aware of the former buyer's participation in the event. It goes against company policy. His participation is unacceptable.
Helena Sundén, secretary general The Institute against Bribery
HS: It's important that companies strive for open and transparent business practice. No one should be able to question whether someone has been influenced. Everything needs to add up, companies must have strict policies, clear guidelines which have to be followed.
Henri de Sauvage Nolting, MD Arla Sweden
R: It's your responsibility to know the policy...
HS: Yes.
R: Of the other companies?
HS: It's my responsibility to know...
R: Did you know them then?
HS:...when signing contracts with companies...
R: It's your responsibility...
HS: And my own policy...
R: When inviting people to events, you should know those companies' policies.
HS: It is my responsibility to know the law, and make sure we stay within the law.
Helena Sundén, secretary general the Institute against Bribery
R: Whose responsibility is it to find out which policies are in place?
HS: The organiser needs to know who they're inviting and whether it's in keeping with the rules of the companies.
When Arla invites employees of other companies to events, the Institute Against Bribery states it's Arla's responsibility to find out these companies' policies. Had they done, so they would have found that an event worth 4,500 SEK per person far exceeds the individual gift limit set by these companies.
The amount includes those clothes from Abacus. Arla says these were tournament prizes.
Henri de Sauvage Nolting, MD Arla Sweden
HS: In this golf tournament there were prize winners and the money was for those prize winners coming first, second, third, fourth. I don't know exactly, but I checked it. I wanted to be sure that we stayed within legal boundaries of what is allowed within Swedish law when you entertain customers.
Helena Sundén, secretary general the Institute against Bribery
R: Does it change things if you call a gift a 'prize'?
HS: No, it makes no difference. Legal cases demonstrate this. It comes down to what is the reason for doing something? A bribe doesn't even have to carry financial worth. Any offer which could influence you is bad enough.
Arla says those golf grips were offered to all participants and were worth so little that they can't count as unacceptable gifts. But Swedish law states there are no acceptable bribes. And all these golf trips, clothes, equipment, flights, are taxable perks, which means those who receive them from Arla must pay tax on them. It is Arla's responsibility to make them pay.
Henri de Sauvage Nolting, MD Arla Sweden
HS: It's a private matter for them to handle their own tax return.
R: Isn't it your responsibility to ensure your employees pay tax?
HS: Yes, but not their private tax.
SD: No, it is Arla's responsibility!
R: If they receive taxable gifts from you it's your duty to make them pay the tax.
HS: Ok, Ok. They have paid tax on that.
We ask to see proof that those employees receiving such gifts have paid tax. But Arla doesn't want to show us this. And as it wasn't noted who took a golf grip, or how many. Arla can't possibly know who should pay tax.
Henri de Sauvage Nolting, MD Arla Sweden
HS: I had the same questions as you. I asked our law company, Setterwalls, to do an investigation of all the cases where I felt in doubt and so far I have only heard that, yes, there is a lot of money which you can't completely explain to the farmers, but you are outside the danger zone. Those are the facts I have right now.
R: Can you see that, based on the facts I have, can you see that this looks like a possible bribe?
HS: I can understand that our farmers, when they hear this, are unhappy with the amount of money which we're spending on that. That I can absolutely underline.
R: That's not what I'm asking. Do you see, this can look like a bribe?
HS: I want to come back to the facts. I don't want to speculate.
R: You don't want to answer my question.
HS: I give you an answer. I've had the same questions as you have. I have asked my law firm to look at all these cases. I know this is not a risk. We have stayed within the framework of the law in Sweden.
Helena Sundén, secretary general the Institute against Bribery
HS: What constitutes good business relations today compared to five, ten years ago? This type of event, which lacks an obvious work connection, is exactly the sort of thing that is generally not considered OK.
R: Arla says they have kept within the framework of Swedish law. From what I've told you, do you think that's right?
HS: That's the sort of judgment prosecutors can make. They will examine everything that was on offer – dinner, lodging, golf – and add it together, and the prosecutors will make their decision based on this.
Henri de Sauvage assures us that Arla, having done its own investigation, has tightened the purse strings regarding taxis, golf trips, gifts and other unnecessary expenses.
But just six months ago, Arla invited 200 ICA-supermarket representatives to a three course banquet during yet another golf event.
Henri de Sauvage Nolting, MD Arla Sweden
HS: I think what you mean is that we were a sponsor, one of 15 sponsors, at an ICA golf tournament. This is quite an important event because a lot of ICA store owners are Arla customers. We had a big showcase display with all the Arla products. I think it's a very effective way to communicate with customers, so that's an example, in my opinion, of money well spent.
Peder Tuborgh, chief executive officer Arla Foods
PT: It's both structural changes, lean management and other measures. Less travelling, less projects. That's not one coin that's not investigated.
Jonas Karlsson och Johanna Karlsson, former milk farmers
R: What do you think when you hear this?
Johanna Karlsson: It's very disappointing. I can't understand why we should suffer. Many are suffering worse and giving up. It's not right.
R: What isn't right?
Johanna Karlsson: That they spend money on things that aren't... necessary, they might think they are but in the grand scheme of things they're not necessary... Not for the milk farmers at least... No, it makes one sad. There's not much solidarity in them living it up with our money.
Jonas Karlsson: Our statement is that we can't produce milk this cheaply so we're quitting and leaving Arla. That's the... that's the conclusion.
Henri de Sauvage Nolting, MD Arla Sweden
R: You throw banquets, pay for luxury restaurants, offer golf equipment, clothes, alcohol – what kind of cost culture is this?
HS: Let's keep to the facts. We did a...
R: These are facts.
HS: Our 2014 cost investigation found a lot of things which were taken out. We have saved 10 million SEK. A lot of the examples you mention are from 2014 when we started to implement... I'm happy on one hand with the progress we made in 2015. But I'm not happy because we're not completely there yet. There still needs to be more work on improved policies. More work on getting people trained, more work on cost culture itself, and more focus on our leaders being responsible.
”Mission Investigate” has gone through many, but not all, invoices for purchases and events which Arla Sweden has paid for during 2014. What we've noted, aside from the pure waste on taxis and banquets, is that Arla has let the farmers pay for private purchases, seemingly without checks or consequences.
We've seen that employees, including the MD, at the farmers' expense, receive gifts for private use, for which Arla won't show us the tax details. We've closely examined one of Arla's many events for clients and employees, an event which repeatedly raises bribery concerns.