In August 2002 the Danish newspaper Berlingske Tidende reported on how the Tvind Teachers Group, supposedly helping the Third World’s poor, defrauds people who in good faith drop their used clothes into Tvind’s collection bins throughout Europe. Following is TvindAlert’s translation, completely revised in August 2019.
Tvind’s clothing donors deceived for years
By Michael Bjerre | Berlingske Tidende, Denmark, 24 August 2002
For at least ten years, Tvind has systematically deceived clothing donors across Europe. The garments are sold in Eastern Europe, and, although Tvind promises that the profits go to the Third World, many millions are channeled back to secret Tvind companies.
Meanwhile, as Tvind’s imprisoned founder, Mogens Amdi Petersen, is on his way home [to Denmark] to face embezzlement charges in court, Tvind’s international business carries on undisturbed.
Berlingske today reveals how Tvind, under the guise of helping the poor in the Third World, deceives well-meaning people across Europe when they drop their used clothes into Tvind’s donation bins. Via a network of secret companies hidden in the Netherlands, Ireland and the British tax haven Jersey, Tvind has channelled millions from clothing sales to itself for at least ten years.
The small man with graying hair points emphatically toward the front door: “I have nothing to say,” he snarls.
The man’s name is Flemming Gustaffson; he has for many years been one of Tvind’s leading businessmen. The 59-year-old Dane stands behind the main entrance to the office in a grey and drab building next to a busy main road in the provincial town of Maarsen, southeast of Amsterdam.
It’s difficult to imagine that this particular building would be the setting for one of Tvind’s largest and shadiest businesses in Europe.
But for at least a decade from this location, Tvind betrayed all the well-meaning Europeans who thought the profit from the sale of clothing donated to Tvind would help the poor in the Third World, as Tvind promised. Instead, Tvind channeled the money through their secret companies into their own accounts.
Tvind doesn’t exactly advertise the office’s existence. Only a handwritten scrap of paper attached to the doorbell tells us that the company ‘Conmore’ is housed here in the sleepy Dutch province.
Gustaffson’s scant hospitality might have something to do with him playing a central part in Tvind’s grand used clothing scheme.
“Is there anything about the companies you’re involved in that can’t withstand the light of day?” Berlingske asks on the way out.
“There’s something wrong with the newspapers in Denmark,” Gustaffson retorts, adding: “I would ask you to leave this office — NOW!”
There may be several reasons why Gustaffson refuses to publicly share details about his daily work.
First, Tvind has never before been under such pressure, which has become clear recently as its founder Petersen, after six months in rough American jails, gave in and agreed to be extradited home to Denmark. Here he and six other Tvind leaders are accused of embezzlement and tax fraud for 75 million Danish kroner.
(Ed. note: Berlingske mistakenly gave the figure only for the embezzlement charges, while an additional 111 million kroner pertain to the tax fraud charges — according to the November 2001 Case Summary against Tvind, by Denmark’s Public Prosecutor for Serious Financial Crime. The total is 186 million kroner, which, in 2001, would roughly equal $22 million — in 2019, about $32 million.)
Second, Gustaffson himself is charged with another financial criminal case in Belgium. He and seven other Tvind leaders are accused of having laundered about 23 million kroner in a case whose details the Belgian police are not disclosing publicly.
Third, there are questions regarding Tvind’s trading companies that Gustaffson would like to avoid. Given that the companies were gearwheels in an extremely clever system of deceiving both the donors of used clothing as well as the poor who would have benefited, Gustaffson’s deflection makes sense.
Thus Berlingske reveals what up until recently was one of Tvind’s largest frauds.
The fraud was based on the fact that Tvind’s humanitarian organisations in Western Europe — UFF and Humana People-to-People — receive only a fraction of the profit generated from the sale of clothing collected in their bins.
Instead, they sell the donated items, officially, to a Tvind company in Holland, which in turn sells them, officially, to Tvind companies, for example, in the British tax haven of Jersey, which then earns profit by selling the goods in Eastern Europe at far higher prices.
In this way, the vast majority of profits accumulate in Tvind’s own business accounts instead of UFF and Humana, which then have far less to give to the Third World, which they promise to help.
In order to understand the structure and background of Tvind’s ‘clothing money laundering machine’, we must turn back to a historic date: 9 November, 1989, when the Iron Curtain separating Europe finally fell.
It seemed that the party would never end in Berlin. Champagne corks popped everywhere, people toasted with each other, and a wave of happiness and liberating relief swept across the European continent.
But for some the new era was more than just a party. From a distance, Tvind’s top leadership, led by Petersen, began to devise new business plans.
Tvind leadership saw Eastern Europe as a big new market for raking more money into their coffers. That’s why Petersen, shortly after the fall of the Berlin wall, established a new comprehensive plan, according to sources close to the leaders for some years.
Petersen’s idea was to create an international business empire that would ensure Tvind’s further expansion, and already in the 1980s he had devised a project called ‘Money-earning Business’.
Tvind’s earlier, education project, which had begun in the 1970s as a revolutionary movement in which young people participated in edifying excursions in Tvind’s ramshackle buses and ships, now had to fully utilise capitalist methods to achieve its goal.
Eastern Europe fit that strategy perfectly. These countries are an excellent market for a commodity with which Tvind’s storage facilities are nearly overflowing: used winter clothing.
By 1989 Tvind had long been collecting used clothing in several European countries. In Denmark, Sweden, Norway and Finland they collected under the name ‘Ulandshjælp fra Folk til Folk’ (UFF) [Development Aid from People to People]. In England, Holland, Belgium, Germany and Austria they went by ‘Humana People-to-People’.
But a substantial portion of the used clothing people dropped into the yellow and green collection bins were warm winter clothes, which were obviously unsuitable for use in Africa.
Eastern Europe, on the other hand, is an obvious opportunity to sell the [warm] clothes. As always, when Tvind devises big plans, its “Distribution Group” looks for project managers within the Teachers Group [the controlling body of the broader Tvind organisation].
The Distribution Group consists of Petersen and his girlfriend, Kirsten Larsen, who, according to Tvind sources, soon autocratically appointed a number of faithful members who had already demonstrated good results in business.
One of them was Flemming Gustaffson.
On 3 September 1992, Gustaffson founded the company E.C. Trading in Holland. Gustaffson became the sole shareholder. Later, all shares were acquired by one Kirsten Kristiansen. And later still, they were taken over by one Poul Laurits Jørgensen.
But the frequent replacement of shareholders was just a ploy to conceal E.C. Trading’s connection to Tvind, several Tvind sources explain to Berlingske.
Gustaffson isn’t the only one of the three who has been with the Teachers Group for many years. Kirsten Kristiansen has been in Tvind for 30 years, first as a teacher at Tvind’s Travelling Folk High School and later as coordinator of container transports with clothes.
Poul Laurits Jørgensen — within Tvind called ‘Poul Junior’ to distinguish him from Tvind spokesman, Poul Jørgensen — has been in Tvind for 20 years, most of the time with UFF.
Although E.C. Trading was a Tvind company, there was good reason for Tvind to keep that fact hidden. E.C. Trading’s most important task was to buy used clothes, which [Tvind’s humanitarian organisations] UFF and Humana have collected in containers throughout Western Europe.
With the close trade partnership, it was possible to channel large sums of money away from UFF and Humana, which [presumably] distribute to Tvind projects in the Third World.
And this is exactly what was happening.
E.C. Trading, as mentioned, was only an intermediary in Tvind’s large Eastern European scam.
E.C. Trading sold a majority of the goods — about 85 percent — to five Tvind companies, four of which are hidden on the Isle of Jersey, a British tax haven.
But low tax isn’t the only advantage of the Jersey address. Here, one can also hide everything, from financial data to staff members, as there are virtually no reporting requirements.
Berlingske is, however, in possession of documents of the four Jersey companies: Holland House, Holland Trading, Holland Enterprise and World Wide Suppliers.
Birgitte Larsen sits on the Executive Board of all of them. She’s not just any woman in Tvind. For years she has played a central role in the management of Tvind’s finances. From Tvind’s headquarters in Grindsted [Denmark], she had previously supervised the personal finances — i.e. the issuing of tax cards and pocket money — for all Teachers Group members, all of whom had signed up for Tvind’s ‘Common Finances.’
But now her role is to channel profits from the Jersey companies into secret bank accounts. This doesn’t happen physically on the green British island [Jersey], but from an equally secret Tvind office located at City Mill Lane 28 in the tax haven of Gibraltar.
As general manager of Tvind’s tax havens, Larsen soon took on many new responsibilities.
Tvind’s decision to venture into the Eastern European market proved to be a major success.
Eastern Europeans went crazy for the modern clothing from the West. Unlike when they had to spend a month’s paycheck to buy used Levis on the black market, they could now buy used brand clothing for a reasonable price.
That’s why the buyers kept the Jersey phones ringing all day long.
In practice, however, the calls were transferred via answering machines directly to E.C. Trading in the Netherlands, and in their Amsterdam office the order forms were filled out, too, as former Tvind workers tell Berlingske.
The demand was so high at times that E.C. Trading could barely keep up. In a steady stream trucks filled with used clothing pulled away from one of 37 loading ramps in the 200-meter long sorting facility, and headed toward Eastern Europe. The same thing happened in England, Belgium, Germany, Sweden and wherever else in Europe that Tvind collects clothing.
E.C. Trading even picked up garments from UFF’s large sorting facility in Ballerup near Copenhagen, and in Århus, as proven by several hundred freight bills obtained by Berlingske.
In 1997 Tvind channelled over 25,000 tons of used clothing through E.C. Trading and the Jersey companies. With an average load of 17 tons this equals 1,500 trucks stuffed with used clothing heading from Western to Eastern Europe in 1997 alone.
Other financial data reveal how gigantic the Teachers Group’s Eastern Europe business has become.
E.C. Trading’s revenue rose markedly in the mid-nineties, from 17.2 million Dutch Guilders (about 60 million Danish kroner [$11 million]) in 1995 to 35.5 million Guilders (about 130 million kroner [$19 million]) in 1998.
Tvind’s money-machine was running smoothly. But the Hungarian tax police were closely watching the transports with used clothing from the west.
The Hungarian customs officers discovered that the Tvind trucks are carrying falsified customs papers. There was far more clothing loaded on the trucks than what was stated on the documents.
That’s why in the fall of 1999, Hungarian customs police asked their Dutch counterparts to launch an investigation into E.C. Trading.
At E.C. Trading’s Amsterdam offices the employees were shocked as two policemen showed up to ask about the falsified customs forms. But the officers left empty-handed.
Panic seemed to grip Tvind. The police suspected E.C. Trading of having an active role in the Hungarian case, a former employee tells Berlingske.
The person wishes not to reveal his identity, as he has been involved in issuing the falsified customs forms at E.C. Trading’s office.
“We sent out two different sets of customs forms. One was real, while the other stated a much smaller portion of what was in the cargo. In some cases, it was only ten percent of what actually was in the truck,” the ex-worker says.
Informants say that after the police visit to the Amsterdam offices, Tvind people destroyed all evidence of irregularities.
The informants’ interpretation of the event is as follows: “On the same evening of the police visit, one of the Tvind leaders at E.C. Trading’s office frantically went through all the folders of customs papers to ensure nothing could be traced back to the company. Then one piece of paper after another disappeared into the shredder.”
Tvind also had become active in Hungary. Earlier, Gustaffson had travelled there to set up a Tvind office for one of the Jersey-registered companies, as clothing sales in that country boomed.
Now, everything was done to get out of the country as fast as possible. Immediately a shipping container was rented in order to clear away the office within 24 hours. Furniture and computers were packed and removed. When police arrived at the office, the only thing left was Gustaffson’s leased Mercedes in front of the building.
The Dutch police were also looking for Gustaffson. But he seemed to have vanished into thin air.
According to information available to Berlingske, Gustaffson had fled to Kenya’s capital, Nairobi, where he still maintains an address even while working, again, in Holland.
Berlingske naturally would have liked to hear Gustaffson’s own interpretation of the proceedings, but this hasn’t been possible because, as mentioned, he doesn’t want to talk to the newspaper.
Police in Holland didn’t find any evidence of the customs form fraud, and some months later, on 23 May, 2000, E.C. Trading filed for bankruptcy.
The company quietly tried to disappear from the face of the earth, claiming they weren’t able to recover after the collapse of their used clothing business in Eastern Europe.
The court-appointed trustee was J.C. Rosenberg Polak, a Hague-based lawyer specialising in bankruptcy. He soon realised that this was no ordinary bankruptcy.
“Actually, I’ve never seen something like this before,” Polak says.
At first, the lawyer thought it was just a regular liquidation. But after receiving a tip that a cult-like Danish school movement from the 1970s owns the bankrupt company and all of their trade partners — UFF, Humana and the Jersey companies — he began to wonder.
“This model is obviously great for anyone who wants to empty a company and then channel the money away to themselves.”
While trying to identify the cash flows between the companies, Polak also found a very suspicious pattern: E.C. Trading’s biggest debtors are the four Jersey companies, and a fifth, Birchwood Trading, registered in Ireland.
Meanwhile, annual account statements show that shortly before E.C. Trading’s bankruptcy claim, at least two of the five companies had paid out a dividend of two million dollars to the five companies’ joint holding company, Coriander Holding.
“The question is whether this is a coincidence or the dividend was deliberately paid out at the expense of the effectively bankrupt company,” the suspicious liquidator wrote in a report on the case, dated 11 September, 2000.
For the same reason, Polak also requested information on Coriander Holding, which Tvind is also behind, and which, according to Berlingske‘s information, is controlled by Petersen.
But despite the fact that Polak repeatedly pressed the Jersey companies’ Tvind director, Birgitte Larsen in Gibraltar, for information on the holding company, there never came an answer. Other times, he received a white lie.
”Initially, it was denied that the bankrupt company was associated with the Tvind group. But among others, the directorate of some of the companies based on the Channel Islands [e.g. Jersey] later confirmed that these companies were part of the Tvind group. All indications are that the bankrupt company [E.C. Trading] was also part of the Tvind group,” wrote Polak in a receiver’s report on May 7 of this year .
The case hasn’t been finalized yet. But after Polak threatened some of the Jersey companies with a lawsuit filed on Jersey itself, the Tvind people appear to have become nervous and have paid off part of their debts to E.C. Trading.
“It seems they fear a lawsuit filed on Jersey. Because then it would become obvious in court who’s behind Coriander Holding,” says Polak.
Today, the liquidator generally doesn’t think much of Tvind.
“I find it hard to see what their way of doing business has to do with humanitarian work. If they want to do good for people in the Third World, then they shouldn’t sell the clothing to their own companies to make the greatest profit for themselves,” says Polak.
The lawyer is also dismayed that after E.C. Trading’s bankruptcy, Tvind has just set up another Dutch company, Conmore, to continue the scam.
“This is always the problem with bankruptcies: people can just continue with a different company,” Polak concludes resignedly.
ISOBRO is a union of 39 humanitarian organisations in Denmark. Members include Folkekirkens Nødhjælp [DanChurchAid], BØRNEfonden [the Children’s Fund] and UNICEF. ISOBRO reacts strongly to the revelation of Tvind’s financial laundering of used clothing.
ISOBRO’s stated goal is precisely to create a high ethical standard for collections and donations. Thus the union has prepared common ethical guidelines in this regard.
“First, it’s incredible that Tvind would hold some of the world’s poorest people hostage with this kind of speculation,” says ISOBRO’s chairman, Stig Fog.
“Second, the Danish authorities will soon have to live up to their responsibilities. It’s insane that they give VAT exemption to UFF/Humana, even though they clearly don’t stand on the right side of the law.” [ed. note: VAT = Value-Added Tax, also known as ‘Goods & Services Tax’]
This Friday [23 August, 2002], Coop Danmark — formerly FDB, [a consumers cooperative] that operates [the retail store chains] SuperBrugsen, Kvickly and Fakta, among others — announced Tvind would no longer be allowed to have their collection bins in front of their shops.
The decision was justified by the fact that Tvind operates with secrecy, which is incompatible with Coop Danmark’s ideals of openness and dialogue. Mr. Fog believes that the country’s municipalities must now follow suit.
“It would be strange if Danish municipalities would continue to provide space for UFF’s collection bins after all the information becomes public,” Mr. Fog declares.
The question as to the legality of Tvind’s financial arrangements must now be determined by others. For the time being, Tax and Customs authorities investigate, closely cooperating with Bagmandspolitiet [‘The Finance Police’ — an informal name for Denmark’s State Prosecutor for Serious Financial Crime], to determine whether UFF/Humana has drained VAT tax or tax-free funds out of the country illegally.
Upon reading the information collected by Berlingske, [Denmark’s] state prosecutor Henning Thiesen says:
“What, in this context, is happening in Holland and other countries will of course be included in our consideration.”
translation by TvindAlert