Transocean, advisers deny tax fraud in Norwegian trial

OSLO Wed Dec 5, 2012 11:41am EST

OSLO Dec 5 (Reuters) - Rig operator Transocean and three advisers denied charges of tax fraud in connection with shifting assets between subsidiary companies, at the start of their trial in Norway on Wednesday.

Norwegian authorities are suing several Transocean subsidiaries along with their individual advisers, two of whom are employed by consultant Ernst and Young, for 1.8 billion Norwegian crowns ($320.45 million) in damages.

Transocean is accused of having underpaid taxes in 2000-2002, when it acquired three rivals worth $27 billion and moved its own headquarters to Switzerland from the Cayman Islands.

The alleged underpayments stem from several transactions in connection with the sale of 12 oil rigs from Transocean's Norwegian subsidiary to other company divisions, and the company is accused of several instances of providing tax authorities with incomplete and misleading information.

Transocean and its subsidiary Arcade Drilling pleaded not guilty as the trial began on Wednesday, as did the advisers.

Transocean's Norwegian subsidiary, Transocean Norway AS(TAS), is charged with having provided incomplete and misleading information when it sold its Polar Pioneer drill rig to a subsidiary in 1999.

The rig was towed from a repair yard in Norway and taken on an eight-hour detour outside Norwegian waters, during which it was sold. That resulted in a tax loss for the Norwegian government of 689 million crowns, according to court documents.

The company is also accused of having given misleading and incomplete information regarding the Norwegian subsidiary's sale of six other drill rigs, which were bought by its holding company registered in the Caymans.

After the transaction, both TAS and the Cayman holding company were dissolved, while the funds were re-lent to the parent company, Transocean Sedco Forex, with no security. Transocean ended up paying no taxes for the transaction as a result.

Transocean subsidiary Aracade Drilling is charged with giving misleading information when moving management operations to the United Kingdom after its merger with Transocean effective on Jan. 31, 2001, a move the prosecution claims was motivated by a wish to avoid heavy Norwegian taxes.

Arcade Drilling was under a threat of having to pay a $28 million balancing charge for not returning one of its rigs to the UK sectors within a specified time limit, and the prosecution said that Aracade wanted to change tax status to Britain to avoid this charge, while the board in effect did not operate out of Aberdeen, as the company claimed.

The prosecution claims Norwegian authorities lost 217 million crowns as a result in 2002.

Transocean is also accused of giving false information to Norwegian tax authorities trying to avoid both Norwegian and Danish taxes when transferring a dividend from a Danish subsidiary to the Cayman Islands for the year 2001.

The trial is scheduled to continue until September next year.

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