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Erik Werlauffs responsum
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Henrik Christrup(H): Verdict highly unlikely.
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En hilsen fra Fonden til fremtiden

 

 

Lawyer Mr. Henrik Christrup (H): Verdict highly unlikely.

Mr. Chairman Poul Jørgensen
Skorkærvej 86990 Ulfborg

Referring to the charges raised against you and other previous members of the Board for the Foundation to the support of Humanitarian purposes, to the enhancement of research and to the Protection of the Environment (from here on called the Foundation), where you are accused of severe breach of mandate and of tax fraud, you have requested a statement with regard to these charges in relation to laws on foundations and certain associations.

In connection with the above I have the following statements:

The objectives of the Foundation are to be found in § 2, which declares the objectives of the Foundation, with interest-bearing or interest free loans, grants or in other ways to render support to humanitarian objects, to the enhancement of research and to the Protection of the Environment world wide.

Rikke Viholm and Tove Birkø, who paid the principal capital of DKr. 200,000, established the Foundation on 16th February 1987.

According to the § 3 of the objectives, it is the responsibility of the Board to ensure that none of the founders or contributors nor any of their family members, hereunder spouses and/or children, can gain any economic advantages from the activities of the Foundation, referring also to § 9.

§ 20 clearly states that the capital can never be repaid to the founders or to the contributors, or to and persons close to the founders.

The objectives, hereunder the §§ 2, 3 and 20 are recognized by the Civil Directorate as late as 3rd March 2000. As is stated in the above, The Civil Directorate has had no objections against the comprehensive objectives and its estimative character, just as the Civil Directorate has had no objections against the other objectives of the Foundation and whom it was not allowed to give support.

In the written charges by the Chief Constable dated 26 March 2001, which are attached as enclosure No. 1, the Chief Constable claims that the breach is substantiated in the fact that “the accused, in contradiction to the recognized objectives of the Foundation and under the pretence that the grants were given to nonprofit or similar objectives, has transferred the stated amount (app. Dkr. 75 million) to organizations or persons who, in power of an arrangement, an economic community, organizational community or in any other way have been close to the charged, or had closely similar interests with the charged, and who according to the objectives and the laws would not be eligible for legal payments form the Foundation.”

The charges of grave breach of tax regulations are connected to – as the charges are formulated – to the charges of breach of mandate. In the case there is no breach of mandate, there is also no breach of tax regulations.

Above we have been trhough the Foundation’s objectives to whom there could be given no grants. As it is clear from the above, the charges are mentioning “Agreements”, “economic community”, “organisatinal community”, or closely similar interests. These expressions are not included in the list  that are prohibited from receiving grants.

The charges include cases where grants according to regulations unjustified. Thus there are reasons to take a closer look at the regulations for foundations and certain communities and find out where there is prohibition of giving out grants.

The § 31 states the following

"§ 31. Parrt 1.The Board cannot give grants to founders, board members, auditors, directors or persons who play a leading role in the Foundation, but can only give remunerations which cannot amount to more than is usual for the kind of business and the kind of work involved. The same is valid with regard to person who are connected to the above persons through marriage or cohabitatiaon.

 Part 2. The Board cannot give out loans or give guarantees of loans to   
 persons who appear in part 1.

  § 31 of the Law is being commented in Lennart Lynge Andersen: Fonde og Foreninger, 4. udgave, side 158-162.

It is particulalry reasons to emphasise the notes on pages 161-162 which are attached in Enclosures 2 Bilag 2.

Here it is made clear that in order to exclude a research prject from receiving funds as a result of a board member being connectd to the project, the board member must have an economic interst in the research project. Thus, there is at no point in the law, in the Foundation Objectives or in the literature, any obstructions for giving grants to other foundations or legal perwsons, also in cases where there is an economic common interst between grant-giver and grant receiver. The board in the receivngf foundation or the legal person is just not allowed to have any economic or personal interests directly in the grant receiving project.

As Enclosuere 3 Bilag 3 please find a list of projects which have received grants from the app. 75 million DKr. And as enclosure no 4, there is an overview which shows the projects to which the Foundation has given grants and where they are carried out by independent institutions, limited companies, or other forms of legal åpersons in or outside of Denmark, but which are legally founded on local regulations.

It should be added here that the above is not an expression of taking a stand to whether the foundations, organizations or institutions mentioned in enclosures 3 and 4 above have any economic or organizational common interests. The above is only expressing that even  if so should be the case, this is not necessarily making it illegal for the Foundation to support them.

Accoring to my evalutions, the legal position with reagrtd to giving out grants by the Foundation could be summerised as follows:

1)       The decisive factor in givcing out legitimate grants from the Foundation is whether funds are given to proejcts which are within the objectivews of the Foundation.

2)       Graants must not be given to projects where members of the Board or founders or contributors or any persons close to the above will gain economic benefits or where the above have a direct individual interst.

3)       Grants can legitimately be given to projects outside of Denmark.

4)       The realisatin of a project will usually necessitate the purchae of materials, services or work force from others than the grant receiver. Funds received as grants can legally be spent in order to purchase such services from any other foundations and institutions etc. on market conditions, as long as persons mentioned in point 2 do not receive economic benefits.

5)       A given grant e.g. does not become illegal where the reseach does not lead to any results.

6)       A given grant is only becoming illegal provided that the receiver – without the grant givers consent – is using the grant contrary to the objectivbes to which the grants has been given.

The decisive factor for the legality of a grant as mentioned above, is whether the grant is given to objects or projects which are included in the Foundation’s objects clause.

In the charges by the Chief Constable (encl. 1) that there is economic and organizational common interests etc. between the giver and receiver – even if such may exist – are not sufficient for stating breach of mandate.

As far as I am concerned, the charges are expressing that the prosecution wishes to construct rules and regulations for institutions which, according to the state administration have connections to the School Cooperation Tvind – rules which have not been valid before. This is done in the same way as it was done by the legislative power when they made law No 506 of 12th June 1996 (the Tvind exceptional Law) which unsuccessfully tried to put schools with a connection to the School Coopeartion Tvind in a poorer position than other schools.

Finally it is worth mentioning, that even in cases where the Board has given out grants that, when taken to the courts, will be found to be outside of a foundation’s objects clause, it does not automatically lead to a conclusion of breach of mandate. According to the Criminal Law, § 280, it must be intentional, in order to gain unlawful profits for self or others, to enforce loss of fortune by abuse, or to act against the best interests of the Foundation.