Annual Report 2008 - Securitas

108 Annual report
Notes and comments to the consolidated financial statements
Note 36. Other short-term provisions 1
MSEK 2008 2007 2006
Liability insurance-related claims
reserves 2 652.5 694.6 819.0
Provisions related to Loomis
cash Management Ltd – 483.5 –
Other items 156.3 157.9 –
Total other short-term provisions 808.8 1,336.0 819.0
1 Further information is provided in Note 33.
2 Liability insurance-related claims reserves primarily consist of estimated provisions for the portion of
claims payable by the Group, that is its self-retention.
Note 37. Pledged assets
MSEK 2008 2007 2006
real estate mortgages – – 76.4
Pension balances defined
contribution plans 55.2 58.3 54.0
Total pledged assets 55.2 58.3 130.4
Note 38. Contingent liabilities
MSEK 2008 2007 2006
Sureties and guarantees 23.4 17.3 4.5
Other contingent liabilities 48.0 – 90.0
Total contingent liabilities 71.4 17.3 94.5
Brazil – Estrela Azul
In connection with the efforts of Securitas to expand its activities in Latin
America, Securitas entered into an agreement in 2005 with respect to the
possible acquisition of a security guarding company in Brazil. In order to
support this company while required governmental approvals were obtained,
Securitas provided a bank guarantee for the benefit of the subject
company. The governmental approvals took much longer than anticipated
to obtain and during such period the financial condition of the target company
substantially deteriorated. Given the decline in the financial condition
of the company, in December 2006 Securitas exercised its right not to complete
the acquisition following the receipt of the government approval. In
view of the decision not to complete the subject transaction, a provision in
the amount of the bank guarantee was recognized as of December 31,
2006.
The company has since filed for protection from its creditors under
Brazilian legislation providing for a judicial restructuring process. Securitas,
being a creditor in the insolvency matter, has objected to the company’s
restructuring plan proposed in the judicial restructuring process. The insolvency
judge decided against Securitas and this decision was appealed by
Securitas in 2008. The court of Appeal has in its decision upheld the lower
courts’ decision. This decision is now subject to a “special appeal”.
In connection with the commencement of this judicial restructuring process,
the company has asserted a claim of MUSD 140 against Securitas,
alleging that Securitas is responsible for the company’s failure. Securitas
denies all responsibility for such claim. The defense of these cases has been
entrusted to one of the leading law firms in Brazil.
In addition, a number of employees of Estrela Azul who claim to be owed
wages have named Securitas in addition to other parties in pending labor
suits. The number of labor law cases involving Securitas increased in 2008.
The claimed amounts are normally low. The defense of these labour cases
has been entrusted to one of the leading law firms in Brazil. Securitas denies
all responsibility for such claims.
Securitas Annual report 2008
Germany – Heros
The German cash handling operations were divested in November 2005 to
the German Heros Group. In February 2006 the Heros Group of companies
filed for insolvency under German law. In connection with the foregoing, the
Insolvency Trustee has been examining all relevant prior transactions of the
insolvent companies, including the German cash handling companies which
Securitas sold to the Heros Group. Following his investigation, the Trustee
has raised questions relating to pre-acquisition transactions in the divested
companies alleging possible material future claims.
On April 7, 2008 the Insolvency Trustee advised Securitas in a letter that
according to the Trustee, the Heros companies (in bankruptcy) may have
substantial monetary claims on Securitas Germany and that in the absence
of a mutual understanding and agreement on the questioned transactions,
Heros will commence legal action against Securitas Germany.
The claims of the Heros companies (in bankruptcy) are based on the
Trustees current understanding of the subject transactions, resulting in the
allegation that certain inter-company transactions (set-offs) performed by
Securitas Germany prior to the sale of the companies were not in compliance
with German law. Heros’ aggregated claims on Securitas Germany amounts
to approximately MEUr 108. Heros is in addition requesting Securitas
Germany to re-assign a claim against the insurance company IF which was
kept by Securitas in the divestiture. Based on local legal expertise and a
legal opinion from a renown law professor, Securitas will object to the claims
raised by the Trustee.
As of December 31, 2006 a minor provision was recognised to cover the
known exposure in the Heros claim at that time. This provision remains unchanged.
No additional provision has been established for the recent claim.
Germany – U.S. Army
Securitas Germany has filed a law suit against the U.S. Army for unpaid
services under a now expired contract for guarding services. Securitas’ claim
is approximately MEUR 4.4. The U.S. Army has filed a counterclaim of
MEUr 10.5 plus penalties (requesting also treble damages under U.S. law)
alleging over-billings of 550,000 hours by Securitas. An independent auditing
firm has been engaged to assist in the investigation of the claim.
Based on Securitas’ U.S. counsel’s current evaluation of Securitas’ claim
and the conclusions of the auditing firm, Group Management view a settlement
solution as a possible option for Securitas. Settlement discussions are
therefore agreed with the U.S. Army to continue during 2009.
USA – the events of September 11, 2001
A detailed account of the developments surrounding the events of
September 11, 2001 has been presented in press releases and interim and
annual reports for 2001 to 2007.
Globe Aviation Services corporation (Globe), a subsidiary corporation
within the Securitas Group, had a contract for the provision of passenger
checks and screening with American Airlines. One of the American Airlines
planes that were hijacked was screened by Globe at Logan Airport, Boston.
All investigations of the events of September 11, 2001 continue to indicate
that Globe in no way has been negligent in its actions or is otherwise at fault
for the events. This was confirmed through the release of previously confidential
congressional testimony by the Director of the FBI. The customer
contract gives Globe the right to tender claims for damages to the customer.
Globe is a separate operation and a separate legal entity. Any liability for
claims thus is limited to Globe’s own ability to pay and the insurance protection
available to it. In November 2002, the U.S. congress restored the liability cap
for eligible screening companies such as Globe. Under this legislation, any
potential liability arising out of the terrorist events of September 11, 2001
would be limited to the amount of liability insurance coverage maintained.
As previously disclosed, a special fund has been established by the U.S.
Government to compensate victims of the September 11, 2001 tragedy.
Over 98 percent of persons claiming on behalf of world Trade center
deceased victims has elected to obtain compensation from the victim’s
compensation fund rather than pursue litigation. claimants under the fund
waive their right to seek compensation through litigation. The deadlines for
filing wrongful death, bodily injury and property damage claims have now
all expired. Cross claims may still be filed by existing parties to the already
filed claims.