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Meet the Two Brothers Making Millions Off the Refugee Crisis in Scandinavia

Hero Norway’s for-profit model offers lodging for asylum seekers

Bloomberg Businessweek

January 6, 2016

By Bill Donahue

“Brad Henderson of the United Nations High Commission on Refugees notes that in recent months NGO care providers have frequently collaborated with for-profits to meet the needs of asylum seekers, stepping in to provide phone and Internet service, as well as to charter flights from Syria and elsewhere.”

It’s a scene that could possibly warm even the two-sizes-too-small heart of the Grinch. Here in a little village in Norway, as dusky midday light filters in through the forest outside a classroom, a half-dozen Afghan teenagers hunch over a long wooden table, assiduously scissoring colored sheets of construction paper. These are 15- to 18-year-old boys who’ve endured miseries no child deserves—gunfire, explosions, the killing of a parent by Islamic State—and they’ve traveled here from their homeland on foot and in suffocatingly crowded vans. They sneaked through the woods on the Turkey-Bulgaria border, and they’ve been chased and bitten by police dogs and beaten by their smugglers. Now they’re celebrating Christmas and inscribing cards with some of the very first Norwegian words they’ve learned: God Jul. Merry Christmas.

Are they happy to be here?

“It is calm and peaceful,” says Bilal, 15, in Pashto.

“It is nice,” says Ahmad, also 15, “but why isn’t there a cricket pitch?”

In Rade, refugees registered this December to receive clothing, food, and health care, before getting transferred to Arendal
In Rade, refugees registered this December to receive clothing, food, and health care, before getting transferred to Arendal, three-and-a-half hours away by bus.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Their middle-aged teachers—a Syrian and an Eritrean, both onetime refugees themselves—hover over them, benevolent, smiling, as a commuter train rattles in the distance. This, arguably, is the Scandinavia that the self-proclaimed socialist presidential candidate Bernie Sanders was referring to in October when he suggested that Americans “should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished”—particularly when it comes to government programs that assist those in need.

Except there’s this other guy in the room, standing off to the side, almost invisible as he handles incoming e-mail on his smartphone. Kristian Adolfsen, 55, wears a V-neck sweater, a striped button-down, and glasses. This is his first visit to this refugee center in Hvalstad, but he owns the operation with his brother, Roger, 51, and they run 90 such centers in Norway and 10 more in Sweden. Refugees represent a huge opportunity for them; the Adolfsens’ Oslo-based company, Hero Norway, is the leader of a burgeoning Scandinavian industry that charges the Norwegian and Swedish governments a fixed fee—$31 to $75 per person per night in Norway—to house and feed refugees.

Bloomberg Businessweek cover, Jan. 11, 2016
Featured in Bloomberg Businessweek, Jan. 11, 2016. Subscribe now.
Photographer: Espen Rasmussen for Bloomberg Businessweek

In Norway, Hero operates several different kinds of refugee lodging, among them short-stay dormitories where asylum seekers sleep a few nights, waiting to be screened by police after crossing the border; a second phalanx of facilities where refugees wait a couple of weeks to be interviewed by immigration officials, taking their meals in a cafeteria; and longer-term camps where they live more independently, in detached houses, cooking their own meals, as they wait, often for years, to be settled in Norway with protected refugee status.

For 2015, Hero Norway expects revenue of $63 million, with profits of 3.5 percent. In the rest of Europe, where asylum seekers typically are cared for by nongovernmental organizations such as the Red Cross, only one for-profit is larger than the Adolfsens’ operation, ORS Services, a Swiss company that in 2014 generated $99 million in profit caring for refugees in Switzerland, Austria, and Germany. (ORS won’t disclose its 2015 profits.)

The Adolfsens have succeeded in part because they have a background in hospitality. In the three decades since they founded Adolfsen Group, Kristian and Roger have built an $800 million-a-year network of businesses that includes preschools and nursing homes, as well as hotels, apartment buildings, cruise lines, and ski resorts. The two entered the refugee sector in May 2014, when they paid a Danish company, ISS Facility Services, $22 million for Hero Norway, a 27-year-old company that ran 32 refugee centers.

A country of 5 million, Norway received more than 31,500 asylum seekers in 2015.

At first the Adolfsens set their sights on Sweden. Almost immediately, though, refugee arrivals in Norway exploded, and they’ve kept arriving since. A country of 5 million people—a relatively sleepy, snow-clad, 1,600-mile-long, lutefish-eating kingdom that had never seen more than 17,000 refugees in a single year—received more than 31,500 asylum seekers in 2015 as Syria continued to fall apart and wars in Afghanistan, Iraq, and Eritrea drove refugees to Europe. The Norwegian Directorate of Immigration (UDI) can’t cope with the influx, so it’s turning to entrepreneurs, desperately, lest more refugees sleep in the streets. “UDI calls for capitalists,” blared a recent headline in Oslo’s Aftenposten newspaper.

For-profits now care for about 90 percent of Norway’s refugees. A gold rush has commenced, and it’s also a bit of a circus. Just outside Oslo, a savvy entrepreneur named Ola Moe recently rented a vacant hospital for $10,000 a month, did minimal upgrades, and began charging the government $460,000 a month to house and feed 200 refugees. At a refugee center in Southern Norway, 50 resident asylum seekers went on a two-hour march in November to protest the poor food, prompting one politician, an Iranian Norwegian named Mazyar Keshvari, to proclaim, “These ungrateful people should immediately leave the country.”

Amid such controversy, the Adolfsens appear like poised professionals. In press photographs, they flash can-do smiles as they sit before gleaming conference tables in airy office towers. One Oslo paper, Dagens Naeringsliv, has called them “Norway’s least known billionaires.” Yet concerns remain. In their monetization of the refugee crisis, will the Adolfsens provide superior, more efficient havens, or will they cut corners and skimp on services to improve profits? And does their bottom-line approach threaten a depth of caring that transcends hard cash?

The Hero facility in Valdres was a hotel until 1999, when it was converted to refugee housing.
The Hero facility in Valdres was a hotel until 1999, when it was converted to refugee housing. Here the company offers displaced families shelter for months, even years.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Kristian and Roger grew up in Northern Norway, a sparsely peopled region imbued with a provincial, gloomy, Southern Rock vibe. Moonshine is popular there, along with fishing and hunting, and the Adolfsen brothers pride themselves on speaking a northern dialect, which Kristian says “is filled with swear words—not bad ones, but you know, stuff like ‘devil hell.’?” Their hometown of Andenes, population 3,500, situated on Andoya Island, is so windy there are almost no trees. Their father, Kolbjorn, an engineer, worked days at the Andoya Space Center, launching rockets to study the northern lights. In the evening, he ran a TV sales and repair shop. Eventually he built a hotel. “A lot of people in Norway have cabins,” says Kristian. “Our second home was the TV shop. That’s where we saw our father.”

When Kristian was 5, he began selling the local newspaper, the Andoya Avis. At 7, he got involved with the production of a Northern Norway ocean delicacy, cod tongue. It was his job each winter afternoon to jab hundreds of cod down onto a metal spike, one by one, before lopping off the fish’s tongues with a knife. “As soon as the last bell rang at school,” he says, “I began sprinting. You had to be the first on the pier. There were only so many fish.” He cut quickly, running behind his wheelbarrow in the 10F to 15F air to fetch loads of fish. After three hours, he’d spend three more selling cod tongues door to door. “But that wasn’t so bad,” he says, “because then you could wear gloves.”

Kristian and Roger Adolfsen at their office in Oslo.
Kristian (left) and Roger Adolfsen at their office in Oslo. The brothers own Hero Norway.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Roger stayed out of the cod tongue industry (by the time he came of age, his mother was weary of living in a household smelling of fish), but he soon followed his brother into competitive running and cross-country skiing. The brothers served as delivery boys, Kristian carrying groceries on his sled and Roger baked goods. Both worked as salesmen in the TV shop, and during the late 1970s—as Norwegian conservative Kare Willoch rose to power, eventually becoming prime minister in 1981—the brothers grew infectiously excited over his staunch opposition to the social democratic state that took root in Norway after World War II.

Kristian and Roger ran for the Andenes City Council as teenagers. Both won seats and fought for the privatization of road services and garbage pickup in Andenes. “My first speech was about privatizing the road grading,” Kristian says. “I spent hours writing and correcting many times what I would say. I tried to memorize every word.”

When the Adolfsens made their first major business move in 1991, purchasing the 44-room Andrikken Hotel in Andenes, the gesture had an almost holy resonance: They were buying the very hotel their father had built. In 1981, Kolbjorn had lost the business to bankruptcy. But he kept its giant sign in his basement. It depicted a long-necked duck flying into the midnight sun. The brothers rehung it—then staffed the hotel with old friends from Andenes, establishing a tone. “We have a coast culture in our companies,” Kristian says. “We are professional but informal, and we base everything on trust. When you grow up in a small place, you can’t do anything wrong. You get a bad reputation.”

Over the next decade, the Adolfsens built Norlandia Hotel Group, which now manages about 30 establishments, many of them Best Westerns, throughout Norway and Sweden. As the Norwegian government started allowing private companies to make money on social welfare work, they ventured into nursing homes, then preschools. “We are like sportsmen,” Kristian says calmly and clinically, explaining his and Roger’s drive. “We set goals, and then we reach our goals, and then we have to set new goals. It is not about the money. It is about the excitement.”

Europe’s refugee crisis has been bubbling since the Arab Spring of 2011. When it boiled over last summer, many Norwegians traveled to Lesbos, Greece, on the edge of the Aegean Sea to help refugees land their boats in Europe. They set up tents, served food, and offered trauma counseling. Back in Norway, groups such as Refugees Welcome to Norway supplied the newcomers with clothes and toys as other volunteers taught them to knit. The Adolfsens, meanwhile, enlisted an aide to cast about Norway’s hinterlands for abandoned or little-used properties: defunct boarding schools, onetime rehab centers, hospitals, mountain hotels that go dead in autumn—any and all structures where refugees could be housed temporarily or permanently at a profit. As Roger tended to other aspects of the Adolfsens’ business, Kristian expanded the refugee services. “We see it as a niche in the health and care industry,” he says.

On Norway’s political left, the Adolfsens are regarded as distasteful and greedy, especially by Linn Herning, deputy director of Norway’s Campaign for the Welfare State and the author of a 2015 book, Velferdsprofitorene (The Welfare Profiteers), which traces the gradual expansion since the late 1990s of entrepreneurs in Norway’s preschools and nursing homes. The cover features detailed, anatomically correct drawings of creepy insects—parasites—and Herning devotes several pages to the Adolfsens, who, she says, are “the biggest players, the only welfare profiteers in every sector.” In early December, she helped Norway’s Socialist Party and Social Democratic Party call in Parliament for a study looking into the feasibility of banning profiteering in refugee care.

Asylum seekers play billiards at the Hero reception center in Valdres.
Asylum seekers play billiards at the Hero reception center in Valdres.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Still, Herning could point to only one specific example of the Adolfsens’ supposed treachery. In the small Norwegian city of Moss, an hour south of Oslo, Orkerod, a respected, publicly owned, 88-bed nursing home for dementia patients, went into tumult after the Adolfsens’ Norlandia Care Group began managing it in 2014. “The focus on specialized dementia care disappeared,” says Lorentz Nitter, the clinic’s lead doctor until he quit in June. “Such care is very expensive,” about $125,000 annually per person, he says, “and Norlandia didn’t want to pay for it.” When highly paid nurses trained in dementia work quit, Norlandia replaced them with cheaper nonspecialists. “They began treating all patients the same way,” Nitter says, and this was dangerous. About 30 percent of all dementia patients are “aggressive,” he says, “and they walk around causing many problems.”

In Orkerod’s first 12 months under Norlandia’s guidance, 19 nurses quit. In a recent op-ed in Moss Avis, Nitter joined two other Orkerod doctors in complaining that the clinic’s excellence, built over its first 13 years of operation, had been “torn down in a single year.”

Kristian denies that the quality of the service at Orkerod declined and argues that departed staffers were disgruntled simply because Norlandia shook them from long-standing work habits. “These were people who’d been there for many years,” he says. “They were used to doing things their way, and then we made changes. It’s a lot more demanding to work for a private company because we focus on providing better quality at lower prices.”

Clothes are handed out to new arrivals at Rade. The clothes the refugees are wearing have to be put into a freezer for 48 hours.
Clothes are handed out to new arrivals at Rade. The clothes the refugees are wearing have to be put into a freezer for 48 hours.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Could Norwegian refugee centers suffer similar changes? It’s apparently already happened. From 2006 to 2014, as reported in the Oslo paper Ny Tid, one of Norway’s largest for-profit refugee care providers, Link, habitually broke binding budget promises to the Norwegian government. In 2014, Link, which operates 14 refugee centers, signed on to a budget that would cap its profits at $230,000. By skimping on promised services—child care, for instance, homework help, and the supervision of people with disabilities—it ended up $1.15 million in the black.

Ny Tid’s figures came from an anonymous source within UDI, a 20-year veteran at the agency. When I met with this man, he said of Link, “Every year they overestimate what services will cost them. That is how the game is played, and if new operators don’t understand that, they’re going down.” Hallstein Saunes, the leader for Link’s refugee centers, disputes the figures presented by Ny Tid, calling the paper’s interpretation of them “misleading” and saying that Link didn’t skimp on social services. Rather, he says, it saved elsewhere—on utilities, for instance. “Our aim,” he says, “is to operate good reception centers within the financial framework of our agreements as we develop the company and contribute towards solving an important task in our society.”

UDI’s monitoring of corruption is minimal, according to the UDI source. “We can only concentrate on opening new refugee centers,” he said. He had no special knowledge on Hero Norway, but in discussing the company, he was uncharacteristically sunny. “They’ve been a good partner for UDI,” he said. “They’re very flexible. When we need them to expand, they do. It’s easy.”

“We need Hero, and it’s totally illogical to say they can’t make profits.”

Brad Henderson of the United Nations High Commission on Refugees notes that in recent months NGO care providers have frequently collaborated with for-profits to meet the needs of asylum seekers, stepping in to provide phone and Internet service, as well as to charter flights from Syria and elsewhere. He’s carefully optimistic about the profiteers. They can “create a long-lasting, mutually beneficial partnership with UNHCR if they can be aligned to shared goals and values,” says Henderson, who is UNHCR’s European lead on fostering relations with for-profits. “They can bring new ideas and vital energy to the refugee cause.”

It’s not clear whether others will embrace or reject the Adolfsens’ refugee riches, but several insiders predict that Norway’s Parliament will allow refugee entrepreneurs to continue but will cap their earnings. “I wish we could operate with only NGOs and municipalities running refugee centers,” says Marte Gerhardsen, the director of Oslo-based Tankesmien Agenda, a think tank closely aligned with Norway’s Labor Party, “but right now, right here, we need Hero, and it’s totally illogical to say they can’t make profits. That would be like Prohibition in America—it won’t work.” She adds, “we do need to regulate them, though.” Gerhardsen argues that private operators be limited to a 3 percent profit margin. The Adolfsens claim that theirs is 3.5 percent, but Herning calls that figure “highly unlikely. All the other refugee companies that I’ve looked at have a much higher profit margin.” She says that in handling revenue from nursery schools and nursing homes, the Adolfsens have played a shell game, shifting profits from one business within their conglomerate to another. “I wouldn’t be surprised if they were doing that for Hero as well,” she says.

Mikal Tedros, 19, and her siblings Bethelhim, 12, Evenezer, 8, and Salina, 17, from Eritrea, in their room at the Refstad reception center in Oslo. Mikal takes care of her sisters and brother, and they have been staying at the center for a month.
Mikal Tedros, 19, and her siblings Bethelhim, 12, Evenezer, 8, and Salina, 17, from Eritrea, in their room at the Refstad reception center in Oslo. Mikal takes care of her sisters and brother, and they have been staying at the center for a month.
Photographer: Espen Rasmussen for Bloomberg Businessweek

It’s 2 p.m. on another Norwegian afternoon, and Kristian and I are driving south out of Oslo in his Porsche SUV. The car is new, with only 2,800 miles on it, but Kristian is fast to point out that he got a huge tax credit; the car is a hybrid.

“We live like normal people,” he says. “I have a regular house and a mountain apartment and cabin, but for all these I paid less than 10 million kroner,” about $1.1 million. “I have never hired a nanny. My brother and me, we just take small salaries”—about $230,000 a year. “We work too hard to spend the money.”

Rich people always say things like this, of course, but coming from Kristian, the humble talk is somewhat believable. For a man who could reasonably cast himself as the Donald of Norway, he’s a remarkably bland and polite presence, even by taciturn Norwegian standards. When we confer with the heads of three refugee centers, he scarcely speaks. He doesn’t harry anyone, and he asks very few questions. His focus seems far away, ensconced in a netherworld of ledgers and spreadsheets.

He and Roger are almost monklike in their devotion to business. Both work about 70 hours a week, following achingly methodical routines. “Monday to Thursday,” Kristian says, “I work in my office at home until 1 a.m. I leave for work between 7:20 and 7:25. When I am on vacation, I work for an hour in the morning and an hour at night.”

Adnan Mousa, responsible for the stock of clothing at Rade, and Kari-Anne Andersen, community worker at Hero, organize clothing that is handed out to newly arrived refugees.
Adnan Mousa, responsible for the stock of clothing at Rade, and Kari-Anne Andersen, community worker at Hero, organize clothing that is handed out to newly arrived refugees.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Neither brother has smoked a cigarette or tasted alcohol, and in 2011, when Kristian crumpled to the ground while running a half-marathon, stricken by a heart attack that stilled his pulse for 10 minutes, he didn’t resolve to slow down. Rather, as he lay recovering in a public hospital, he stewed over its inefficiencies. “The building was very old, and the highly paid nurses spent hours walking the corridors, serving food,” he says. “I thought, You could sell the building for apartments and use the money to build a new hospital with better logistics.”

Right now, we’re driving to Hero Norway’s biggest refugee center, in Rade near the Swedish border. In recent weeks up to 1,200 new arrivals have crowded into a vacated supermarket, living in indoor tents as they wait for interviews with the Norwegian border police. I feel like I’m descending into the maw of history. I’m aware now of all the wars, the bloodshed, the human struggle that have brought so many to remote Rade, which is little more than a scattering of ugly chain stores by the highway. Kristian’s remarks drift toward the international only once, however: when he thrills over a new app, SayHi, which translates spoken words into more than 100 languages. “It will save so much money,” he says.

Next year, Hero Norway hopes to open 5 to 10 refugee centers in Sweden. The campaign could be spotted with difficulties. In Sweden, arsonists have torched more than 40 centers since July, in part because in 2015 Sweden accepted about 160,000 asylum seekers, more per capita than any other European nation. Still, the prospects for Hero Norway’s continued success are high. Neither Sweden nor Norway has plans to stanch the flow of newcomers, and the Swedish government has said it will spend up to 30 percent of its 2016 foreign aid budget on resettling refugees.

Mikiyas, 12, and his brother, Nahom, 7, are from Ethiopia and have shared a flat at Vang for five years with their mother.
Mikiyas, 12, and his brother, Nahom, 7, are from Ethiopia and have shared a flat at Vang for five years with their mother. The two attend local schools and love to ski.
Photographer: Espen Rasmussen for Bloomberg Businessweek

Kristian stands back, aloof, chatting only with administrators, conferring about their plans to build a health clinic here to screen refugees for tuberculosis and other diseases.

In time, we’re given a tour by the camp’s director. Helge Ekelund is a large, hulking fellow with a tight ponytail, and he’s a no-nonsense guy who’s well aware that the great migration to Norway can continue only if there are functioning toilets. “Here are the tents we got free from the army,” he says. “Here is where we take away everyone’s clothes. We put the clothes in these freezers here, to kill off the bedbugs.” The freezer is set at -30F, he says. The clothes stay in there for 48 hours, while the asylum seekers wear borrowed garments.

When Kristian and I step back into the rain, I ask him what about the refugee center intrigued him the most. “The freezers,” he says. “I thought those were interesting.”

We begin driving north. It’s 3 p.m. There are still 10 hours to go before his workday is over.