The company, Swedish Security Technology and Innovation (SSTI), was reportedly set up by the Swedish Defence Research Agency (Totalförsvarets forskningsinstitut – FOI) in order to oversee the construction of a factory for the maintenance and upgrade of anti-tank missile systems.
In order to keep the company secret, FOI needed cash in order to set it up, according to Svergies Radio (SR), which first reported on the secret plans for the Saudi weapons plant earlier this month.
However, FOI was unable to procure the necessary cash on its own, but instead had to rely on help from the Swedish Military Intelligence and Security Service (Militära underrättelse- och säkerhetstjänsten – MUST).
MUST provided the cash to FOI in the form of a loan, according to SR.
Swedish Armed Forces (Försvarsmakten) spokesperson Erik Lagersten confirmed for the radio station that money was transferred to FOI, but claims that MUST didn't know that the funds were to be used to set up the shell company.
"That's something for the preliminary investigation to reveal," he told SR, referring to the preliminary criminal investigation launched by prosecutors last week in order to determine whether the secret Saudi weapons deal may have violated the law.
FOI's own investigation has revealed information leading the agency to believe “there are suspicions that a crime may have been committed”, it said in a statement, prompting FOI head Jan-Olof Lind to report the incident to prosecutors.
As FOI is a state agency, it isn't allowed to start any companies without the approval of the government – something which, according to SR, did not occur in the case of SSTI, which was started in 2009.
The company was launched as part of what is referred to in confidential documents reviewed by SR as Project Simoom, a project started by FOI in 2007 with the aim of helping build an advanced weapons plant in Saudi Arabia.
At the time of SR's revelations, SSTI CEO Dick Sträng, who is also a high ranking official at FOI, refused to divulge how the company was funded.
"I refuse to answer that question," he told SR.
"I can't answer it without lying."
SR has subsequently learned, however, that SSTI was financed by FOI and that the start-up capital came in the form of a cash loan from MUST.
On Tuesday, FOI head Lind is scheduled to appear before a parliamentary committee to answer questions about his agency's connections to SSTI and its involvements in the Saudi arms plant construction project.