Fraud affair: waiting for the charges in the Wirecard scandal

As of: 12/29/2021 8:22 a.m.

The process of coming to terms with the Wirecard scandal is making slow progress. A year and a half after the group went bankrupt, there hasn’t even been an indictment. Increasingly, the focus is also on the role of the examiner EY.

By Lothar Gries,

Wirecard, the biggest fraud scandal in the history of the Federal Republic of Germany, is still causing a stir. Even one and a half years after the bankruptcy of the former payment processor, shareholders and creditors are still waiting for compensation – in the billions. But the judiciary is having a hard time with the case. The Munich public prosecutor’s office has still not brought charges – neither against ex-board member Markus Braun, nor against the volatile co-board member Jan Marsalek. A spokesman for the Munich Higher Regional Court announced the day before Christmas that the court is now assuming that there will be charges by mid-March – provided that there are no unforeseen difficulties in the investigation.

Little is known about the status of the investigations. It remains unclear whether important witnesses have since been questioned – above all Pav Gill, the former head of the legal department in Asia. Together with his mother, he made a decisive contribution to making the scandal public, after just a few weeks after starting work it was clear to him that the balance sheets reported by Wirecard contained inconsistencies. Instead of receiving praise for his work, however, he was fired. Later he even received threats that he would have expected in a criminal environment, but not from a DAX company.

“Braun decided everything”

And Markus Braun, the former Wirecard boss who always appears like a German Steve Jobs? His hope of being released from custody has not been fulfilled. He was also held in custody for the holidays. In mid-December, the second criminal division of the Munich Higher Regional Court ordered the continued custody. The attempt by Braun’s lawyers and his PR advisor, Dirk Metz, former spokesman for the Hessian Prime Minister Roland Koch, failed for the time being to portray the manager as an innocent lamb.

The fact that Braun knew nothing about the shadow structures and embezzlement at Wirecard and did not benefit from them turned out to be a fairy tale, as research by WiWo reporters Melanie Bergermann and Volker ter Haseborg have shown. A witness on the Wirecard investigative committee also remembers differently from what Braun’s advisors claim. “The group was shaped by Markus Braun, as was the corporate culture. He decided everything, he specified everything, including growth. There was no room left or right. He was not interested in guidelines or laws.”

And now? An indictment against Braun is currently expected in the first quarter of 2022, over a year later than expected. The public prosecutor’s office is investigating suspected gang fraud, breach of trust, misrepresentation and market manipulation. While prosecutors remain silent about the reasons for the delay, experts point to the extreme complexity of the case. They expect that all aspects of the crime complex will take years to uncover.

Billions made up

Neither the shareholders nor the insolvency administrator Michael Jaffé want to wait that long. He believes it has been proven that the 1.9 billion euros allegedly in escrow accounts never existed on the payment processor’s balance sheet. In proceedings before the Munich Regional Court, Jaffé now wants to have Wirecard’s balance sheets from 2017 and 2018 declared null and void, as he announced in mid-December. He claims that the 2017 balance sheet was a good 740 million euros, and a year later even a good 970 million euros. In truth, Wirecard has also posted high losses since 2015 – a total of 1.1 billion euros.

On this basis, he could claim dividends – a total of 47 million euros – and taxes from investors and the state in favor of the creditors. With a verdict in his favor, the pressure on the EY auditors, who had audited Wirecard’s balance sheets, could also increase. The presiding judge announced a decision for May 5, 2022.

Pressure on auditors is growing

Investors are also going to court. Your anger is directed against the longtime Wirecard auditor EY. You accuse the company of having reacted too late to the fraud at Wirecard. Because there were enough indications of irregularities and discrepancies, yet the EY auditors awarded the Aschheim-based payment processor’s balance sheet the long-awaited seal of “everything in order” year after year.

The complaints of over 100 Wirecard shareholders have so far not been heard at the Munich Regional Court. They were turned away – probably wrongly. In a preliminary notice in December, the Munich Higher Regional Court expressed serious doubts about the court decisions of the first instance. While the regional court saw no breach of duty by the examiners, the OLG is of the opinion that the judges should have examined much more precisely. This means that the pressure on EY has increased significantly. Tens of thousands of Wirecard shareholders have now come together to sue EY for compensation. It could start in January.

Cards reshuffled

The cards were reshuffled in this matter with the publication of the so-called Wambach report in late autumn 2021. This is a special audit that the Wirecard investigative committee of the Bundestag had initiated to investigate possible omissions by the EY auditors. The report was classified as secret because EY pretended that it contained business and trade secrets. But the “Handelsblatt” decided to publish it anyway.

In fact, the report goes into detail about possible failures by EY in examining Wirecard’s books. Martin Wambach, who was appointed as the special auditor, came to the conclusion that, although EY identified indications of possible fraud at an early stage, it did not investigate it critically enough. EY, one of the four largest auditors in the world, may face claims for damages in the billions. Because this could jeopardize the company’s existence, lawyers like Klaus Nieding from the German Association for Protection of Securities Holdings (DSW) advise everyone involved to reach an amicable settlement.

For the Wirecard shareholders this would mean that they would have to forego a large part of their claims. Because there is nothing more to be gained from Wirecard itself. According to insiders, insolvency administrator Jaffé has so far raised less than a billion euros through sales of foreign subsidiaries and other assets. On the other hand, there are claims of 15.8 billion euros. Financially, Wirecard is likely to prove to be a fiasco for everyone involved.

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