German ministers face grilling over Wirecard collapse

Wirecard filed for insolvency last month after admitting that €1.9 billion missing from its accounts did not exist. — Reuters pic
Wirecard filed for insolvency last month after admitting that €1.9 billion missing from its accounts did not exist. — Reuters pic

FRANKFURT, July 29 — Germany’s finance and economy ministers will be grilled by lawmakers today about the massive fraud scandal that brought down payments provider Wirecard, amid criticism that authorities missed early warning signs.

Wirecard filed for insolvency last month after admitting that €1.9 billion (RM9.5 billion) missing from its accounts did not exist.

Former CEO Markus Braun has been arrested on suspicion of falsifying accounts and market manipulation.

The Wirecard revelations have stunned Germany, drawing comparisons with the Enron accounting scandal in the United States almost two decades ago.

Germany’s parliamentary finance committee has asked Finance Minister Olaf Scholz and Economy Minister Peter Altmaier to attend a closed-door special hearing to shed light on the saga from 1400 GMT.

Questions are likely to focus on when exactly the government and regulators learned of accounting irregularities at Wirecard, what action they took and whether there were any regulatory failings.

Both ministers have vowed full transparency in a case that Scholz has called “an unparalleled scandal” and a blow to Germany’s finance reputation.

He has vowed to reform German finance watchdog Bafin, accused by critics of having been too lax in its oversight of Wirecard, by giving it greater powers to intervene and launch investigations.

Finance committee chair Katja Hessel of the pro-business FDP party told Deutschlandfunk radio that there had been “failures across the board” that needed urgent clarification.

She did not rule out launching a parliamentary inquiry if the ministers’ answers today are deemed insufficient.

Wirecard’s downfall has increasingly become a political hot potato, after finance ministry documents showed Scholz was told as early as February 2019 of misconduct suspicions.

Even more embarrassing was the revelation that Chancellor Angela Merkel promoted Wirecard on a trip to China in September 2019, when the firm was eyeing a foray into the Chinese market.

Merkel had “no knowledge” of the Wirecard irregularities at that time, her spokeswoman told reporters.

Rise and fall

Founded in 1999, Bavarian start-up Wirecard rose from a company piping cash to porn and gambling sites to a respectable electronic payments provider that edged traditional lender Commerzbank out of the DAX 30 in 2018.

It boasted a market valuation of more than €23 billion at one point — outweighing even giant Deutsche Bank. Its share price has collapsed by more than 98 per cent since last year.

Wirecard’s woes began in January 2019 with a series of Financial Times articles alleging accounting irregularities in its Asian division, headed by chief operating officer Jan Marsalek.

Bafin responded by announcing a probe into FT journalists.

Wirecard’s troubles exploded in June when longtime auditors Ernst & Young said they were unable to find €1.9 billion of cash meant to be sitting in trustee accounts at two Philippine banks.

Wirecard then acknowledged that the money, making up a quarter of its balance sheet, likely “did not exist”.

The firm’s Austrian born ex-CEO Braun was arrested and released on bail.

EY said it had been fed false statements and accused Wirecard of an “elaborate and sophisticated” fraud. But the auditing group has itself come under fire for signing off on Wirecard’s accounts for years.

3.2 billion ‘lost’

The scandal widened last week when Munich prosecutors re-arrested Braun and detained two other former board members for largescale “commercial fraud”, saying their investigations showed the trickery was already happening in 2015.

They also said evidence suggested banks and other investors were conned into providing funds of up to €3.2 billion to Wirecard.

Those sums are now “very likely lost”, they added.

Braun, former finance chief Burkhard Ley and former accounting head Stephan von Erffa, as well as the managing director of a Dubai-based Wirecard subsidiary, stand accused of inflating the firm’s revenues and balances to hide years of losses.

Ex-COO Marsalek, who is also wanted by German authorities, is on the run. — AFP

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