Robert HARNEIS -TDO- (FRANCE)- German opposition members have gathered enough votes to force a parliamentary enquiry into the collapse of payments company Wirecard.
The Greens, the Left Party, and the Free Democratic Party say that they have formed an alliance to compel the coalition government - made up of the Christian Democratic Union and Social Democratic Party - to open an enquiry. The probe will examine, among other things, what the government knew and whether it or the financial regulator had deliberately ignored concerns about Wirecard’s operations.
Wirecard revealed in June this year that €1.9bn ($2.27bn) shown in its balance sheet ‘probably did not exist’. Auditor EY, who had refused to sign off on the 2019 accounts because the company failed to prove that the money was in accounts in the Philippines as claimed, said in June that there were “clear indications” Wirecard had carried out an “elaborate and sophisticated fraud involving multiple parties around the world...with a deliberate aim of deception.”
The timing of the parliamentary investigation is embarrassing for the two ruling parties, as it will run into 2021, which is a national election year in Germany.
The enquiry will in particular put Finance Minister Olaf Scholz, under pressure. Scholz’s ministry supervises the country’s top financial regulator, BaFin, which has been harshly criticized for a lack of oversight on Wirecard. A number of BaFin’s officials were found to have traded in Wirecard shares. Schroder is running as the Social Democrat candidate to replace Angela Merkel as Chancellor.
Merkel has said that this is her final term, but the CDU has not yet chosen its candidate for 2021.
The Financial Times first reported on suspicious accounting practices in Wirecard’s Asian businesses in 2015. Instead of investigating Wirecard the German authorities investigated the journalists writing the articles, based on the accusation that they were only making the claims against Wirecard so as to be able to short the shares.
Wirecard declared itself insolvent in June, and was ejected from Germany’s DAX 30 index in August. There have been accusations that Wirecard was involved in money laundering and had connections with criminal elements in Malta.
Half of Wirecard’s staff have been made redundant and the company’s assets are being sold off to try and recoup some of the €4bn that it owes creditors. Staff in Munich claim they have not been paid their salaries for May and June
Former chief executive Markus Braun and two other executives are in the custody of the Munich authorities, accused of fraud and other charges.
Former chief operating officer Jan Marsalek is on the Interpol most-wanted list, and has been on the run since June. He has also been associated with Austrian secret service operations. There are claims that he is in Russia.
The Wirecard fraud centered around creating fictional transactions to boost turnover and profits. Much of the company’s business and profits was claimed to come from agent companies run by former employees in the Far East.
One of these, Christophe Bauer was alleged to be a close associate of Jan Marsalek. He owned and operated PayEasy Solutions. He was declared dead aged 44 on 27 July 2020 ‘from natural causes’ whilst under investigation by the Philippines authorities. The Wirecard accounts showed that PayEasy supposedly generated 20% of Wirecard’s profits. Jan Marsalek portrayed PayEasy as operating in a high risk area involving Casinos, on-line gambling and pornography.
The German police are also investigating up to €1 billion paid in ‘advance of commissions’ - effectively unsecured loans - to a number of shell companies.
Legal actions, involving billions of euros, have been started against the company, its officers, auditors EY and BaFin, the financial regulator.
Wirecard shares peaked at €193 in 2009. In April they were still trading at €134. They are currently changing hands at around 75 euro cents.
The most recent revelation by the Financial Times is that as recently as last autumn Wirecard was planning to buy the troubled Deutsche Bank, Germany’s biggest bank. In terms of assets. It is thought that if Wirecard had pulled off the takeover, they planned to ‘lose’ the missing €2 billion amongst the necessarily massive accounting adjustments involved in restructuring the bank. The plan failed because accountants KPMG, called in to give a clean bill of health to the Wirecard books, refused to do so.