Former Wirecard boss goes on trial in fraud scandal that rocked Germany

Wirecard AG

08/12/2022 04:00

By Jörn Poltz
       MUNICH, Dec 8 (Reuters) - The trial begins on Thursday
of the former Wirecard chief executive who steered the payments
company through its rise and spectacular collapse two years ago
in a fraud scandal that shook German politics and tarnished the
country's business reputation.
    The 53-year-old former CEO Markus Braun, who has been in
custody since his arrest in 2020, and two other managers of the
defunct blue chip firm face charges including fraud and market
manipulation. 
    They could be jailed for up to 15 years if convicted.
    Braun has denied embezzling money from Wirecard and accused
others of running a shadow operation without his knowledge.
    He will appear in Munich's largest and newest courtroom, a
bomb-proof underground hall built in the Stadelheim prison
complex that is also intended to try terror suspects. A verdict
is not expected before 2024 at the earliest.  
    Founded in 1999 and based in the Munich suburb of Aschheim,
Wirecard's fairy-tale rise transformed it from a payment
processor for pornography and online gambling to a showpiece for
a new type of German tech company that could compete with the
established titans of Europe's largest economy. 
    It displaced Commerzbank  CBKG.DE  in Germany's DAX
blue-chip index and at one point was worth $28 billion, but its
demise embarrassed the Germany establishment, placing
politicians who backed the company and regulators who took years
to investigate it under scrutiny.
    After batting away suspicions of wrongdoing from investors
and journalists and successfully lobbying the German authorities
to investigate those who were scrutinising its finances instead,
Wirecard was forced to admit in June 2020 that 1.9 billion euros
were missing from its balance sheet. 
    The prosecution has said Wirecard's management invented vast
sums of phantom revenue to hoodwink investors and creditors.
    The government of then Chancellor Angela Merkel, which had
previously backed Wirecard's pursuit of an acquisition in China,
briefly considered bailing out the company.
    However, within days, Wirecard became the first-ever DAX
member to file for insolvency, owing creditors nearly $4
billion. 
    EVIDENCE 
    Prosecutors will draw on evidence from Braun's co-defendant
Oliver Bellenhaus, the former head of Wirecard's subsidiary in
Dubai, who became a key witness after turning himself in to the
German authorities in 2020. 
    Another former executive, Stephan von Erffa, is also on
trial. He has publicly expressed regret about the events at
Wirecard but denied orchestrating them. His lawyer said von
Erffa did not want to comment on the charges. 
    A key suspect, Wirecard's former chief operating officer Jan
Marsalek, is an international fugitive whose whereabouts are
unknown. 
    Following Wirecard's demise, the head of German financial
regulator BaFin resigned and the head of Germany's accounting
watchdog also stepped down.
    Merkel and her then Finance Minister, now Chancellor, Olaf
Scholz faced criticism for bungling oversight of the company.
Merkel and Scholz have said they are not to blame. Scholz beefed
up BaFin's powers and installed new leadership in 2021. 
    Scholz also criticised Wirecard's auditor, EY, for failing
to catch the fraud. EY has said it acted professionally.
    There are 100 court dates provisionally scheduled until the
end of next year in the case.
 (Writing by Matthias Williams; Editing by Kirsten Donovan)
 ((matthias.williams@thomsonreuters.com;))