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

Wirecard AG

08/12/2022 09:29

(Updates with start of trial)
    By Jörn Poltz
       MUNICH, Dec 8 (Reuters) - The trial began 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. 
    Braun walked into the courtroom without speaking wearing a
dark turtleneck jumper and jacket and carrying a laptop. 
        The trial, which began 45 minutes late, is taking place
in Munich's largest and newest courtroom, a bomb-proof
underground hall built in the Stadelheim prison complex. 
  
    The accused 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.
    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 mislead 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
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 on Europe's most wanted
list 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 detect 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 and
Jason Neely)
 ((matthias.williams@thomsonreuters.com;))