Preview: Wirecard in the dock as Germany's biggest fraud trial starts

Wirecard AG

06/12/2022 06:00

By Jörn Poltz and Christian Kraemer
       MUNICH/BERLIN, Dec 6 (Reuters) - Former Wirecard
executives go on trial on Thursday, two years after the collapse
of the payments company that produced Germany's biggest post-war
fraud scandal and sent shockwaves through the country's
political and financial establishment. 
    Austrian former chief executive Markus Braun and two other
high-ranking managers of the defunct blue-chip company are
facing a number of charges, including fraud and market
manipulation, and could be jailed for up to 15 years if
convicted. 
    Braun denies wrongdoing and accuses others of running a
shadow operation without his knowledge. 
    The prosecution has said Wirecard's management invented vast
sums of phantom revenue to hoodwink investors and creditors. 
    A verdict in the Munich court is not expected until 2024 at
the earliest. 
    Founded in 1999 and based in the Munich suburb of Aschheim,
Wirecard had a fairy tale rise and became a showpiece for a new
type of German tech company that could compete with the
established titans of Europe's largest economy.
    Wirecard, which started out processing payments for
pornography and online gambling, rose to be worth $28 billion
and displaced Commerzbank  CBKG.DE  in Germany's DAX blue-chip
index.
    REPUTATIONAL DAMAGE 
    Wirecard batted away suspicions of wrongdoing from some
investors and journalists and successfully lobbied German
authorities to investigate those who were scrutinising its
finances. 
    But in June 2020, Wirecard was forced to admit that 1.9
billion euros were missing from its balance sheet. 
    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. 
    But within days, Wirecard became the first-ever DAX member
to file for insolvency, owing creditors nearly $4 billion.
    "The Wirecard scandal has caused lasting damage to the
reputation of our financial centre and our business location
internationally," said Danyal Bayaz, state finance minister of
Baden-Wuerttemberg, who was formerly on a parliamentary
committee investigating Wirecard.
    "Politicians, financial regulators, banks, auditors,
supervisory boards - almost everyone has made a fool of
themselves with Wirecard, with high costs for investors," he
told Reuters. 
    "The investigative committee in the Bundestag (parliament)
has uncovered many mistakes and identified weaknesses that
urgently need to be addressed. We are on a long road to
restoring lost trust in our regulators and institutions."
    Munich prosecutors and a special police task force pursued
an investigation, carrying out 450 interrogations, searching
more than 40 properties in Germany alone and sifting through 42
terabytes of data, resulting in a 474-page indictment.
    Authorities in more than two dozen countries have become
involved, from Switzerland to Singapore, Austria, the
Philippines, Britain and Russia. 
    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 Wirecard 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. 
    In the ructions that followed 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 a 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.
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 (Writing by Matthias Williams. Editing by Jane Merriman)
 ((matthias.williams@thomsonreuters.com;))