Frankfurt am Main (AFP) – German
Finance Minister Olaf Scholz said Wednesday that he had given lawmakers a “detail” of everything he knew about the fraud scandal that prompted The Wirecard’s down payment amid a complaint that the government had overlooked the precautionary symptoms of the problems.
Wirecard filed insolvency claim last month after admitting that there were 1.9 billion euros ($2.2 billion) in its accounts.
Former CEO Markus Braun has been arrested on suspicion of falsting accounts and manipulating the market.
Wirecard’s revelations surprised Germany, making comparisons to Enron’s accounting scandal in the United States nearly two decades ago.
Germany’s parliamentary finance committee held a special closed-door session in Berlin to grill Scholz and Economy Minister Peter Altmaier, with questions focussing on when exactly they had learned of Wirecard’s misconduct and if there were any regulatory failings.
As he left the hearing after about four hours, Scholz told reporters it was a “detailed discussion.”
“I made sure everyone knew exactly what we know,” he said, adding that his priority now is “to initiate reform.”
Scholz plans to reform German regulator Bafin, accused by critics of being too lax in his supervision of Wirecard, giving him stricter and more personal powers of intervention.
Finance committee member Hans Michelbach of the conservative CDU/CSU bloc of Chancellor Angela Merkel said it is not enough to announce reforms, “there are also responsibilities.”
Finance committee chairwoman Katja Hessel of the FDP pro-business opposition party has decided to launch a parliamentary inquiry into the scandal.
Even more shameful was the revelation that Merkel promoted Wirecard to a vacation to China in September 2019, when the company was contemplating a foray into the Chinese market.
– Ascension and fall –
Founded in 1999, the Bavarian start-up Wirecard has gone from being a company that transports cash to pornographic and betting sites to a respectable electronic payments provider that pulled classic lender Commerzbank out of the DAX 30 market index in 2018.
It boasted a market valuation of more than 23 billion euros ($26 billion) at one point, surpassing even the giant Deutsche Bank. Its percentage value has fallen by more than 98% since last year.
Wirecard’s problems began in January 2019 with a series of Financial Times articles alleging accounting irregularities in its Asian division, led by lead chief operating officer Jan Marsalek.
Bafin responded by ruling an investigation into FT’s journalists.
Wirecard’s unrest exploded in June when Ernst and Young’s longtime auditors said they could not locate 1.9 billion euros of money that was intended to be placed as true with accounts at two Philippine banks.
EY said he fed up with false statements and accused Wirecard of “elaborate and sophisticated” fraud. But the audit organization itself has been criticized for approving Wirecard’s accounts for years.
– 3.2 billion euros ‘lost’ –
The scandal escalated last week when Munich prosecutors arrested Braun and arrested two other former board members for large-scale “commercial fraud,” saying their investigations showed that the deception was already happening in 2015.
They also said there is evidence to recommend that banks and other investors had been defrauded to provide a budget of up to 3.2 billion euros to Wirecard.
These sums are now “most 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.
Former chief operating officer Marsalek, also wanted by the German authorities, has disappeared.
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