German
Finance Minister Olaf Scholz said Wednesday that he had given lawmakers a “detail” of everything he knew about the fraud scandal that prompted corporate Wirecard to pay amid a complaint that the government had overlooked the first signs of riots.
Wirecard filed an insolvency claim last month after admitting that there were 1.9 billion euros ($2.2 billion) in its accounts.
Former CEO Markus Braun was 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 about two decades ago.
Markus Braun, former CEO of Wirecard, is in custody for falsting accounts and manipulating the Photo market: AFP / Christof STACHE
The German Parliamentary Finance Committee held a special closed consultation in Berlin to question Scholz and Economy Minister Peter Altmaier with specific questions about the precise timing of the Wirecard fault and there were regulatory failures.
When he left the hearing after about 4 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 start reforms.”
Scholz plans to review the German watchdog Bafin, accused by critics of being too lax in his supervision of Wirecard, giving him stricter and more personal powers of intervention.
He also wants more scrutiny of private-sector auditors.
Finance committee member Hans Michelbach, from conservative CDU/CSU bloc by Chancellor Angela Merkel, said it was not enough to announce reforms, “there will also be responsibilities.”
German finance and economy ministers will face lawmakers on Wednesday over the big fraud that brought down Wirecard Photo: AFP/Christof STACHE
However, he praised Scholz for his “willingness to provide answers” to legislators.
Finance committee chairman Katja Hessel of the FDP pro-business opposition party has ruled out launching a parliamentary investigation into the scandal.
Wirecard’s downfall has become increasingly political after documents from the Ministry of Finance showed that Scholz had been informed since February 2019 of suspected irregularities.
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.
Merkel was “unac aware” of Wirecard’s irregularities at the time, her spokesman said.
Finance Minister and Vice-Chancellor Olaf Scholz and German Econ will attend one of the German parliamentary finance committees Photo: AFP / Tobias SCHWARZ
Founded in 1999, the new Bavarian company Wirecard has gone from a company that transports cash to pornographic and gambling 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 Chief Operating Officer Jan Marsalek.
Bafin responded by ruling an investigation into FT journalists.
Wirecard’s disorders exploded in June when Ernst and Young’s auditors said they could not locate 1.9 billion euros of money destined to be accepted as true with accounts at two Philippine banks.
Wirecard then stated that the money, which accounts for a quarter of its balance sheet, “probably existed.”
The former CEO of the company, born in Austria, Braun, was arrested and released on bail.
EY said he fed himself through false statements and accused Wirecard of an “elaborate and sophisticated” fraud. But the audit organization itself has been criticized for approving Wirecard accounts for years.
The scandal intensified 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 occurring in 2015.
They also said there is evidence to recommend that banks and other investors have 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 leading monetary officer Burkhard Ley and former chief accountant Stephan von Erffa, as the executive leader of a Dubai-based Wirecard subsidiary, are accused of inflating the company’s revenues and balances to hide years of loss.
Former chief operating officer Marsalek, also wanted by the German authorities, has disappeared.