Wirecard, the German payment company once known as Alipay Europe, has been celestified by huge financial fraud, but the political earthquake it triggered may have only just begun. The reason for this is that the current Wirecard financial fraud has evolved from Germany’s worst financial fraud case since World War II into a political scandal.
Opposition parties in germany’s Bundestag have called for a parliamentary commission of inquiry to provide a political explanation for the financial fraud at Wirecard, with institutions such as the BaFin, which is part of the German finance ministry, the focus of the investigation, meaning that the German finance minister and even the German Chancellor’s Office could be affected.
Moreover, it is worth noting that the parliamentary commission of inquiry, if it opens a full investigation, will not close until the parliamentary break in the summer of 2021, meaning that the Wirecard scandal will continue into 2021, Germany’s election year, and will make a huge impact on German politics and even the choice of a new chancellor.
Spotlight 1: When did the German government become aware of Wircard’s wrongdoing?
Back in September 2019, nine months before the Wirecard financial fraud came to light, Lars-Hendrik Röller, chief economic adviser to the German Chancellor’s Office, met with a Wirecard delegation at the Prime Minister’s Office.
However, as early as the end of January 2019, British media wrote an article questioning Wirecard’s use of suspicious transactions to whitewash accounts, and Singapore police have subsequently launched an investigation into possible fraud by Wirecard, which is still regarded as one of Germany’s most successful fintech companies.
Mr. Wirecard’s top brass, Burkhard Ley, who led the group’s meeting with Mr. Lawler, was arrested a year later by German police on fraud charges, though he has so far denied any wrongdoing.
Members of the German parliament are puzzled by the high-level lobbying privileges granted to Wircard by the German government. There is evidence that, despite doubts within the German government at the time, senior executives were allowed to meet with senior aides such as Mr Lawler and even to endorsement Thecard internationally.
In an interview withmedia, a senior German official said that from what is known so far, the truth is gruesome, and that “Wirecard’s alleged crimes are far beyond my imagination”. He added that government agencies and auditors had suffered no defeat in the incident.
For opposition parties in the German parliament, the Wirecard scandal has exposed major regulatory failures in Germany’s ruling coalition over financial issues. Many German lawmakers have taken aim at Olaf Scholz, Germany’s finance minister, who is expected to run for chancellor on behalf of the Social Democrats (SPD) in the 2021 election and is also the direct head of the Federal Financial Supervisory Authority (BaFin) and Germany’s anti-money laundering agency, the Federal Financial Intelligence Unit (FIU).
At present, there is evidence that the German Federal Financial Intelligence Service has not forwarded dozens of reports of suspicious economic activity by Wirecard to the German Prosecutor’s Office.
Focus 2: Why the German Federal Financial Supervisory Authority is not acting.
The Wirecard scandal has also unexpectedly exposed weaknesses in Germany’s financial regulatory system, particularly the inaction of its market regulator, the Federal Financial Supervisory Authority, which has embarrassed the German government.
In years of interviews with German financiers, German journalists have been proud of their strict regulatory measures. But with Wirecard’s financial fraud, German lawmakers found that the German Federal Financial Supervisory Authority and criminal prosecutors in Munich did not conduct a substantive investigation into the company after previous media revelations about Wirecard’s accounts, but issued a direct statement prohibiting shorting Ofcard’s stock. For the first time in German history, a ban on shorting a single stock has been announced by German officials.
A lawyer who works for a German boutique investment bank, speaking anonymously to First Financial, told First Financial that there are indeed many German shareholders, and even investors, who have seen the endorsement of the German Federal Financial Supervisory Authority, who will firmly trust Wirecard.
According tomedia reports, the German law firm TILL, which led the lawsuit against Wirecard, said more than 30,000 shareholders had been asked to take part in the lawsuit.
“No government agency has contributed to the disclosure of this case, whether it is the German Financial Supervisory Authority, the German Federal Financial Intelligence Unit or the German prosecutors.” Florian Toncar, a member of parliament from Germany’s Free Democratic Party (FDP), said.
Although the German parliament’s commission of inquiry into the matter has not yet been formally set up, lawmakers have prepared several pointed questions.
Why, for example, did Markus Braun, Wirecard’s chief executive, visit Wirecard’s Munich headquarters on his 50th birthday in November 2019?
Why is the German Federal Financial Supervisory Authority so reluctant to investigate a company that has been generating negative news for months? And while the agency finally investigated Wirecard, employees of Germany’s Federal Financial Supervisory Authority were still trading Wirecard’s stock.
Why, for example, did the German Federal Financial Supervisory Authority issue a statement banning shorting of Wirecard shares after seeing the British media reports, followed by criminal proceedings against the two journalists involved in writing the report? Wait a minute.
Focus 3: What level of lobbying should be achieved.
Wirecard was once regarded as germany’s most successful fintech company, and in 2018 it replaced Commerzbank as a member of Germany’s DAX 30 index. The DAX30 index includes Germany’s top 30 largest companies.
In the wake of the Wirecard scandal, the case has even reached Angela Merkel, Germany’s current chancellor.
On September 3, 2019, Merkel met with Karl-Theodor Guttenberg, a former German defense minister, according to a timetable provided by the German Chancellor’s Office. Guttenberg was forced to resign in 2011 after being accused of plagiarism and later became co-founder of Spitzberg Partners, a consulting firm one of the company’s clients, Wirecard.
Guttenberg is understood to have spoken about Wirecard in a chat with Merkel at the time, and later emailed Rollerton to discuss an international acquisition of Wirecard. Merkel then backed Wirecard during the visit, and Mr. Roald wrote back to Mr. Guttenberg, promising “further political support.”
In August, Ms Merkel defended her move, saying: “It is common practice not only in Germany, but also in other countries around the world, to refer to corporate claims during foreign visits.” “
Ms Merkel said she was not aware of the breach at the time and, after all, that Wirecard was a “DAX30 company” at the time.
But the explanation failed to dis dis distast the opposition in the German parliament, noting that Ms Merkel’s move was to help Hertenberg, a former cabinet colleague.
Paus, a Green Party lawmaker, called for a radical overhaul of Germany’s lobbying system. “The question is: Who can visit the Prime Minister?” There does not seem to be any clear criteria. No one is checking who’s knocking at the door and who can come in. She said.
As the case deepened, German media found that the former government member who lobbied for Wirecard was not just Guttenberg.
On September 11, 2019, Klaus-Dieter Fritsche, a former official who coordinated German intelligence at the German Chancellor’s Office, introduced Rey and others to Lawler. According to the timetable of the German Chancellery, the meeting was a “meeting of mutual understanding” in which Wirecard informed Mr. Lore of possible business opportunities.
In June 2020, Wirecard admitted that a 1.9 billion euro payment on its books did not exist. The Munich prosecutor’s office, where the business is located, said Wirecard had been providing false profit certificates since 2015 and had lost about 3.2 billion euros to banks and investors.
Now that Wirecard has gone bankrupt, several executives have been arrested or are on the run, and the market value of 13 billion euros has been nearly zeroed in a week.