German MPs take battle with EY over classified Wirecard documents to court
Parliamentary committee and Big Four firm clash over release of full report
Germany’s highest court will be asked to decide whether a cache of classified EY documents linked to Wirecard can be published, after MPs investigating the scandal and the Big Four audit firm clashed over their release.
The parliamentary committee examining the collapse of the payments firm has agreed to turn to the Federal High Court of Justice, according to people familiar with the matter, to resolve an escalating battle with Wirecard’s former auditor.
The dispute centres on more than 150 internal EY audit documents cited in a report the committee commissioned into the firm’s work for Wirecard, which received a decade of unqualified audits until it collapsed last June in one of Europe’s largest frauds.
The committee wants to publish the documents alongside the full report, which was written by Martin Wambach, a partner at accounting firm Rödl & Partner. EY says that the release of the documents and the full report, which are both currently deemed classified under German law, would jeopardise its business secrets as well as infringe the rights of its employees.
“We all agree that there aren’t any business secrets in those documents,” Kay Gottschalk, an MP for the far-right Alternative for Germany party and the chair of the committee, told the Financial Times. “The Wirecard victims are entitled to know why EY failed to spot the fraud earlier.”
A preliminary version of the report, which was submitted to the committee last month, found a series of serious shortcomings in EY’s work. The firm failed to spot fraud risk indicators, did not fully implement professional guidelines and, on key questions, relied on verbal assurances from executives, the report found.
In a statement, EY said that it had “no objection to the publication of the key findings of the special investigators’ report”, but added that it needed to be done “in a manner that respects EY Germany’s business secrets and the personal rights of its employees.”
The firm said it had suggested how this could be done, but “in spite of constructive discussions, the [parliamentary committee] unfortunately did not agree to this solution.” It now “welcomes the intended clarification by the highest court.”
The decision to resort to Germany’s top court followed weeks of protracted discussions with EY over how to release documents. The committee initially agreed to disclose a much smaller slice of the documents before abandoning the plan, according to a person familiar with the matter.
An option to create second version of the report that would not directly cite the classified EY documents was dismissed by Wambach, according to people familiar with the matter. Wambach declined to comment.
The committee is expected on Thursday to formally ratify the decision to send the dispute to Germany’s highest court. Last year the court in Karlsruhe adjudicated on a clash over EY’s confidentiality obligations in a ruling that opened the door to the firm’s partners testifying before the committee.
“The Wirecard case cannot be understood without the [unqualified] audits by EY,” said Florian Toncar, an MP for the pro-business Free Democrats, arguing the documents and the report should be published in full. “Anything else would equal a partial ban of the committee’s work.”
EY has repeatedly said it was deceived by the fraud and that “the EY Germany auditors performed their audit procedures at Wirecard professionally, to the best of their knowledge and in good faith.”