German parliament to open full inquiry into Wirecard collapse
Decision comes as MPs question why regulators failed to detect huge corporate fraud
The German parliament is to hold a full inquiry into the collapse of the disgraced payments company Wirecard, in a move that will keep the affair at the top of the political agenda well into a critical election year.
A full parliamentary committee of inquiry was needed “to clear up an accounting scandal which has no precedent in Germany’s post-war history”, said Lisa Paus, finance spokeswoman for the opposition Green party. “We owe it to the investors and citizens of this country.”
MPs decided to push for a full investigation after concluding that a series of special hearings before the Bundestag finance committee had left critical questions about the authorities’ role in Wirecard’s collapse unanswered.
“The image we’ve been presented with over the past two months is of a government that just pushes the blame on to other people,” said Florian Toncar, an MP for the liberal Free Democrats (FDP).
Wirecard collapsed into insolvency on June 25 after admitting that about €1.9bn in cash was missing from its accounts. Former chief executive Markus Braun, who denies allegations of fraud and embezzlement, and three other former top managers are in custody, accused of running a criminal racket that defrauded creditors of €3.2bn. Jan Marsalek, the former chief operating officer, is on the run.
MPs will want to know when exactly the German government first knew about irregularities at Wirecard and whether it could have done more to prevent the fraud, which has badly damaged the country’s reputation as a financial centre and exposed profound weaknesses in its system of financial regulation.
Many opposition lawmakers believe the authorities were more focused on protecting a company seen as one of Germany’s few tech superstars than in properly investigating alleged fraud at the group.
The shockwaves of the Wirecard affair have reverberated to the top of German politics. MPs have questioned why Angela Merkel lobbied for the company during an official trip to China last year when reports of suspicious activity at the payments provider had been circulating for months.
Critics of Germany's financial markets watchdog BaFin have also asked why it responded to reports in the Financial Times last year about accounting irregularities at Wirecard by filing a criminal complaint against the FT journalists involved. In addition, BaFin has been hurt by the disclosure last month that its employees were trading Wirecard shares in the months before the company declared insolvency, raising questions about potential conflicts of interest.
“There are still open questions which concern the chancellor’s lobbying for Wirecard in China, the role of the financial watchdog and of the law enforcement authorities and the regional government in Bavaria,” said Fabio De Masi, an MP for the hard-left party Die Linke. “An investigative committee is unavoidable.”
The decision to set up the committee means that political debate over Wirecard could dominate Ms Merkel’s final months in power. Bundestag elections next year will mark the end of her tenure after 16 years as chancellor.
A parliamentary probe could also prove embarrassing for finance minister Olaf Scholz, who is the Social Democrats’ candidate for chancellor next year. His ministry oversees BaFin as well as the Financial Intelligence Unit, Germany’s anti-money laundering agency, which, like BaFin, stands accused of ignoring countless warning signs at Wirecard. In testimony to the Bundestag finance ministry, Mr Scholz had placed much of the blame on auditors at EY, who had given the company a clean bill of health over the course of a decade.
Opposition MPs from the FDP, Die Linke and the rightwing populist Alternative for Germany had long been demanding a parliamentary inquiry. But it was not until the Greens backed their demand that they had enough votes to prevail. A quarter of the Bundestag’s 709 MPs must give their assent for a full inquiry to proceed.
The investigative committee into Wirecard will be under the cosh, however. It must wrap up its work by next summer, ahead of the Bundestag election. “It will be a Herculean task,” said Ms Paus.
Ms Merkel’s bloc, the CDU/CSU, was originally sceptical about a parliamentary probe: but some Christian Democrats — aware of its potential to harm Mr Scholz’s electoral chances — now support the idea. “In the case of Wirecard, the control mechanisms failed, so that the [company’s] machinations came to light far too late,” said Matthias Hauer, a CDU MP. “As the CDU and CSU we will continue to push for a full political review.”