How the house of Wirecard fell
Group acknowledges for the first time the potential scale of a multiyear accounting fraud
Where to start with Wirecard? The €2bn of “missing” cash? The 80 per cent share price drop? The relentless attacks on its critics and journalists who looked into the company?
Or perhaps we should talk about the bank analysts who continued to tell clients they should buy Wirecard shares even as reports about accounting irregularities continued to mount? Special shout-out to Heike Pauls at Commerzbank.
We could also start with BaFin, the German regulator, who called the scandal “a complete disaster” but last year imposed a short selling ban even as Wirecard’s Asian headquarters were raided by Singapore police.
There is also, of course, Wirecard’s auditors. How did they miss a multiyear accounting fraud of this scale? Oh and let’s not forget the poor souls who continued to pour money into the German company despite reports from the Financial Times that it appeared that a large part of Wirecard’s revenue and profits did not, in fact, exist.
Among them SoftBank Investment Advisers, that agreed to invest €900m in Wirecard after the accounting scandal had come to light. DD’s Robert Smith and Arash Massoudi have the goods on how that worked out. Hint: no bueno.
And last but not least, Wirecard chief Markus Braun, pictured above, who was always ready and willing to bat away allegations of wrongdoing. Most recently just one month ago:
Our colleagues at the FT — Dan McCrum, Paul Murphy, Olaf Storbeck and Stefania Palma — have been reporting on Wirecard’s accounting scandal for the past 18 months.
It all started with an FT investigation into Wirecard’s meteoric rise back in October 2018. Over the next year, Dan and the team delved into its suspected use of forged contracts, a preliminary report by a top law firm that there was evidence suggesting Wirecard employees engaged in a pattern of book-padding and made up partners that couldn’t be found, which gave us one of the best FT intros:
“Agostin Antonio was mystified. A retired seaman living quietly with his extended family of 12 in a suburb of the northern Philippine city of Cabanatuan, he had no idea why a company called ConePay International had used his address.”
To save us from linking every fantastic piece of journalism from the team, you can access all the reporting under the FT section Inside Wirecard and Alphaville’s House of Wirecard series where Dan has been looking into the company’s accounting since 2015.
Dan also took everyone on a tour of internal documents from the payments company that indicated a concerted effort to fraudulently inflate sales and profits. Throughout the entire time, Wirecard disputed the FT’s reporting and claimed the documents were fake (unfortunately the company has decided to delete the statement). But they did follow up another one of Dan’s stories with accusations of market manipulation.
Back to the present. Everyone wants to be on the right side of history. Even Akshay Naheta, the man behind SoftBank’s investment in Wirecard took to Twitter to blame EY for its auditing job. He quickly then locked his Twitter account.
Everyone that is except Olaf Scholz, Germany’s finance minister, pictured below, who rebuffed calls for tighter regulation as a consequence of the Wirecard case. “The supervisory institutions worked very hard and did their job, which we see today,” he said. 🧐
The curtains have been pulled back. Wirecard has conceded that the missing money probably never existed. The Philippine banks, where the cash was supposed to be located, told the FT that Wirecard was not a client and the head of the Philippine central bank said the money never entered the country. It seems clear that it was Wirecard’s internal records that were fake, not the documents the FT had reported on.
In October last year, as Wirecard pushed back on much of the FT’s reporting, Dan provided some food for thought:
“Are the internal documents published today by the FT really fake, or should that description be applied to much of the profits at one of Germany’s largest and most popular companies?”
We have the answer now.