TCI files Wirecard complaint with Munich prosecutors
One of Europe’s best-known investors steps up campaign against German payments group
TCI Fund Management has filed a complaint against Wirecard executives in Munich, an escalation of the activist campaign against the German payments group by the short seller Christopher Hohn.
The call from one of Europe’s most successful investors for a criminal investigation into alleged accounting fraud adds to the pressure on the Dax-listed fintech long regarded as one of Germany’s most promising technology companies.
“The KPMG report published by Wirecard on April 28, 2020 as well as public reporting, including that in the Financial Times and Wirtschaftswoche, reveal anomalies that may have criminal relevance,” TCI said in a statement on Tuesday.
Wirecard shares have lost two-fifths of their value since the results of a six-month KPMG special audit were released late last month. The accounting firm said it encountered “obstacles” to its work, and that it was unable to verify that the “lions share” of Wirecard’s operating profits between 2016 and 2018 were genuine.
Prosecutors in Munich confirmed that they received the complaint by TCI “against people responsible” at Wirecard and others.
TCI, which has assets of about $25bn, has sold short 1.5 per cent of Wirecard, which on Tuesday had a €10bn market capitalisation.
According to the prosecutors, TCI is raising the suspicion of embezzlement against Wirecard executives tied to the group’s acquisition of the Indian company Hermes as well as unsecured loans that Wirecard made to third-party business partners.
The prosecution office told the Financial Times that it was evaluating TCI’s complaint. “At this point, further information will not be given,” it said, adding that it wants to avoid “influencing the share price of Wirecard AG.”
Under German law, criminal prosecutors have discretion over how to deal with complaints filed by third parties. They can open a formal criminal investigation if they conclude it is merited or dismiss the complaint.
Wirecard already faces a criminal investigation in Singapore, inquiries by Germany’s financial watchdog, BaFin, and a probe by the accountancy regulator.
The company has denied any wrongdoing and declared the KPMG report a vindication, blaming a second delay to publication of audited full-year figures for 2019 on coronavirus.
In a statement, Wirecard said that it considered TCI’s complaint “to be completely unfounded”, adding that the fund was not a shareholder in the company. “Wirecard therefore regards the filing as a purely tactical manoeuvre of a short seller,” it said.
Sir Christopher, an activist investor known in Germany for previous campaigns at Deutsche Boerse and Volkswagen, has previously called for Wirecard chief executive Markus Braun to be fired or sidelined while a full internal investigation is held.
The KPMG special audit was launched in October last year after the FT published internal documents that appeared to indicate substantial sales and profits at Wirecard units in Dubai were fraudulently inflated.
Wirtschaftswoche subsequently raised a number of questions about the group’s accounting, including figures reported for Hermes, a Wirecard business in India that was acquired as part of a controversial €340m takeover.
KPMG said it was not able to identify the beneficial owners of a Mauritius fund to which Wirecard paid €340m in that 2015 deal.