Ex-Wirecard CEO goes on trial over ‘unparalleled’ fraud

FRANKFURT - Former Wirecard chief executive Markus Braun goes on trial in Munich this week for his role in the collapse of the once celebrated payment company, brought down by the

biggest accounting fraud scandal in German corporate history.

Austrian-born Braun and two other former Wirecard executives will appear in the dock from Thursday on charges of commercial gang fraud, breach of trust, market manipulation and accounting manipulation. The Munich district court has scheduled 100 court dates for the mammoth trial.

Wirecard, once hailed as a standard-bearer for the German technology industry, imploded spectacularly in 2020 after admitting that €1.9 billion (S$2.7 billion) missing from its accounts probably did not exist.

Chancellor Olaf Scholz, who was the finance minister at the time, described the scandal as “unparalleled” in post-war Germany.

Braun, who has been in custody for more than two years, denies any wrongdoing. The 53-year-old has pointed the finger at Wirecard’s fugitive former chief operating officer, Jan Marsalek, a shadowy figure with alleged ties to foreign intelligence agencies.

Marsalek was reported earlier this year to be hiding out in Russia.

A senior Wirecard employee, however, told a German parliamentary inquiry last year that nothing happened at Wirecard without Braun’s knowledge.

“The group was shaped by Markus Braun, and so was the corporate culture. He decided everything, he dictated everything,” Mr Rainer Wexeler told lawmakers.

‘Incorrect’ accounts

On trial alongside Braun are Oliver Bellenhaus, the former head of Wirecard’s Dubai subsidiary, and former accounting boss Stephan von Erffa. They face several years in prison if convicted.

Bellenhaus has admitted wrongdoing and will serve as a key witness for the prosecution.

It took German investigators more than 20 months to unravel the complex web of fraudulent transactions implicating Wirecard subsidiaries and third-party companies across the globe.

Prosecutors say the accused presented “incorrect” financial results from 2015 to 2018, by including fabricated revenues and profits from partner companies in Dubai, the Philippines and Singapore, and using forged documents to make Wirecard appear more successful than it was.

Among the victims of the fraud were banks that had provided credit of €1.7 billion to Wirecard. Bonds worth €1.4 billion were also issued and are unlikely to be repaid.

Fall from grace

Founded in 1999, the Bavarian start-up Wirecard started out processing payments for porn and gambling sites and grew into a respectable electronic payment provider that edged traditional lender Commerzbank out of the blue-chip DAX index.

Rumours about possible cheating at Wirecard surfaced now and again over the years, including from short-sellers doing research on companies they suspected might be overvalued.

But Wirecard’s problems began in earnest with a series of Financial Times articles in 2019 alleging irregularities in its Asian division, based on revelations from former employees and leaked documents.

The company was initially able to fend off the claims, with the FT’s journalists themselves coming under investigation by German regulators.

But the scam finally unravelled in June 2020 when long-time auditor EY said it had discovered a €1.9 billion hole in Wirecard’s accounts.

The sum, which made up a quarter of the balance sheet, was meant to be sitting in trustee accounts at two Philippine banks. But the Philippines’ central bank has said the cash never entered its monetary system and both Asian banks, BDO and BPI, denied having a relationship with Wirecard.

Regulatory overhaul

Wirecard filed for insolvency soon after, becoming the first DAX company to fail. Its dramatic downfall sent shock waves through Germany and prompted an overhaul of the country’s finance watchdog BaFin, heavily criticised for ignoring early warning signs about Wirecard.

The fallout also embarrassed Germany’s political establishment, with former chancellor Angela Merkel coming under fire for promoting Wirecard during a 2019 trip to China – when journalists were already raising doubts about the company.

In a grilling in 2021 by lawmakers, Dr Merkel said there was “no reason at that time” to believe there were “serious irregularities at Wirecard”. AFP