ROUNDUP 5: Wirecard before disassembly – new searches and criticism of supervision | 01.07.20

(continuously updated)

MUNICH (dpa-AFX) – The Dax (DAX 30) group, which is involved in a billion-dollar balance sheet scandal, is expected to be dismantled and sold. The provisional insolvency administrator Michael Jaffé announced on Wednesday night that “numerous interested parties worldwide had already registered for the acquisition of business areas”. A little later, dozens of prosecutors, police officers and computer specialists searched five buildings in Germany and Austria in search of evidence for allegedly fictitious bogus shops in the Middle East and Southeast Asia, including the Wirecard headquarters in the Munich suburb of Aschheim for the second time within a month.

In the Bundestag, attempts by the President of the Federal Financial Supervisory Authority (Bafin) Felix Hufeld to explain the role of his authority left many questions unanswered. At least several opposition groups criticize this after a non-public report by Hufeld in the finance committee.

A weak consolation for the 5800 Wirecard employees worldwide: Operation should not be interrupted or stopped if possible. The provisional insolvency administrator obviously wants to prevent the spin-off of Wirecard subsidiaries on his own: The “transaction process” is to be “concerted” by the German parent company. The US subsidiary Wirecard North America had put itself up for sale on Tuesday and emphasized its autonomy.

According to the public prosecutor, the raids were primarily about the allegations made against ex-CEO Markus Braun, among other things – incorrect information in the Wirecard books and market manipulation. Two objects were searched in Austria. Former CEO Markus Braun is Austrian, as is Jan Marsalek, who was formerly responsible for day-to-day business on the Wirecard board. According to current knowledge, Marsalek’s trail is lost in the Philippines.

Beyond the criminal investigation, there are increasing indications that the Wirecard Supervisory Board gives Braun and Marsalek at least joint responsibility for the affair of alleged air bookings in the amount of 1.9 billion euros. The supervisory board subsequently released Braun without notice. The employment contract of the long-standing CEO had been terminated “with immediate effect”. Marsalek had also been fired without notice. In this regard, similar standards apply to managers as to normal employees; usually, termination without notice is preceded by allegations of serious misconduct.

However, both the Supervisory Board and the auditing company EY, which audited Wirecard’s annual balance sheets, are themselves faced with lawsuits and threats from angry investors.

Financial supervision Bafin and its president Hufeld are also under pressure. After Hufeld’s appearance on the finance committee, several MPs criticized that it is still unclear why financial supervision did not intervene earlier. “A lot has remained unanswered,” said committee chair Katja Hessel (FDP). “The financial center Germany has been damaged by the Wirecard case. (…) There must be consequences in the end,” said the Nuremberg FDP politician.

“One thing is clear: after a comprehensive error analysis, BaFin needs to be restarted,” said green finance expert Lisa Paus. It is still open “whether this can succeed with Mr. Hufeld at the head of the Bafin.”

As things stand, Wirecard managers have forged a significant portion of the company’s sales and profits in Southeast Asia and the Middle East. At the beginning of last week, Wirecard had admitted that a total of 1.9 billion euros in balances on Southeast Asian trust accounts did not exist with “predominant probability”.

The company from the Munich suburb of Aschheim processes cashless payments as a service provider for banks, credit card companies and retailers. The subsidiary Wirecard Bank has a full banking license. One of the unanswered questions: Why was Wirecard not classified as a financial service provider and thus placed entirely under the supervision of Bafin?

According to informed circles, the European Central Bank spoke an important word. Accordingly, in 2018, at the request of Wirecard, Bafin checked whether the company was a financial service provider

– which would have meant that the Bafin was fully responsible for supervision

would have been. In the end, however, at the beginning of 2019, with the participation of the Bundesbank and the ECB, it was decided not to classify Wirecard as a financial service provider but as a technology company.

Hufeld then emphasized that all previous decisions in this regard had been made in full consensus. According to the assessment of all the institutions involved, Wirecard AG has so far not been classified as a financial holding company, as a Bafin spokeswoman explained.

Wirecard not only loses money, but also customers. Due to the scandal, Allianz Deutschland is discontinuing its “Pay & Protect” payment app, which runs through Wirecard Bank, as the company announced on Wednesday. The alliance is the first heavyweight in the German financial industry to publicize the termination of a cooperation with Wirecard./cho/mis/DP/fba

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