justice
First verdict: Wirecard balance sheets were wrong
The former CEO of Wirecard, Markus Braun, in autumn 2020 before the Wirecard investigative committee of the Bundestag. Photo: Fabrizio Bensch/Reuters Images Europe/Pool/dpa
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The first verdict on the accounting of the Wirecard scandal group is in a civil case: the balance sheets were wrong. This is of great importance – not least to the accused ex-CEO Braun.
In a civil proceeding, the Munich Regional Court declared the balance sheets of the scandalous Wirecard group for the years 2017 and 2018 to be null and void.
On Thursday, the chamber upheld a lawsuit filed by the insolvency administrator Michael Jaffé. The dividend resolutions for the two years are therefore also void. The lawsuit was based on the alleged bogus bookings with which Wirecard managers are said to have inflated the balance sheets by invented billions.
Should the judgment become final, the insolvency administrator could reclaim the dividends paid by Wirecard for the two years in the tens of millions from the shareholders, as well as taxes paid by Wirecard. The judgment also provides ammunition for the almost 1,000 lawsuits by outraged shareholders against the auditing company EY, which had checked and certified the Wirecard balance sheets.
The group collapsed in 2020 after admitting sham bookings of 1.9 billion euros, the former CEO Markus Braun has been in custody for almost two years. In 2017 and 2018, Wirecard reported high profits totaling more than 600 million euros and paid out dividends totaling 47 million euros for both years.
One of the main beneficiaries of the dividend resolutions was Braun, who has been in custody for almost two years. Because the Austrian manager was not only CEO, but also a major shareholder with eight percent of the shares. Ex-CEO Braun was not sued by Jaffè as a person, only Wirecard AG, which continued to exist as a legal shell without a board of directors and supervisory board. But then Braun joined the process himself.
The insolvency administrator then also made it clear that he wanted to target Braun and other large investors in the event of possible dividend reclaims, but not the small shareholders. “Small and private investors will not be significantly affected in this respect,” said Jaffès law firm.
The Munich public prosecutor’s office assumes that the missing 1.9 billion euros to date were fictitious. Braun, on the other hand, defends himself with the argument that the 1.9 billion is there, but the money was booked elsewhere.
Whether the missing billions exist or not was of no importance for the verdict, as the presiding judge Helmut Krenek explained. To declare the balance sheets void, it was sufficient to establish that the money could not be found where Wirecard said it was booked: in escrow accounts in Singapore.
“If the funds had existed, they would have had to be found there,” said Krenek. And because the Wirecard balance sheets were wrong, the dividend resolutions of the 2018 and 2019 general meetings were also void as a “necessary consequence”, as the chairman explained.
The shareholders’ association DSW sees the verdict as increasing the chances of success for the almost 1000 lawsuits against EY. According to Braun’s argument, the money is “somewhere completely different,” said DSW Vice President Daniela Bergdolt. “But even then, Wirecard’s bookkeeping was grossly wrong. They should have noticed that too” – the EY examiners – “then.”
EY, on the other hand, emphasized in a statement that the work of the auditors was not the subject of the proceedings: “EY Germany or EY employees are not a party or a defendant in this legal dispute.”
The key figure is still in hiding to this day
The Munich public prosecutor’s office assumes that Braun and his accomplices swindled billions with the help of false balance sheets from banks and investors. Braun, on the other hand, sees himself as a victim of fraudsters in the company. A key figure in the scandal is former sales director Jan Marsalek, who resigned in the summer of 2020 and has remained in hiding to this day. The annual reports were signed by both the board members and the auditors, who thus vouched for the correctness of the figures.
Missing funds were reportedly booked later in the two years at the bank OCBC in Singapore – according to the verdict, it was more than 700 million euros at the end of 2017 and a good one billion at the end of 2018. Before the Wirecard insolvency, the 1.9 billion euros was the final figure that was to be booked in the unaudited 2019 balance sheet.
Braun’s next detention test is scheduled for June. In the criminal proceedings, the Munich Regional Court is currently examining the charges against the manager. If the charges are approved, the criminal trial could begin as early as this year.