Former Wirecard executives go on trial on Thursday, two years after the payments company went out of business, which led to the biggest fraud scandal in Germany since World War II and sent shockwaves through the country’s political and financial establishment.
Markus Braun, an Austrian who used to be the CEO of the now-defunct blue-chip company, and two other high-ranking managers face a number of charges, including fraud and market manipulation. If they are found guilty, they could go to jail for up to 15 years.
Braun says he didn’t do anything wrong and says that other people were running a secret operation without his knowledge.
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The prosecution says that Wirecard’s managers made up huge amounts of fake income to trick investors and creditors.
At the Munich court, a decision is not likely to be made until at least 2024.
Wirecard was started in 1999 in the Munich suburb of Aschheim. It grew quickly and became a model for a new kind of German tech company that could compete with the big players in Europe’s biggest economy.
Wirecard, which used to process payments for pornography and online gambling, is now worth $28 billion and has replaced Commerzbank (ETR:CBKG) in Germany’s DAX blue-chip index.
REPUTATIONAL DAMAGE
Some investors and journalists suspected Wirecard of doing something wrong. However, Wirecard was able to convince the German authorities to look into those who were looking at its finances.
But in June 2020, Wirecard had to admit that its balance sheet was wrong by 1.9 billion euros.
The government of then-Chancellor Angela Merkel, which had helped Wirecard try to buy a company in China, thought for a short time about helping the company.
But within a few days, Wirecard was the first member of the DAX to file for bankruptcy, owing nearly $4 billion to creditors.
“The Wirecard scandal has hurt the reputation of our financial centre and business location around the world for a long time to come,” said Danyal Bayaz, the state finance minister of Baden-Wuerttemberg, who was on a parliamentary committee that looked into Wirecard.
“Almost everyone has made a fool of themselves with Wirecard, which has cost investors a lot,” he told Reuters.
“The Bundestag (parliament) investigation committee has found a lot of mistakes and weaknesses that need to be fixed right away. “We have a long way to go before we can trust our government and institutions again.”
Prosecutors in Munich and a special police task force looked into the case. They did 450 interviews, searched more than 40 properties in Germany alone, and went through 42 terabytes of data. This led to a 474-page indictment.
More than two dozen countries, including Switzerland, Singapore, Austria, the Philippines, Britain, and Russia, have gotten involved.
Prosecutors will use evidence from Oliver Bellenhaus, one of Braun’s co-defendants and the former head of Wirecard’s subsidiary in Dubai. Bellenhaus became a key witness when he turned himself in to German authorities in 2020.
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Stephan von Erffa, who also used to work for Wirecard, is also on trial. He has said in public that he is sorry about what happened at Wirecard, but he has denied that he was behind it. His lawyer said that von Erffa didn’t want to say anything about the accusations.
In the chaos that followed the failure of Wirecard, the head of Germany’s financial watchdog, BaFin, and the head of Germany’s accounting watchdog both quit their jobs.
People said that Merkel and Olaf Scholz, who was Finance Minister at the time and is now Chancellor, didn’t do a good job of keeping an eye on the company.
Merkel and Scholz have said that they are not to blame. Scholz gave BaFin more power and changed the people in charge in 2021. Scholz also said that the auditor for Wirecard, EY, was to blame for not catching the fraud. EY says it did the right thing.
In this case, there are 100 possible court dates until the end of next year.
