Fraud Scandal at Germany’s Bankrupt Wirecard Lead to More Arrests

BERLIN, KOMPAS.com — More arrests have been made at the bankrupt German payment company Wirecard in a fraud scandal that took down the company’s former CEO.

Wirecard’s former CEO, Markus Braun, has been taken back into custody after the case against him was expanded, according to prosecutors.

Two former executives at Wirecard have also been arrested on Wednesday.

The two managers are suspected of defrauding investors of around $3.7 billion by inflating the company’s balance sheet.

The former execs are Wirecard’s former Chief Financial Officer until end-2017 and former Head of Accounting.

The updates revealed on Wednesday were shared by Munich prosecutor Anne Leiding.

Anne identified the two individuals as L. and von E. respectively, in keeping with German privacy rules.

The case against ex-CEO Markus Braun was expanded and a judge ordered him kept in custody, Leiding said.

Markus Braun was first arrested last month on suspicion of market manipulation and falsifying financial results, and then released on bail.

A fourth former executive, the head of a subsidiary in Dubai, was arrested in early July.

Wirecard filed for protection from creditors through an insolvency proceeding on June 25 after executives admitted that €1.9 billion ($2.2 billion) that had been represented as being held in trust accounts in the Philippines probably did not exist.

The company said it is investigating the scope of its business handling payments through regional third parties, a major source of profits, and how that business was being conducted.

Leiding said prosecutors believe that the four suspects arrested, along with others, agreed in 2015 to inflate Wirecard's balance sheet by faking income from business with so-called third-party acquirers, making it more attractive to potential investors.

“In reality, it was clear to the suspects by the end of 2015 at the latest that Wirecard was losing money overall with its actual business,” she told reporters.

The suspects initiated talks that resulted in banks in Germany and Japan - along with other investors hoodwinked by the over-rosy annual accounts - providing some €3.2 billion in total, Leiding said.

The money is probably lost now that the company is insolvent, she added.

Leiding wouldn't break down the potential charges against the individual suspects but said they include fraud, breach of trust, misrepresentation and market manipulation.

The Wirecard debacle has raised questions about the effectiveness of German financial regulation, and about who in the government knew what when.

The German parliament's finance committee plans a special meeting next Wednesday, which the finance and economy ministers are expected to attend.

Officials also have acknowledged that the chancellery was in contact with Wirecard advisers.

The scandal has been viewed as a setback for the investment climate and attempts to promote the country as a base for financial services companies.

The whereabouts of one key figure at Wirecard — former chief operating officer Jan Marsalek, who was fired last month — remain unclear. Recent media reports have suggested that he may have fled to Belarus or Russia.

Asked where Marsalek is, Leiding replied: “You tell me.”

“It is obvious that we are trying to get in contact with everyone who may have been involved, but I can't say anything about that,” she added.

(Writer: Geir Moulson)

Source: https://apnews.com/ca49128730ad89498040ff45b8f71a4a