Wirecard CEO Markus Braun had managed to reassure shareholders troubled by news of an internal fraud investigation in 2019 after lawyers leading the investigation called them false.
The chief executive of the then high-flying German payments firm, which months earlier had entered the elite club of the 30 largest listed German firms, strongly and publicly denied a Financial Times report about alleged accounting manipulation , calling them “wrong, misleading and defamatory”. ,
“There were no material compliance findings as to the governance and accounting practices of any Wirecard subsidiary,” it added.
But in a clarifying letter dated February 13, 2019, Raja & Tan, the blue-chip Singapore law firm in charge of the investigation, attributed these statements to Braun.
“We . . . believe that the statement with respect [to] “We regret that we are unable to agree with the views publicly expressed by Wirecard AG and/or its CEO,” the firm wrote. ,
The letter is one of several examples of Braun being accused of making false and misleading statements to investors, an FT analysis of Wirecard emails and other documents shows. The events raise further questions about Braun’s credibility, just as he is due to take the stand at the high-profile Munich trial investigating the company’s failure.
“Braun is as believable as Baron Munchhausen,” said MP Jens Zimmermann, an 18th-century nobleman famous for his strange stories. Zimmermann, an MP for the Social Democrats who sat on the parliamentary inquiry into the scandal, said: “A CEO who does not take into account that his most important customers are not real may exist in fiction, but I am sure that Braun Was very aware of the position of his company.
Wirecard went bankrupt in 2020 after disclosing that €1.9bn of corporate cash, half of its annual sales, and its outsourced operations in Asia did not exist.
Braun’s personal credibility is critical to the outcome of the criminal case that began in December. The 53-year-old man, who has been in police custody for two-and-a-half years, has been accused of cheating, embezzlement, accounting and market manipulation. Two other senior Wirecard executives are also on trial.
So far Braun has not given a statement in court. His attorney, Alfred Dyrlum, has said that his client is ready to do so and answer questions. Previously, Braun has denied any involvement in the fraud and suggested that as Wirecard’s largest shareholder, he too is a victim.
Braun has been seriously implicated by one of his co-defendants, Oliver Bellenhaus, a former Dubai-based executive. After the collapse of Wirecard, Bellenhaus traveled from Dubai to Munich, turned himself in and became a key witness. With a lack of conclusive evidence that Braun knew of or was directly involved in the alleged fraud, the trial hinged on the extent to which the five-judge panel hearing the case believed it.
Internal emails and other documents reviewed by the FT show that important factual statements by Braun were not always true and were sometimes challenged by the company and by its own auditors and lawyers hired by the supervisory board .
In January 2019, after an FT story reported that a compliance investigation by King and Tan had indicated “serious offenses of forgery and/or falsification of accounts”, Braun told analysts on a call that the ongoing investigation “found no evidence, or conclusive conclusion, that any of these allegations are true” and was not expected to do so.
In their February 13 letter to Wirecard, Raja and Tan said that in their last formal update to the company, they were, in fact, of the view that “many of the initial doubts raised in our initial report . . . appear to be substantiated.” Are”.
The letter further stated: “Our findings following a review of the accounting documents and interviews conducted with various persons, lead us to recommend expansion of the scope of investigation instead of dismissing the allegations.” It then elaborated on some of the findings that were worthy of further investigation.
The firm said it disagrees with Wirecard and Braun’s view that it “has not made, nor expects to make, any findings of material noncompliance as to the governance and accounting practices of any Wirecard subsidiary or employee.” “.
It also rejected Wirecard’s suggestion that the allegations were based on flawed or forged evidence, saying: “We have not yet been provided with nor disclosed any such defect or forgery”.
King and Tan stated that the public position of Braun and Wirecard “gives us cause for concern that our investigation and findings may not be considered fairly and fairly” by Wirecard and urged the company to remain open about the investigation. Stop making public statements “till our final report is released”.
A year later, it was KPMG’s turn to tell Braun that his portrayal of the facts was not in line with reality. The firm’s forensic investigators had been trying for months to establish whether Wirecard’s outsourced businesses in Asia were genuine.
On April 21, 2020, KPMG told Wirecard that it had “obstructed the investigation”, that too many documents were missing and that Wirecard’s outsourcing partners in Asia were not cooperating. The supervisory board later extended the KPMG probe by only one week.
The supervisory board was already concerned that Braun, who was in charge of communications with investors, would distort facts in required stock exchange statements, according to people familiar with the discussions at the time.
It therefore provided a summary of key points to mention in the statement, including the fact that KPMG was “obstructing the investigation” as well as an assessment that the auditor was “unable to rebut the allegations made against the company”. were about [outsourced operations in Asia] during the investigation period”.
Braun nevertheless drafted a spirited statement that suggested that KPMG, rather than Wirecard, was responsible for the delay and claimed that “no concrete findings have been made to date” by KPMG.
Before it was published, Braun shared his draft with KPMG. Sven-Olaf Leitz, the senior partner in charge of the investigation, responded by email, telling Braun that his “portrayal does not correspond to our perception of the actual facts and does not match our written and oral reporting”. Leitz also said that Wirecard should tell investors that KPMG has been unable to investigate “a number of issues” due to “constraints.”
Braun would have none of this, and sent out its own version of the statement after the market closed, dismissing input from the supervisory board and KPMG.
When trading opened the next day, Wirecard’s share price was up 11 percent and, in their charges against Braun, prosecutors cited this regulatory statement as a prime example of market manipulation.
According to people familiar with the details, Braun’s defense argued that Wirecard had promised to submit new documents that were likely to change KPMG’s point of view, and an outside attorney told Braun that the regulatory statement was not valid. The recommendations of the supervisory board were not in line with the law. Requirements.
But when the final KPMG report was published a week later, the stock fell 26 per cent in a day.
In an effort to reassure fearful investors, Braun told analysts in a recorded call that day that the delayed annual audit by EY would not be affected by KPMG’s findings: “EY informed us this morning that they had no interest in signing off on the audit. Not a problem. ,” They said.
At this point, Martin Dahmen and Andreas Badde, the two EY lead audit partners, broke down.
In a brief email to Wirecard chairman Thomas Eichelman, which was seen by the FT, he told Wirecard “at no point” did EY make such a statement, adding that Braun’s public claim ” may create misinformation in the public market and incorrectly suggest that we have reached a conclusion on Wirecard’s 2019 financial statements and are prepared to issue an unqualified opinion.”
Dahmen and Budde urged the supervisory board to “timely review this matter and consider whether it is necessary to issue a corrective statement to clarify the status of EY’s audit work.” Internally, EY assessed whether it was legally entitled to resign as Wirecard’s auditor, according to people familiar with the matter.
That audit was never completed, and Wirecard collapsed on June 25.
Dierlam, counsel for EY, KPMG and Braun, declined to comment. Rajah and Tan did not respond to an FT request for comment.