Wirecard has been suspected of manipulating the balance sheet for months; Only recently there was a raid on the company’s headquarters. Wirecard has always rejected the allegations. A special report by KPMG’s auditors, which was published at the end of April, was unable to substantiate the allegations against the Dax group due to a lack of access to company documents – but also could not refute them.
The subsequent investigation by EY was supposed to relieve the group that had climbed into the Dax in autumn 2018. The attestation for the annual report should provide clarity, but the opposite was the case. Instead, news of the renewed delay caused Wiredcard’s stock to plummet.
Even if the looming scandal seems historical: Even before Wirecard, some companies were already making headlines with financial irregularities and suspected falsified balance sheets. Personal-Financial.com has compiled six examples of accounting scandals:
Six companies, six accounting scandals
Until 2017, Steinhoff was the number two furniture and household goods retailer right behind Ikea, was popular with investors and was traded as a candidate for promotion to the Dax. In August 2017, however, the first reports appeared on alleged counterfeiting of the balance sheet and an investigation against the then CEO Markus Jooste. In December things went very quickly: The auditor Deloitte refused to sign the balance sheet. Steinhoff withdrew the 2015 and 2016 annual reports, acknowledged irregularities and announced Jooste’s resignation. Within a few days, the Steinhoff share fell by more than 90 percent. Finally, the testing company PwC was commissioned to carry out an investigation. In March 2019, it announced the first results: Steinhoff has therefore styled sales and profits over the years. Overall, it is about transactions with a value of 6.5 billion euros between 2009 and 2017.
Schieder founder and boss Rolf Demuth (photo) was long considered the “furniture king”. His company has since risen to become the largest furniture maker in Europe, and Ikea was one of his customers. Schieder Holding expanded strongly and in 2007 had more than 41 locations with around 11,000 employees. The turnover was 1 billion euros. In May 2007, a new management team took over the top of the company – and discovered inconsistencies in the balance sheets. Demuth and three other top managers were subsequently arrested in June. In 2010, the public prosecutor charged the company with bogus balance sheets, overvalued inventories, and incorrect numbers to hide the company’s plight and save the company. Demuth was eventually sentenced to three and a half years in prison. In 2013 he was released after serving two thirds of his sentence.
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Since the 1990s, the Japanese optics specialist Olympus has hidden losses in the securities business behind multi-billion acquisitions. The balance sheet fraud in the amount of the equivalent of 1.3 billion euros was uncovered in 2011 by former CEO Michael Woodford. Freshly promoted, he became aware of inconsistencies in the balance sheets. Attempts at clarification ended when he was released in October 2011. Woodford then passed on important company documents to the media. In November, Olympus finally made the balance sheet fraud public. The share then lost 29 percent. An independent commission later appointed 19 former and incumbent managers to be responsible for the fraud, including former CEO Tsuyoshi Kikukawa. Olympus sued the executives. Kikukawa and five other managers were sentenced in 2017 to pay $ 529 million in damages.
At the end of 2001, the American energy trading giant Enron went surprisingly bankrupt. Shortly before, the company from founder Kenneth Lay and CEO Jeffrey Skilling (photo from 2013) announced that it wanted to become the largest company in the world. Instead, thousands of employees lost their jobs – and shareholders, banks and pension funds lost $ 60 billion. Because the company’s success only existed on paper: the group did business with itself for years through a network of more than 2,000 partner companies. The revenues ended up in the Enron balance sheet, the debts in the balance sheets of the partners. In 2004, a court found Skilling and Lay guilty. In 2013, a court reduced Skilling’s prison sentence by ten to 14 years.
In the 1990s, telecommunications giant Worldcom made a name for itself as one of the fastest growing companies. After a burst merger in 2000, the stock plummeted. In 2002, Worldcom founder and boss Bernie Ebbers (photo) had to go under pressure from the shareholders. It was noted that Ebbers borrowed $ 366 million from Worldcom to cover losses on derivative transactions in its own shares. In order to slow the downturn in the stock, Ebbers also corrected the balance sheets – and posted $ 11 billion in excess profit. Worldcom then collapsed. Ebbers was indicted and sentenced in July 2005 to 25 years in prison for balance sheet fraud. He was released in late 2019 due to his poor health and passed away on February 2nd, 2020.
In 1998, the Augsburg software company Infomatec attracted attention with an IPO of superlatives. With an increase of 560 percent, entry into the stock market was the most successful of the year. The positive news from the founders Alexander Häfele (left) and Gerhard Harlos also sounded like a promising success story. It was precisely these messages that finally fatalized the duo. Infomatec influenced the share price with ad hoc announcements. It was said that the network provider Mobilcom had ordered 100,000 Infomatec devices – instead of the actual 14,000. Even after the false report came to light, Häfele and Harlos still held that they were well positioned. The stock plummeted in February 2000, and Infomatec filed for bankruptcy in May. Harlos was finally sentenced to a suspended sentence in 2003, and Häfele to prison in 2004 – among other things for insider trading and course fraud.