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Prosecutors assume “gang fraud”

The Munich public prosecutor issued three arrest warrants against former managers in the Wirecard case. There is even talk of “gang fraud” in what may be the largest fraud case in post-war history.

The scam scandal at the Dax group Wirecard has reached a new dimension: The Munich public prosecutor’s office has meanwhile assumed “commercial gang fraud” since 2015, as the investigative authority said, more than three billion euros could be lost. Former CEO Markus Braun was remanded in custody for the second time within a month – and unlike at the end of June, he was no longer released on bail. This was announced by the Munich public prosecutor on Wednesday.

You can see the statement of the public prosecutor in the video above or here.

The former CFO Burkhard Ley and the former head of accounting are now also behind arrest warrants. Meanwhile, the federal government is under further political pressure because Chancellor Angela Merkel (CDU) advertised the Beijing leadership in 2019 for the planned market entry of the group in the People’s Republic of China.

Wirecard could become the biggest fraud case in post-war history

The prosecutor’s allegations amount to the fact that the Dax group may have been led by a criminal gang since 2015 – a process that has never been seen in the history of the German stock market league. “Deceived by the wrong financial statements, banks in Germany and Japan, as well as other investors, provided funds amounting to around EUR 3.2 billion that were most likely lost due to the bankruptcy of Wirecard AG,” the investigators said.

If this is confirmed, Wirecard could become the largest fraud case in German post-war history. The previous leader is the Baden-based company Flowtex, which caused damage of over two billion euros in the 1990s by selling non-existent special drilling machines. “We are also wondering how such a system could be established,” said Chief Prosecutor Anne Leiding, spokeswoman for the investigative authority.

Testimony: Ex-CEO Braun the head?

According to witness statements, ex-CEO Braun was possibly the head: During their interrogations, witnesses spoke of “corps spirit” and a “strictly hierarchical system” under the chairman of the board, Leiding reported.

The Wirecard, based in the Munich suburb of Aschheim, had admitted before its bankruptcy application that 1.9 billion euros could not be found, which should be booked in Filipino trust accounts.

Press conference in Munich: Prosecutor Anne Leidig gives an opinion on the latest developments in the investigation against those responsible at Wirecard. (Source: Peter Kneffel / dpa)

“In reality, the accused had known at the latest since the end of 2015 that the Wirecard Group had overall losses in actual business,” the investigators wrote in their message. This also means that Wirecard should never have moved into the Dax. At times, the company on the Frankfurt Stock Exchange was worth more than 20 billion euros – apparently based on inventions.

“The very intensive investigations by the Munich I public prosecutor’s office have shown that the facts charged with the accused must be expanded considerably once again,” said Attorney General Anne Leiding, spokeswoman for the authority. “We have very comprehensive statements from a leniency.” Accordingly, the accused managers should have decided in 2015 to “inflate” the Wirecard balance sheet by pretending income – that is, to report non-existent sales and profits.

Former sales director Marsalek still on the run

As far as is known, the Wirecard board of directors invented business with subcontractors in Dubai and Southeast Asia, which supposedly processed credit card payments for the German company in Southeast Asia and the Middle East. The former head of the Wirecard subsidiary in Dubai, Cardsystems Middle East, was already in pre-trial detention.

According to the balance sheet of the parent company Wirecard AG 2018, this company contributed a large proportion of the profits to EUR 237 million – profits that did not exist. The investigators did not reveal who the key witness was, but the former Cardsystems managing director had agreed to cooperate. Former sales director Jan Marsalek, like Braun, is still on the run as an Austrian citizen.

For ex-CEO Braun, the recent arrest was probably surprising: the investigators arrested him on Wednesday morning when he reported to the police as planned. All three would not have turned themselves in, reported Leiding.

The scandal is also becoming increasingly uncomfortable for the federal government. Chancellor Merkel campaigned for Wirecard in China in 2019, when Bafin financial regulators had long been aware of the allegations against the company. The ex-secret service coordinator of the government headquarters also acted as an advocate for Wirecard. A Bundestag investigation committee is getting closer. A dispute over responsibilities has broken out within the coalition.

Chancellery asks for information

The Federal Chancellery confirmed that there have been multiple contacts with Wirecard managers and consultants since the end of 2018. Among other things, the former State Secretary Klaus-Dieter Fritsche, responsible for the secret services from 2014 to spring 2018, contacted the Chancellery and asked for an appointment for Wirecard AG. In preparation, the Chancellery asked the Ministry of Finance for information about the company. The finance department then sent “publicly available information” to the Chancellery, including government responses to opposition inquiries about allegations against Wirecard, such as accounting irregularities.

On her trip to China in September 2019, Merkel spoke to the Beijing management about the planned acquisition of the Chinese company AllScore Financial by Wirecard. At the time of the trip, Merkel “had no knowledge of possible serious irregularities at Wirecard,” said the spokesman. It is common practice for top German politicians, including the Chancellor, to promote German companies abroad.

According to the Chancellery, ex-CEO Braun also denied the allegations of counterfeiting in these contacts at the German government headquarters. Left-wing parliamentary group Fabio De Masi said about the new details: “The Wirecard affair is becoming increasingly opaque.”

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