The work of auditors usually takes place in secret. When the financial management specialists examine the tax data and accounts of companies, they always do so in an extremely discreet manner. External audits at well-known companies are therefore almost never publicly known. Tax secrecy rules. And that is sacred in Germany.
It was the same with Wirecard, the payment service provider from the vicinity of Munich, which went bankrupt in June and which today stands for the largest balance sheet fraud scandal in German history. Years ago, tax auditors began to be very interested in the group and its business. Most recently, until June 2020, auditors from the Bavarian State Office for Taxes examined the fiscal years 2010 to 2015 together with the Federal Central Tax Office (BZSt).
What the examiners uncovered in their investigations sheds a whole new light on the role of the authorities in the Wirecard scandal. As research by Personal-Financial.com and “Stern” shows, the tax specialists sounded the alarm earlier than others. Other authorities deliberately ignored the repeated allegations of fraud against Wirecard, which were mainly published by the British Financial Times (FT). The Federal Finance Minister Olaf Scholz (SPD), subordinate to financial supervision Bafin, even protected the Dax group with a temporary short sale ban for Wirecard shares. In contrast, the auditors in Bavaria took the allegations seriously, quietly investigated evidence of possible crooked deals – and found what they were looking for.
This involved, for example, transfers to letterbox companies in the case of company takeovers, from which people from the Wirecard environment benefited. The investigators also dealt extensively with anomalies at those strange partner companies in Asia, which allegedly provided the group with a large part of its supposed profit – which this summer then turned out to be a fairy tale. Confidential documents show that the Munich tax office informed the public prosecutor in Munich no later than the beginning of 2020 based on the findings of the tax auditors. But the investigative authority saw no “sufficient initial suspicion” that “justifies the initiation of criminal proceedings”, as stated in a note from January.
According to documents from the tax administration, the driving force behind the investigation was primarily an official from the Bavarian State Tax Office, who was responsible for the tax audit at the payment service provider from the suburb of Aschheim. This investigator displayed an eagerness to investigate for months that was not evident in any other German authority in the Wirecard case until the collapse this year – at least not in the financial supervision or the public prosecutor’s office.
When the Bafin filed a criminal complaint against the “FT” journalists in the spring of 2019 for alleged market manipulation, who repeatedly reported irregularities at Wirecard, the tax auditor did something that other authorities apparently did not come up with or did not want to come up with “FT” after. In doing so, he compared the information in the newspaper with the findings from the tax audit. In addition, he obtained income from registers and databases about companies in the group’s environment – opportunities that are not only open to the tax authorities.
In June 2019, the tax auditor then passed on his findings in a detailed report to the Munich tax office responsible for Wirecard. In it, based on the “FT” articles from March and April 2019, he dealt in detail with the question of “whether there are balance sheet manipulations” and whether the group’s high claims against important partner companies in Asia are “valuable”. The investigator summed up the resilience of the claims “cannot be assessed according to the current state of investigation”. Should receivables prove to be of no value, this would lead to lower sales revenues and profits “in an amount that cannot yet be quantified”.
In connection with the Asian partner companies, the report also listed other “conspicuous facts”. With one of these partners, Pay Easy in the Philippines, neither employee numbers nor bank details could have been determined. A body through which the German tax authorities can obtain information about companies abroad told the auditor: “It cannot be confirmed that Pay Easy is actually economically active in the Philippines”. In the case of the Group’s Dubai subsidiary, the auditor also mentioned the subject of trust accounts.
Deals with Mauritius
The Bavarian tax auditor and his colleague from the Federal Office also devoted themselves to a number of strange company deals by the Wirecard Group in great detail. In the years 2010 to 2015, the period of the most recent tax audit, Wirecard swallowed around a dozen smaller payment companies or bought their customer bases for a total of more than half a billion euros. In four of these deals, the tax audit at Wirecard had shown, the purchase price did not end up with clearly identifiable owners, but with letterbox companies in tax havens such as the British Virgin Islands, Panama or the island of Mauritius.
One deal in particular alarmed the auditors: At the end of 2011, Wirecard took over a customer portfolio from a company called a & a Holding based in Mauritius. Agreed purchase price: 17.25 million euros. As the tax audit showed, a former Wirecard manager and his wife were behind the a & a. The man named Alexander H. was Wirecard’s CFO at the beginning. After he left in 2003, H. also founded another payment company. He lived temporarily in South Africa and finally settled in Kleinmachnow near Berlin.