Former Wirecard executives go on trial on Thursday, two years after the collapse of the payments company that produced Germany’s biggest post-war fraud scandal and sent shockwaves through the country’s political and financial establishment.
Austrian former chief executive Markus Braun and two other high-ranking managers of the defunct blue-chip company are facing a number of charges, including fraud and market manipulation, and could be jailed for up to 15 years if convicted.
Braun denies wrongdoing and accuses others of running a shadow operation without his knowledge.
The prosecution has said Wirecard’s management invented vast sums of phantom revenue to hoodwink investors and creditors.
A verdict in the Munich court is not expected until 2024 at the earliest.
Founded in 1999 and based in the Munich suburb of Aschheim, Wirecard had a fairy tale rise and became a showpiece for a new type of German tech company that could compete with the established titans of Europe’s largest economy.
Wirecard, which started out processing payments for pornography and online gambling, rose to be worth $28 billion and displaced Commerzbank (CBKG.DE) in Germany’s DAX blue-chip index.
Wirecard batted away suspicions of wrongdoing from some investors and journalists and successfully lobbied German authorities to investigate those who were scrutinising its finances.
But in June 2020, Wirecard was forced to admit that 1.9 billion euros were missing from its balance sheet.
The government of then Chancellor Angela Merkel, which had previously backed Wirecard’s pursuit of an acquisition in China, briefly considered bailing out the company.
But within days, Wirecard became the first-ever DAX member to file for insolvency, owing creditors nearly $4 billion.
“The Wirecard scandal has caused lasting damage to the reputation of our financial centre and our business location internationally,” said Danyal Bayaz, state finance minister of Baden-Wuerttemberg, who was formerly on a parliamentary committee investigating Wirecard.
“Politicians, financial regulators, banks, auditors, supervisory boards – almost everyone has made a fool of themselves with Wirecard, with high costs for investors,” he told Reuters.
“The investigative committee in the Bundestag (parliament) has uncovered many mistakes and identified weaknesses that urgently need to be addressed. We are on a long road to restoring lost trust in our regulators and institutions.”
Munich prosecutors and a special police task force pursued an investigation, carrying out 450 interrogations, searching more than 40 properties in Germany alone and sifting through 42 terabytes of data, resulting in a 474-page indictment.
Authorities in more than two dozen countries have become involved, from Switzerland to Singapore, Austria, the Philippines, Britain and Russia.
Prosecutors will draw on evidence from Braun’s co-defendant Oliver Bellenhaus, the former head of Wirecard’s subsidiary in Dubai, who became a key witness after turning himself in to the German authorities in 2020.
Another former Wirecard executive, Stephan von Erffa, is also on trial. He has publicly expressed regret about the events at Wirecard but denied orchestrating them. His lawyer said von Erffa did not want to comment on the charges.
In the ructions that followed Wirecard’s demise, the head of German financial regulator BaFin resigned and the head of Germany’s accounting watchdog also stepped down.
Merkel and her then Finance Minister, now Chancellor, Olaf Scholz faced criticism for bungling oversight of the company.
Merkel and Scholz have said they are not to blame. Scholz beefed up BaFin’s powers and installed a new leadership in 2021. Scholz also criticised Wirecard’s auditor, EY, for failing to catch the fraud. EY has said it acted professionally.
There are 100 court dates provisionally scheduled until the end of next year in the case.