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Germany’s position in Wirecard scandal beneath microscope By Reuters 


© Reuters. FILE PHOTO: Investigative committee on Wirecard accounting scandal in Berlin


By John O’Donnell and Tom Sims

FRANKFURT (Reuters) – In February 2019, after a steep drop in Wirecard’s share worth, German authorities launched legal probes into short-sellers and journalists who had accused the corporate of fraud, and banned traders from betting towards the corporate.

Paperwork seen by Reuters present for the primary time that the one unbiased info – past Wirecard’s representations – acquired by Munich prosecutors who launched the legal probes was a third-hand account of occasions from a convicted cash launderer, Daniel James Harris.

The rationale that led to the choices of prosecutors and regulators to launch the legal probes and short-selling ban, and whether or not they had been overzealous in supporting Wirecard, are central points being investigated by a parliamentary inquiry into the corporate’s collapse in Germany’s greatest post-war fraud scandal.

The legal probes and short-selling ban had been launched by authorities after Wirecard complained it was being focused by unidentified speculators who it mentioned had been in cahoots with two Monetary Instances journalists and had advance information of a damaging report that it mentioned baselessly alleged accounting manipulations.

Some Wirecard executives had been in actual fact engaged in a classy international fraud at the moment, the German authorities, prosecutors and regulators mentioned final yr after the fee firm filed for insolvency, owing collectors virtually $4 billion.

The trove seen by Reuters contains 1000’s of pages of emails, chat messages and memos supplied by German authorities to the parliamentary inquiry, which reaches a climax this week with testimony from Chancellor Angela Merkel on Friday.

The witness testimony from Harris was supplied by Wirecard, with a lawyer for the corporate delivering the two-page written assertion in particular person to a prosecutor on Feb. 14, 2019, in accordance with the paperwork.

Within the assertion, Harris recognized himself as an equities dealer in Essex, southern England, and mentioned he met his dealer, whom he did not establish, on Jan. 30, 2019, the day Wirecard’s share worth plunged as much as 22%.

The dealer mentioned he had been informed that traders had been buying and selling in anticipation of a damaging FT report in regards to the firm, which was printed within the afternoon of that day, in accordance with the assertion seen by Reuters.

    “He informed me he had spoken with a good friend of his,” Harris mentioned. “My dealer mentioned that this good friend had informed him that an article was about to be printed about Wirecard.”

In his assertion, Harris mentioned he did not act on the data. Nonetheless Wirecard argued that market discuss of a damaging article forward of publication was proof that traders had been buying and selling on inside info, and maybe in collusion with journalists. On the time, the FT denied this, characterising Wirecard’s claims as a “smokescreen”.

Reuters was unable to contact Harris or his attorneys for remark.

Harris was sentenced to a two-year jail time period in February 2017 for cash laundering for drug sellers who ran a moped supply service in London and Essex, in accordance with Britain’s Nationwide Crime Company.

    A spokeswoman for the Munich state prosecutors mentioned Harris’ assertion corroborated Wirecard’s claims that it was unfairly focused by speculators.

    “The assertion beneath oath was utilized by authorized representatives of Wirecard to substantiate the authorized grievance,” she added.

In February this yr, the state prosecutor informed the parliamentary inquiry that he didn’t converse to Harris, with out elaborating.

Munich prosecutors dropped the inquiry into the journalists final yr, concluding there was no proof of any collusion with traders, whereas no motion has but been taken towards the a number of short-sellers investigated.


The paperwork seen by Reuters embody correspondence by executives and officers from Wirecard, prosecutors and monetary regulator BaFin supplied to lawmakers.

The prosecutors’ workplace emailed Harris’ assertion to BaFin on Feb. 15, 2019, a Friday, the paperwork present, and the next Monday BaFin introduced the primary short-selling ban on a single inventory in German historical past.

BaFin’s ban was a watershed within the saga, in accordance with lawmakers who’ve mentioned it implicitly vouched for the corporate’s credibility, whereas halting traders that doubted it.

A BaFin spokeswoman mentioned the Harris witness assertion performed “no position” within the short-sale ban, however that it did match into its examination of market manipulation.

But Sebastian Kimmer, a member of BaFin’s workers who corresponded with Munich prosecutors, testified earlier than lawmakers in February this yr that the Harris assertion supplied “very concrete info” that supported Wirecard’s grievance.

Kimmer mentioned the data from prosecutors was deemed critical and credible by the regulator. He added that Harris’ assertion, together with the allegations from Wirecard relayed by prosecutors, had been escalated to his superiors.

No particulars about Harris’ assertion have been publicly disclosed.

Munich prosecutors have beforehand defended their position, saying they acted impartially in alerting BaFin to Wirecard’s fears that it was going to be focused by short-sellers.

Felix Hufeld, then president of BaFin however who has since resigned within the wake of the scandal, had defended the short-selling ban as a method to keep up confidence in Germany’s inventory market.

However three lawmakers on the parliamentary inquiry mentioned that the prosecutors’ and BaFin’s actions in February 2019 confirmed their readiness to aspect with Wirecard towards critics, even within the face of what they characterised as flimsy proof.

Florian Toncar, one of many lawmakers, mentioned the Munich prosecutors had proven a bent to take a “one-sided view on the Wirecard case”.

    “They held the unsigned draft of a obscure testimony … as a believable story,” he added.

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