Former Wirecard chief executive charged with fraud

Wirecard’s former chief executive Markus Braun has been formally charged by Munich public prosecutors with fraud, breach of trust and accounting manipulation after a 21-month criminal investigation into the collapse of the German payments group.

Wirecard was hailed as one of Germany’s technology success stories and at its peak in 2018 was worth €24bn. It crashed into insolvency in June 2020 shortly after admitting that half of its operations and €1.9bn in corporate cash did not exist. Braun, who has been in police custody since July 2020, denies any wrongdoing and claims he is also a victim of the fraud.

If found guilty on all charges, he faces up to 15 years in jail.

Two other former senior Wirecard managers have also been charged, the prosecutors said on Monday in a statement. One is the group’s former deputy finance director and head of accounting Stephan von Erffa. The other is a former Dubai-based manager in charge of a Wirecard subsidiary, who has turned chief witness and cannot be named for legal reasons. The criminal investigation into other suspects continues.

Prosecutors allege that Braun and co-defendants had known since 2015 that Wirecard’s operations were lossmaking, and accuse them of fraudulently raising €3.1bn in debt from banks and bond investors to cover the group’s ongoing costs.

They assert that the annual results for 2015 to 2018 were “deceitful” and “incorrectly reflected the group’s circumstances” because they reported revenue from outsourced operations in Asia and cash purportedly held on escrow accounts in Asia that did not exist. Prosecutors allege Braun was aware that the figures relating to the outsourced operations and hence the annual report were false.

Braun has also been charged with 25 cases of organised professional market manipulation, including a potentially misleading ad hoc statement by Wirecard about a delay to an investigation by KPMG in April 2020. Prosecutors assert that the statement, which was at odds with a written recommendation from the group’s supervisory board, “untruthfully [conveyed] the impression that Wirecard would be exonerated from all allegations of accounting manipulations”.

Prosecutors also accuse Braun of several breaches of trust in the context of hundreds of millions of euros in loans that Wirecard and its bank gave to business partners in Asia. In Wirecard’s frantic, final months in 2020, €35mn of the money was channelled back to Braun who used it to pay back a loan from Wirecard Bank. Prosecutors allege that the former chief executive violated his fiduciary duties “in an obvious and grave way” in the context of this lending.

Wirecard’s second-in-command Jan Marsalek, who is seen as one of the fraud’s central figures, has been on the run since June 2020 and cannot be charged in his absence under German law. Prosecutors think that Marsalek, who was last traced in the Belarusian capital of Minsk, is likely to be hiding in Russia, according to people familiar with their view.

A spokesperson for Braun said on Monday that his client was unaware of “shadow structures” at Wirecard and only learnt about them through the investigations. “Markus Braun was not a member of the gang that embezzled millions,” the spokesperson said, adding that his client was also unaware of the criminal activities.

The date for the trial at Munich regional court has not yet been fixed, but people familiar with the details told the Financial Times it was likely to start in late summer. The charge sheet, which is 474 pages long, has been compiled after more than 450 interviews with witnesses and suspects.

Lawyers for von Erffa and the Dubai-based ex-manager declined to comment. A lawyer for Marsalek did not immediately respond to the Financial Times’ requests for comment.