SINGAPORE - A company director has been charged in Singapore with falsifying letters linked to scandal-hit German payments giant Wirecard, according to court documents, as the fallout from the firm's collapse spreads further around the world.
The fintech company filed for insolvency in June after admitting that 1.9 billion euros ($2.2 billion) missing from its accounts did not exist, revelations that stunned Germany and drew comparisons with the Enron accounting scandal.
R. Shanmugaratnam, director of a business administration firm in Singapore at the centre of investigations into the case, has been charged with falsifying letters showing it held money in escrow for Wirecard.
The 54-year-old of Citadelle Corporate Services claimed in the letters in 2016 and 2017 the firm held amounts ranging from 30 million euros to around 177 million euros in accounts on behalf of Wirecard, according to court documents seen by AFP Friday.
But the accounts did not hold such amounts and the letters were produced with the "intent to defraud", according to the charges, filed last month.
Shanmugaratnam could not immediately be reached for comment.
Authorities in the city state last month launched an investigation into Citadelle and another company over suspicions they falsified accounts, and Shanmugaratnam is the first person to face charges.
Wirecard's woes began in January 2019 with a series of Financial Times articles alleging accounting irregularities in its Asian division, headed by chief operating officer Jan Marsalek.
German and Philippine authorities want to question Marsalek as part of separate investigations into Wirecard, but his whereabouts are unclear.
Last month, the Philippines justice minister said immigration officers falsified records to show he briefly visited the country after being sacked.
Entries in the Bureau of Immigration database show Marsalek arrived in the Philippines on June 23 -- the day after he was fired -- and left for China on June 24.
But CCTV footage, airline manifests and other records prove Marsalek was not in the country on those dates, minister Menardo Guevarra said in a statement.
The firm's troubles exploded in June when long-time auditors Ernst & Young said they were unable to find the 1.9 billion euros, and that they had been fed false statements.
Agence France-Presse
FRANKFURT AM MAIN -- German Finance Minister Olaf Scholz on Wednesday said he gave lawmakers a "detailed" explanation of everything he knew about the fraud scandal that brought down payments firm Wirecard, amid criticism that authorities missed early warning signs of trouble.
Wirecard filed for insolvency last month after admitting that 1.9 billion euros ($2.2 billion) missing from its accounts did not exist.
Former CEO Markus Braun has been arrested on suspicion of falsifying accounts and market manipulation.
The Wirecard revelations have stunned Germany, drawing comparisons with the Enron accounting scandal in the United States almost two decades ago.
Germany's parliamentary finance committee held a special closed-door session in Berlin to grill Scholz and Economy Minister Peter Altmaier, with questions focussing on when exactly they had learned of Wirecard's misconduct and if there were any regulatory failings.
Upon leaving the hearing after some four hours, Scholz told reporters it had been "a detailed discussion".
"I made sure that everyone knows exactly what we know," he said, adding that his priority now was to "get reforms under way".
Scholz plans to overhaul German finance watchdog Bafin, accused by critics of having been too lax in its oversight of Wirecard, by giving it tougher intervention powers and more staff.
He also wants more scrutiny of private-sector auditors.
Finance committee member Hans Michelbach, of Chancellor Angela Merkel's conservative CDU/CSU bloc, said it was not enough to announce reforms, "there should also be accountability".
He praised Scholz however for "his willingness to provide answers" to lawmakers.
Finance committee chair Katja Hessel of the opposition pro-business FDP party has not ruled out launching a parliamentary inquiry into the scandal.
Wirecard's downfall has increasingly become a political hot potato after finance ministry documents showed Scholz was told as early as February 2019 of suspicions of misconduct.
Even more embarrassing was the revelation that Merkel promoted Wirecard on a trip to China in September 2019, when the firm was eyeing a foray into the Chinese market.
Merkel had "no knowledge" of the Wirecard irregularities at that time, her spokeswoman has said.
- Rise and fall -
Founded in 1999, Bavarian start-up Wirecard rose from a company piping cash to porn and gambling sites to a respectable electronic payments provider that edged traditional lender Commerzbank out of the DAX 30 market index in 2018.
It boasted a market valuation of more than 23 billion euros ($26 billion) at one point -- outweighing even giant Deutsche Bank. Its share price has collapsed by more than 98 percent since last year.
Wirecard's woes began in January 2019 with a series of Financial Times articles alleging accounting irregularities in its Asian division, headed by chief operating officer Jan Marsalek.
Bafin responded by announcing a probe into FT journalists.
Wirecard's troubles exploded in June when longtime auditors Ernst & Young said they were unable to find 1.9 billion euros of cash meant to be sitting in trustee accounts at two Philippine banks.
Wirecard then acknowledged that the money, making up a quarter of its balance sheet, likely "did not exist".
The firm's Austrian born ex-CEO Braun was arrested and released on bail.
EY said it had been fed false statements and accused Wirecard of an "elaborate and sophisticated" fraud. But the auditing group has itself come under fire for signing off on Wirecard's accounts for years.
- 3.2 billion euros 'lost' -
The scandal widened last week when Munich prosecutors re-arrested Braun and detained two other former board members for large scale "commercial fraud", saying their investigations showed the trickery was already happening in 2015.
They also said evidence suggested banks and other investors were conned into providing funds of up to 3.2 billion euros to Wirecard.
Those sums are now "very likely lost", they added.
Braun, former finance chief Burkhard Ley and former accounting head Stephan von Erffa, as well as the managing director of a Dubai-based Wirecard subsidiary, stand accused of inflating the firm's revenues and balances to hide years of losses.
Ex-COO Marsalek, who is also wanted by German authorities, has disappeared.
Agence France-Presse
FRANKFURT AM MAIN, Germany -- German Finance Minister Olaf Scholz said Sunday he wanted to overhaul the country's finance watchdog Bafin and give it more powers after a massive fraud scandal involving digital payments firm Wirecard.
Wirecard filed for bankruptcy late last month after admitting that 1.9 billion euros ($2.1 billion) was missing from its accounts, a case that has triggered criticism of the auditors and regulators meant to be overseeing the firm.
Scholz told the Frankfurter Allgemeine Sonntagszeitung newspaper he wanted to ditch the current two-stage procedure whereby Bafin is only called in when red flags are raised in a first vetting of accounts by a private monitoring body.
"We need far-reaching reforms," Scholz said, adding that Bafin needed to step in earlier and have the right to launch "special audits on a large scale".
"I want to give Bafin more control rights over financial reports, regardless of whether the company has a banking division," he went on.
"If we decide that Bafin needs more money, more employees and more competencies, I will work to ensure that happens."
Bafin chief Felix Hufeld has admitted that his watchdog "had not been effective enough" at preventing the Wirecard disaster.
But auditing firm EY has also come under scrutiny for signing off on Wirecard's accounts for years before finally warning last month of an "elaborate and sophisticated fraud" at the payments provider.
The scandal has raised questions about whether auditing firms should be rotated more frequently, Scholz said, and whether it makes sense for them to advise and monitor a company at the same time.
German shareholders' association SdK, which has launched legal action against two EY auditors and one former employee over Wirecard, welcomed Scholz's proposals.
Bafin needs to be "completely rebuilt," SdK chief Daniel Bauer told the Handelsblatt financial daily.
"It's not enough to increase the number of employees," he warned. "They have to be the right employees who actually understand the subject matter."
Agence France-Presse
FRANKFURT AM MAIN, Germany - German payments provider Wirecard is in crisis after it admitted Monday that 1.9 billion euros ($2.1 billion) recorded in its accounts "do not exist".
Here are the most important facts about a scandal that is drawing comparisons with the collapse of US energy company Enron in the early 2000s over accounting fraud.
What does Wirecard do?
At its heart, Wirecard is a payments processor, offering companies services allowing them to accept credit cards and digital payments like Apple Pay or Paypal in stores, online or on mobile.
The company collects a commission for assuring that merchants will receive the money they are owed.
Around that, it sells its customers extra services like analytics based on the data generated from those transactions that it says can help boost sales and track trends.
Wirecard claims around 300,000 firms worldwide as customers, and deals with giants in the sector like China's AliPay and WeChat, Apple and Google have offered hot prospects for growth.
How did Wirecard make it big?
Wirecard was founded in 1999, starting out offering its services to porn and gambling sites.
Such stable revenue streams helped it survive the early-2000s dotcom crisis, and as more savory forms of online commerce ramped up through the 2000s and 2010s, the group's star mounted with it.
In the early days, founder Markus Braun increased his stake to seven percent, becoming the largest shareholder.
Wirecard now highlights clients like KLM, Deutsche Telekom and FedEx on its website.
First listed on the Frankfurt stock exchange in 2005, by 2018 it elbowed traditional lender Commerzbank out of the blue-chip DAX share index.
In early 2019, Wirecard's market value hit around 17 billion euros, matching crisis-ridden Deutsche Bank with 15 times fewer workers and revenues.
The past week's revelations have now collapsed that value to two billion.
Why weren't weak spots uncovered?
Beginning in January 2019, a string of Financial Times reports highlighted accounting irregularities, notably in Wirecard's Asian division.
Bosses denied any wrongdoing and the German financial world appeared to close ranks around its favourite.
Markets watchdog BaFin announced a probe into potential links between the FT and short sellers betting against Wirecard stock.
The fact his agency did not catch the scandal sooner was "a shame", BaFin chief Felix Hufeld said Monday.
"We weren't effective enough to prevent something like this happening," Hufeld added.
Wirecard's status as a Payment Service Provider (PSP) subjected it to multiple EU directives since 2008 obliging it to better fight payment fraud, but companies are not subject to as much scrutiny over their accounting practices.
Who controls Wirecard?
Wirecard was founded by Austrian Markus Braun, who until Friday served as chief executive.
Braun resigned after the company was forced to acknowledge the 1.9 billion euros might be missing.
Chief operating officer Jan Marsalek had been dismissed the day before.
American James Freis, installed as compliance chief on Thursday, was promoted to acting CEO on Braun's departure.
Freis had previously been compliance chief at German stock market operator Deutsche Boerse.
Aside from Freis, Braun and the remainder of Wirecard's former four-person board are under investigation by Munich prosecutors over "market manipulation" relating to how they presented KPMG's findings in its audit of their old accounts.
Wirecard's five-person supervisory board is headed by Thomas Eichelmann, a former business consultant who later switched to the financial sector including a stint at Deutsche Boerse.
Who is behind the missing cash?
German news weekly Der Spiegel named Mark Tolentino, a lawyer working in the Philippines, as the trustee responsible for the missing cash.
Based in Philippine financial centre Makati City, his website had vanished by Monday, although a Facebook page with public legal Q+A video sessions remained online.
Meanwhile one of the country's largest banks -- BPI -- where some of the missing money was supposedly deposited -- confirmed to AFP that an employee was on "preventive suspension".
Media had reported that an assistant manager at BPI signed a forged document relating to the supposed deposits at the bank.
Agence France-Presse
The founder and chief executive of scandal-hit Wirecard resigned on Friday after the German payments provider was hit with fresh fraud allegations that have left it struggling for survival.
Markus Braun "resigned today with immediate effect", the firm said in a statement, adding that the decision was made "in mutual consent with the supervisory board".
He will be replaced on an interim basis by US manager James Freis.
The bombshell comes a day after auditors from Ernst & Young said 1.9 billion euros ($2.1 billion) were missing from Wirecard's accounts, intensifying a months-long crisis in the company.
The news prompted investors to abandon the once popular fintech company in droves, sending Wirecard's share prices into a tailspin.
The stock has plunged by more than 76 percent since Thursday morning and was trading at 23.90 euros a share by 1130 GMT on Friday.
It marks a stunning fall from grace for the Bavarian start-up, set up in 1999 and once seen as a darling of the fintech scene thanks to the growing global popularity of electronic payments.
It entered Germany's prestigious DAX 30 index with great fanfare in 2018 after nudging out traditional lender Commerzbank.
But since then Wirecard has been dogged by a series of articles in the Financial Times alleging accounting irregularities in its Asian operations.
The company's four board members -- including Braun -- have been under investigation since early June by Munich prosecutors for "market manipulation", and Wirecard's headquarters were searched as part of the probe.
The scandal deepened on Thursday when the firm was forced to delay the publication of its 2019 results for a fourth time.
Instead, Wirecard said in a statement that auditors Ernst & Young had identified "spurious balance confirmations" relating to "cash balances on trust accounts".
- Ticking clock -
The auditors' red flag was raised over escrow accounts at two Asian banks, which were supposed to hold 1.9 billion euros to manage risk for merchants using Wirecard's payment services.
Wirecard said there were "indications" that the balances had been falsified "in order to deceive the auditor".
The two Philippine banks that were supposed to hold the cash denied having a relationship with Wirecard, according to Bloomberg News.
Wirecard's board responded by fling a legal complaint against "unknown persons", saying they could have fallen victim to a vast fraud.
"It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred," Braun said on Thursday.
But the clock is ticking for Wirecard, as two billion euros of credit could be withdrawn if it is unable to publish its results for last year by Friday.
According to preliminary figures, the group said it had processed 173 billion euros of transactions in 2019, up 38.5 percent.
Revenues grew 37.5 percent, to 2.8 billion euros, while net profits added 39 percent at 482 million, Wirecard said.
Agence France-Presse
FRANKFURT/SINGAPORE - Singapore police raided the premises of German payments company Wirecard in the city state on Friday following a series of investigative reports in the Financial Times alleging fraud and creative accounting.
The raid intensified pressure on Munich-based Wirecard, a constituent of Germany's blue-chip DAX index that has shed $10 billion in value since the FT ran the first of a series of three investigative reports at the end of January.
Wirecard has rejected the FT reports as defamatory and said earlier on Friday it would sue the newspaper.
"Police confirm that they have raided the premises of Wirecard entities in Singapore," a police spokeswoman told Reuters.
Singapore police opened inquiries this week following the FT's reporting, which cited the preliminary findings of an investigation by law firm Rajah & Tann that found evidence of series offences of forgery and false accounting.
Wirecard said: "We actively approached the authorities yesterday and pledged our full cooperation in the investigation activities.
"This morning, Wirecard met with Singapore law enforcement at Wirecard's headquarter in Singapore and provided the police with comprehensive supporting material in regards to their enquiry into the defamatory allegations in the FT series of articles.
"We would like to reconfirm that the accusations against employees of Wirecard are unfounded. We are working closely with the Singapore police to clear all allegations."
The FT did not respond to a request for comment.
Wirecard CEO Markus Braun, the company's largest shareholder with a 7 percent stake, said on Monday that no evidence had been found of criminal misconduct either by the company's own compliance team or by Rajah & Tann. Investigations were continuing and would be finished quickly, he said.
Wirecard, founded in 1999, has been a perennial target for speculative short sellers - market players who seek to profit from falls in a company's share price - who have questioned its accounting methods and rapid international expansion.
Yet it also has strong support in the financial community, with 24 out of 28 market analysts rating the stock either a 'strong buy' or a 'buy', according to Refinitiv data.
Their median price target is 210 euros - more than double Friday's level of 101.15 euros, down 9 percent on the session.
LEGAL ACTION
An FT story, published online on Thursday, alleged that Wirecard staffers had engaged in the 'round tripping' of funds to inflate reported revenues, and that managers from its Munich head office had been aware of the practice.
"In the article published yesterday, Wirecard employees are slanderously prejudged with unproven and false allegations," Wirecard said in an earlier statement.
"We will use all available legal means to protect the company and in particular our employees and their personal rights. Wirecard is taking legal actions against FT and its unethical reporting."
Wirecard did not say in which jurisdiction it planned to bring legal action. A spokeswoman added the company would act to protect the personal reputations of individuals named in the newspaper's reporting.
The company was also cooperating with the authorities in ongoing investigations into suspected market manipulation in Wirecard stock being conducted by the Munich state prosecutor with the backing of financial regulator Bafin.
Contacted by Reuters, the Munich prosecutor said it was aware of the Singapore police raid but this did not change its view that there was insufficient evidence to launch a criminal probe against Wirecard's managers.
source: news.abs-cbn.com
