Once upon a time, there was Wirecard

A long, long time ago — to be exact 51 years ago — in a faraway land — to be more specific, Austria — a child named Markus Braun was born. In 2002, he became the King — oops, I meant CEO — of a fintech company called Wirecard in neighbouring Germany.

And just as Germany has spawned many of our most beloved and well-known fairy tales, so too did it birth the dark saga of Wirecard AG.

The official business of the corporation was to provide online payment solutions between merchants, consumers and major credit card companies. In layman’s terms, when you buy, let’s say, an air ticket online, Wirecard and similar companies act as the middleman, ensuring the money moves from your Visa/Mastercard to the ‘merchant’, in this case the airline company.

From its initial dubious clientele in online pornography and gambling, Wirecard evolved to a more respectable portfolio serving German retail giants Aldi and Lidl, and indeed hundreds of airlines.

Herr Markus Braun was portrayed by the Fourth Estate as the archetypal Steve Jobs — a visionary and charismatic tech doyen. Wirecard was the quintessential Cinderella in this rags-to-riches narrative of a non-Silicon Valley unicorn. It even qualified for membership of the prestigious Dax 30 index, reserved for Germany’s top listed blue-chips.

Around 2015, the Financial Times first pointed out that the Emperor may be naked. Wirecard went after them in full force, with lawsuits and underhand tactics via an outfit headed by shady former Libyan militia-types. The German financial watchdog BaFin took Wirecard’s side and initiated a formal investigation. The alleged charge was the FT was conspiring with short sellers to manipulate stock prices.

But the seed had been planted and others started to query claims in Wirecard’s financial statements. In 2019, KPMG was appointed special auditor by the supervisory board to get to the bottom of this.

As in Hansel and Gretel, there was a trail of breadcrumbs that should have been followed by Wirecard’s long-time auditors Ernst & Young. This path should have led EY to answer the elephant-in-the room question: where were the missing 1.9 billion Euros?

The special auditors from KPMG subsequently established that this trail led to mythical accounts in Filipino banks where the non-existent cash was supposedly held. (EY Germany, on the other hand, is the subject of a class action lawsuit by investors citing a lack of fiduciary oversight.)

Yet another trail led to significant unsubstantiated revenue flows from third party acquirers (TPAs) offshored in Dubai, the Philippines and Singapore. Purportedly, they acted on Wirecard’s behalf where it did not have licenses to operate.

Markus B, the Pied Piper of CEOs, misled seasoned investors like Softbank and bankers across the globe who are now exposed to the tune of 3.2 billion Euros. These fairy godmothers will now be losing all their money post the company’s bankruptcy.

Like clockwork it is time for the newest bed-time story of corporate malfeasance. Once again, the telltale signs were there but how did we miss them... again.

The author is the Managing Partner of C.Suite Africa, a management consultancy firm that supports #GoodGovernance. [email protected]