The former Wirecard boss has been in custody since summer 2020.
(Photo: dpa)
Frankfurt Ex-Wirecard boss Markus Braun has achieved another stage victory in the dispute with his manager liability insurance over the assumption of costs. According to information on Monday, the higher regional court (OLG) Frankfurt ruled that Braun was also entitled to be granted provisional insurance cover for PR costs. (Ref .: 7 U 96/21)
Braun has been in custody for more than a year. The public prosecutor’s office accuses him of being one of the main people responsible for the “commercial gang fraud” at the former Dax group. The Munich Higher Regional Court is currently investigating the question of whether there are sufficient reasons for Braun to remain in prison.
The fallen manager defends himself against the allegations and has hired several well-known lawyers and a press officer to help him. There has been a dispute for months about who has to pay their bills.
The Frankfurt Regional Court had agreed that Braun was right in the dispute with the US insurance company Chubb, but rejected the application to cover the PR costs. The OLG now determined: According to the insurance conditions, PR costs are covered if an insured person is threatened with “reputational damage that would impair their career through critical media reporting on an insured liability insurance case”. This is true in the case of Markus Braun.
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Specifically, it concerns the fees of Braun’s PR consultant Dirk Metz and his lawyer Stephanie Vendt from the Hamburg law firm Nesselhauf. Vendt represents the ex-Wirecard boss in all press law matters. According to the court, the decision made in the urgent procedure is not contestable. The main proceedings in this matter are to be heard before the OLG on December 1st. (Ref .: 7 U 150/21)
Wirecard had D&O policies for 150 million euros. D&O stands for Directors and Officers Liability, the customary term for managers’ liability. In this way, companies secure their executive and supervisory boards against claims from third parties or their own company. They also regularly cover the often high legal fees for defending executives.
On June 18, 2020, Wirecard announced that the group was missing 1.9 billion euros on its balance sheet. Six days later, the payment service provider reported “the occurrence of the insured event” to its insurer Chubb. There are “indications of potential breaches of duty by insured persons,” says the Wirecard letter.
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Braun’s lawyers then asked several times for a cover letter from Chubb – also with reference to the public prosecutor, who had meanwhile secured access to the assets of the former Wirecard boss. But the insurer hesitated, requested documents and further information. On September 25, 2020, Braun finally filed a lawsuit.
The former Wirecard boss argued that he was himself a victim of fraud in his company. Braun was of the opinion that without the insurance cover his right to a defense and a fair hearing would be taken away. This could result in irretrievable existential disadvantages, the manager complained.
Chubb saw it differently. Braun can apply for legal aid or have a public defender assigned. The manager forfeited protection from the US company because he concealed the risk-increasing circumstances and fraudulently deceived the insurance industry. Braun had known that Wirecard’s financial reports had been wrong for years.
Other insurers are also involved
Although Chubb acts as a so-called basic insurer with a coverage amounting to 15 million euros, Wirecard also had contracts with R + V, Swiss Re and AGCS, the industrial insurer of Allianz. Also involved are ANV, Dual, AIG, Liberty, HCC and QBE.
Such consortia are common. In order to cover large sums, companies buy what are known as cover layers from several insurers. If the damage exceeds the amount agreed with the basic insurer, the insurers of the following shifts pay one after the other – until the total damage is covered or the total purchased cover is used up.
In the Wirecard case, Chubbs basic insurance of 15 million euros is followed by a total of eight shifts of ten to 25 million euros each. It is still questionable whether the D&O insurers will also have to cover part of the total damage. The only thing that seems clear is that nobody will pay voluntarily.
In the Wirecard insolvency proceedings, creditors and shareholders have registered claims totaling over twelve billion euros. Insolvency administrator Michael Jaffé noted in his latest status report that he has “developed further activities” with regard to D&O insurance. The insurers had informed him, however, that they “do not see any obligation for various reasons”.
With material from dpa.
More: Manager liability is in urgent need of reform.