Dusseldorf Insolvency administrator Michael Jaffé has been dealing with the Wirecard scandal for almost a year and a half. Now he draws a sobering balance sheet. It was “finally certain what had already emerged from numerous circumstantial evidence,” noted Jaffé in his most recent assessment report. “The alleged and reported TPA business with revenues in the billions did not exist at Wirecard.”
TPA stands for Third Party Acquiring, i.e. the third-party business. It is said to have made up more than a quarter of the balance sheet total at Wirecard. However, Jaffé is certain that this business did not exist. He has fought for an insight into the account statements of the banks in Singapore, on whose trust accounts the supposed proceeds are said to have been. According to Jaffé, they “provided direct evidence” that Wirecard “invented billions of assets indirectly”.
According to Jaffé, the question of whether and to what extent Wirecard held funds in the trust accounts plays a “central role in a number of questions” – be it “in relation to the invalidity of the annual financial statements, the liability of the executive bodies or the auditors”. She may also help decide whether Wirecard’s longstanding CEO Markus Braun will remain in custody.
According to Jaffé, “the legend put forward by some of those involved has been refuted” that funds could have been lost when the trustee changed in 2020. It is a clear shot against Braun, who has been incarcerated in the Augsburg JVA since summer 2020. At the beginning of December, the Munich Higher Regional Court will decide whether the former Wirecard boss will be released.
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Braun and his lawyers are still convinced today: The TPA business really existed, but the income was stolen from the ongoing business – by a criminal gang around former board member Jan Marsalek, who had disappeared. For Braun’s defense lawyer, it is a central argument in the attempt to get him out of custody.
Just a week ago, several media outlets had prominently picked up the line of defense. “Did the 1.9 billion euros exist?” Was the headline of the “Tagesschau” on its website. Joint research by NDR, WDR and Süddeutscher Zeitung suggested that the money could have flowed out of the company. Allegedly more than a billion euros seeped into the Caribbean.
Jan Marsalek (right) and his business partner Henry O’Sullivan are suspected of having made money into their own pockets.
(Photo: private)
Jaffé held against it in his assessment report. Braun tries “to refute the evidence presented against the existence of the TPA business and the trust accounts or to present them as not mandatory”. From the insolvency administrator’s point of view, this “did not succeed”. It becomes clear, according to Jaffé, that Braun’s statement “serves primarily the criminal defense”.
The Wirecard insolvency administrator also explains what he found in place of the supposedly significant TPA business: At the end of 2017 and 2018 there were amounts worth less than 3000 euros in two accounts of the long-standing trustee Citadelle from Singapore, and an amount in a third account of less than three million Singapore dollars (the equivalent of just under two million euros).
According to the accounting, it should have been just under 713 million euros at the end of 2017, and more than a billion euros at the end of 2018. “Citadelle has no other accounts at the bank,” noted Jaffé. At the end of 2019, there was no significantly different picture.
Visits to the Hedgehog dance bar
The insolvency administrator suspects that it was just “expense accounts”. More than 90 times, tank fillings have been paid for through them. In addition, “more than 660 payments” showed that “the Hedgehog dance bar on Clive Street was often visited” on weekends. Six purchases from the toy retailer Toys ‘R’ Us were also made via the accounts.
Jaffé also makes it unmistakably clear how things really stood with Wirecard without the alleged TPA sums: From the beginning of 2015 to 2020, the operating loss therefore amounted to around 1.1 billion euros and, in particular, from a negative cash flow from operating activities of 900 million euros passed.
According to Jaffé, suspicious cash outflows of 500 million euros were incurred in the period from the beginning of 2015 to the end of March 2020. The majority made up suspicious payments due to M&A activities, such as the overpriced takeover of companies from the Indian Hermes Group (315.5 million euros).
Jan Marsalek and Henry O’Sullivan met with managers from the Hermes community in January 2016.
(Photo: private)
Jaffé’s findings hardly allow any other conclusion than that Wirecard was ready for bankruptcy far earlier than in June. He commissioned the accounting firm Warth & Klein to determine the exact point in time. The investigation is still ongoing. Jaffé is certain: “Their results will support the assertion of claims.”
According to the insolvency administrator, it has evaluated more than 1000 gigabytes of data. The “maintenance and updating of the claim matrix” played an important role in this. Jaffé has created an overview of possible claims, which is also suitable “to concentrate the activities primarily on the claims, the clarification and enforcement of which promise a corresponding increase in mass”.
Wirecard: Jaffé is disappointed with EY
EY’s auditors are likely to play a central role in this. The company audited Wirecard for a decade until it became clear in June 2020 that the balance sheets were missing 1.9 billion euros. For a long time, Jaffé has therefore been checking “which audit procedures EY has carried out (and which not)” – and whether possible claims can be derived from them.
EY always emphasizes that the company’s employees “have carried out their audits to the best of their knowledge and belief”. The EY team “took all the information and allegations seriously at all times” and “followed up on them in a targeted manner”. It is now “top priority” to help clear up the Wirecard scandal.
Meanwhile, Jaffé is disappointed with EY. The auditor and his legal representatives had “refused to participate in the clarification of the events, so that an action for information was filed,” noted the insolvency administrator in his assessment report.
Meanwhile, Jaffé cites the publication of the Wambach report, named after Martin Wambach, the director of the Institute of Auditors, as an important contribution to coming to terms with the scandal. On behalf of the Wirecard committee of inquiry, he examined the work of EY – and issued the auditors with a disastrous certificate.
More on the publication of the Wambach report:
The secret protection agency of the German Bundestag classified the document as secret on the advice of EY and kept it under lock and key for a long time. The Handelsblatt published the report on November 11th on its website. Shortly thereafter, EY filed a criminal complaint for “forwarding the investigators’ report (Wambach report) and its publication”.
According to Handelsblatt information, Jaffé has so far collected less than a billion euros. In contrast, there are currently 40,000 claims, which add up to around 15.8 billion euros. According to Jaffé, it would be “not unlikely” that it would take “several years” to process it.
At the same time, the insolvency administrator gives little hope that anything will be left for the creditors at the end of the proceedings. Jaffé has identified a “large number of suspicious payments in the group” – especially “in the incriminated environment of the alleged TPA business”.
However, repayments are “not to be expected”. In some cases, however, Jaffé’s letters to assert claims are “not even deliverable”. In addition, opponents of the claim had fled into insolvency proceedings “in order to make it more difficult to pursue any payment outflows”.
More: The Handelsblatt publishes the secret report on the work of the EY auditors