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Win some/lose some for Wirecard

…but mostly lose


Pete Carvill

Disgraced German payment processing firm Wirecard may be off the hook for a large part of the claims lodged against it by shareholders.

As reported in this week’s Handelsblatt, the regional court of Munich has determined that shareholders left emptyhanded after insolvency do not count as creditors. This means, said the paper, that are not able to press their claim for damages with the insolvency administrator. It is understood that Union Investment were behind the lawsuit, filed in 2021, chasing €243m from the fallen company.

Handelslatt wrote: “With the ruling, [insolvency administrator Michael] Jaffe could also dismiss a large part of the claims against the insolvent payment processor. Around 22,000 shareholders are demanding seven billion euros after the former Dax group had to file for insolvency in the summer of 2020 as a result of a billion-dollar fraud scandal. Banks, social security funds and otherWirecard creditors have filed claims over €3.3bn.”

It added: “With its judgment, the regional court confirmed the previous practice, according to which shareholder claims in insolvency proceedings are served at most subordinately. German insolvency law gives priority to banks or bondholders. First, their claims are met before others come into play. As a rule, shareholder claims come last.”

Jaffe was put in charge of dealing with the insolvency of Wirecard after the firm collapsed spectacularly in 2020. Since then, Handelsblatt reports that Jaffe has secured assets for the firm totalling €1bn.

Despite the verdict, this does not seem likely to end here. Despite losing in the district court, it seems likely that Union Investment will continue to pursue this case into the federal court. Handelsblatt reports that the firm may have their eyes set on a bigger target and prize—Ernst & Young, which audited the Wirecard books for years and seemingly missed every warning sign, klaxon, and flashing red light.

Speaking of EY Germany, the Financial Times reported last week that the country’s audit watchdog has temporarily squeezed the brakes on ruling on potential misconduct by the firm. That result is now set to be released in 2023.

As the Financial Times put it: “The ruling by Apas, the auditing regulator, was originally scheduled for October, but after discussing 3,000 pages of a draft document, the five officials in charge of the investigation concluded they need more time.”

Apas, meanwhile, has refused to comment.

The FT added: “Apas has been investigating EY Germany over its Wirecard audits since before the payment firm’s insolvency. Twelve current and former EY employees and the firm itself are in its crosshairs over the audits of both Wirecard AG and its banking subsidiary Wirecard Bank from 2015 onwards. Fines of up to €500,000 per person and per annual audit can add up to millions of euros should the watchdog conclude that the firm’s misconduct stretched over years.

“EY Germany can also be barred from audits of listed companies in Germany for up to three years, or from taking on new audit clients. Moreover, the Big Four firm’s position in civil lawsuits with Wirecard shareholders suing for damages could worsen dramatically should the watchdog conclude that EY acted with intent rather than perhaps just negligence, according to lawyers familiar with the case.”

Elsewhere, the German newspaper Suddeutsche Zeitung has reported that Markus Braun, former boss of Wirecard, has been transferred from prison in Augsburg to a new facility in Munich. It is in that city that the paper reported that his trial, along with that of two codefendants, will take place. That is set to begin on 8 December.

See also: Wirecard collapse sees Deutsche Boerse review exclusion rules