Prosecutors accuse ex-boss Markus Braun

Markus Braun has been in custody since July 22, 2020. About a year and a half and three prison complaints later, the Munich I public prosecutor has now Charges were brought against the former CEO and major shareholder of the insolvent payment service provider Wirecard and two other suspects, as she announced on Monday. The main accusation is commercial gang fraud. There are also market manipulations, misrepresentations in business reports and breaches of trust. Brown faces ten years in prison.

Marsalek on the run

The unusually long pre-trial detention without charges for economic criminal proceedings indicated that the public prosecutor’s office was probably having trouble with the complex matter. The prosecutors also said that the investigations had proven to be exceptionally difficult and extensive because the processes were complex, had lasted for several years and had largely taken place outside of Europe.

The “Trustees” special commission, which is made up of several dozen investigators, has meanwhile compiled a 474-page indictment against the three accused; the files consist of over 700 volumes. The other two accused are Stephan von Erffa, the former chief accountant and deputy chief financial officer, and the key witness Oliver Bellenhaus, the former managing director of CardSystems Middle East, a Dubai-based subsidiary of Wirecard. Bellenhaus is also still in custody. With the former board member Jan Marsalek, another central figure has been on the run for a year and a half.

The Munich prosecutors, led by senior public prosecutor Hildegard Bäumler-Hösl, assume that the three suspects, together with other parties inside and outside Wirecard, had worked for years to present the payment service provider as a rapidly growing and very successful fintech company. To this end, they allegedly invented extremely lucrative businesses in Asia.

Did the Asian business exist?

This is the business with so-called third-party partners (Third-Party-Acquirer, TPA). According to Wirecard, it did business in countries where the company did not have its own service licenses and therefore had to work with third-party partners.

In June 2020, EY’s auditors concluded that €1.9 billion from these transactions could not be found in alleged escrow accounts in the Philippines. The funds corresponded to about a quarter of the balance sheet total. That plunged the then DAX group Wirecard into insolvency. The bankruptcy of the former darling on the stock exchange is one of the biggest economic scandals in post-war history.

This third party business and the question of whether the money from this business ever existed are at the center of the scandal. The public prosecutor’s office assumes that the consolidated financial statements for the years 2015 to 2018 are incorrect and that the company’s circumstances are incorrect because large sums have been booked from the TPA business. The main partners of this deal are said to have been three companies in Dubai, the Philippines and Singapore. For 2019, the auditors from EY had then refused the attestation after lengthy special audits.

In the meantime, the public prosecutor is convinced that the assets allegedly managed by a trust company in Singapore, which last (2018) were almost one billion euros, never existed. Wirecard insolvency administrator Michael Jaffé also assumes that these funds were never available. From the point of view of the public prosecutor, by the end of 2015 at the latest, all of the accused were aware that Wirecard was only making losses with the actual transactions.

Defenders are appalled

This was concealed in order to make further company acquisitions, to be able to bear the running costs and to be able to continue to pay salaries and, in some cases, performance-related salary components. Due to the false facts, banks would have granted Wirecard four more loans and two bonds totaling 3.1 million euros.

Added to the indictment is the allegation of market manipulation, because the accused had lied to capital market participants about the true state of the company for years. In addition, the criminal prosecutors are assuming the offense of breach of trust in several crime complexes, for example because a company in Singapore was given a security deposit without collateral, earmarking or repatriation agreements.

The defense of Markus Braun sees the matter diametrically differently, as communicated through Braun’s spokesman. From their point of view, Braun has never been part of a gang, but is one of the victims. Due to the existence of shadow structures, a gang within the group embezzled millions of dollars behind his back. He only found out about the existence of these shadow structures from the files. As the head of this gang, the defenders should have Jan Marsalek in mind, a Wirecard board member for operational business who has been in hiding and on the run since summer 2020.

It is stunned that the public prosecutor’s office maintains that there was no third-party business and that they did nothing to search for the embezzled money of the shareholders or to understand the cash flows identified by the defense, it said. From the point of view of Braun’s defense attorney Alfred Dierlamm, the prosecution suffers from serious flaws and assumes a completely false picture of the crime. The sole purpose of the manipulation of business figures was to cover up embezzlement worth billions.

Alleged shadow structures

The defenders are convinced that in the period from 2016 to 2020 alone, sales of almost one billion euros were received on the domestic accounts of Wirecard’s third-party partners, a large part of which demonstrably came from digital companies in the third-party area. The vast majority of these payments were misappropriated via shadow structures and shifted to letterbox companies abroad with which Braun had nothing to do and of which he knew nothing.

It is hard to imagine that Markus Braun was not aware of the machinations in his company despite years of allegations against Wirecard in the media, after all, until his arrest for around 18 years, he was not only CEO, but also head of technology at the payment service provider.

But there are also voices from those involved who consider Braun’s ignorance and the thesis of shadow structures to be conceivable. According to the defense, there was not a single indication of Braun’s involvement in around 450 witness interviews and over a million e-mails. It will be interesting to see whether the fourth criminal chamber of the Munich I district court will allow the indictment without restrictions. A decision is expected in the summer.

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