Wirecard under investigation over statements to investors
German regulator looks at group’s statements ahead of KPMG special audit report
This week one of Wirecard’s largest shareholders called for chief executive Markus Braun to be fired after KPMG said it had encountered “obstacles” to its work. © Reuters
May 8, 2020 6:03 pm by Dan McCrum in London and Olaf Storbeck in Frankfurt
Wirecard is under investigation by the German stock market regulator over statements made before a KPMG report last week that sparked a drop in the fintech group’s value by more than a third.
BaFin said on Friday an existing market manipulation probe would look at communications with investors by the Dax-listed group, which had repeatedly said KPMG found nothing untoward.
The move adds to pressure on Wirecard and its supervisory board, which announced on Friday it would hire three new senior executives. This week one of its largest shareholders called for chief executive Markus Braun to be fired after KPMG said it had encountered “obstacles” to its work.
KPMG also challenged the group’s accounting for its revenues and cash reserves and said it was unable to verify whether business that for three years contributed the “lions share” of Wirecard operating profit was real.
Wirecard said it would expand its four-person management board with the appointment of a chief compliance officer, a chief commercial officer and a new chief operating officer. The outgoing COO will remain on the board and while some responsibilities will change, the group’s senior management will stay in place.
“The supervisory board expresses its confidence in the management board and its chairman”, the company said in a statement.
The regulator also said it was assessing whether KPMG’s report, which described the findings of a six-month special audit into allegations of accounting fraud, contained information relevant to the market manipulation probe.
Meanwhile, Frankfurt’s stock exchange is evaluating formal sanction procedures against Wirecard for delaying publication of full-year results prepared by EY, Wirecard’s longstanding auditor, for which the maximum fine is €1m.
Five days before publication of the KPMG report, Wirecard said that while the accounting firm required more time, “to date no substantial findings have been made” that required a correction of financial statements for the previous three years.
KPMG said Wirecard’s supervisory board had been made aware of the delays and obstacles it faced.
When asked about any findings by KPMG in a January interview with Manager Magazin, Wirecard chairman Thomas Eichelmann said “you can draw your conclusions from the fact that we have not yet issued an ad hoc announcement”.
The special audit was launched in October after the Financial Times published internal Wirecard documents that indicated profits and sales had been fraudulently inflated at key subsidiaries.
Wirecard said it had “stated on several occasions that the company had not been provided with any information that would substantiate the accusation of alleged balance sheet manipulation made in the FT. As described in KPMG's report, this is still a factual situation today.”
BaFin’s latest move was first reported by Reuters. Wirecard declined to comment on the regulator’s investigation.
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