Wirecard’s former top accountant admits forging documents for KPMG special audit
Stephan von Erffa said fabricated payment authorisation was an isolated event
Wirecard’s ex-head of accounting has admitted to forging documents requested by KPMG during a special audit, ahead of a trial that is set for later this year, according to people familiar with the matter.
Stephan von Erffa is one of three defendants in a case brought by Munich prosecutors over the spectacular downfall of one of Germany’s highest-flying technology companies. The 47-year-old is the first senior Wirecard executive to admit wrongdoing since Oliver Bellenhaus, head of a Dubai subsidiary, turned himself in to authorities in July 2020 and turned chief witness for the prosecution.
Wirecard crashed into insolvency in June 2020 after admitting that half of its stated revenues and €1.9bn of corporate cash purportedly held in escrow accounts in Asia did not exist. Von Erffa is one of three Wirecard executives who were charged with fraud, breach of trust and market manipulation this year.
He, Bellenhaus and former chief executive Markus Braun, who denies wrongdoing, are set to face trial this year. Von Erffa denied any involvement in the wider fraud and blamed Wirecard’s fugitive second-in-command Jan Marsalek during a parliamentary inquiry into the scandal last year. However, the police investigation found evidence that von Erffa in early 2020 forged documents that were then shared with auditors at KPMG and EY.
The documents were linked to a €50mn payment that Wirecard had received in 2018, purportedly from one of the Asian escrow accounts and wired by a trustee at von Erffa’s behest. One year after the payment, KPMG scrutinised Wirecard’s accounts in a special audit. The investigation was launched by the supervisory board after the Financial Times in October 2019 raised questions about potential balance sheet manipulation. KPMG’s forensic investigators wanted to see von Erffa’s payment authorisation for the €50mn transfer.
As no such document existed, the top accountant decided to fabricate one, he told prosecutors, according to people familiar with the matter. Using a private computer, where von Erffa set back the system date to December 2018, he generated a back-dated email and a sham “escrow request/authorisation form” for the €50mn, both of which have been seen by the FT.
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Von Erffa told prosecutors that the forgery was a single and isolated case, according to people familiar with the matter. He said that the transaction itself had been genuine and he created a document to substantiate it under immense pressure from KPMG to supply evidence.
He stressed he had not been willing to forge documents to doctor the company’s accounts. The collapse of Wirecard, which at its peak was valued at more than €24bn, sent shockwaves through Germany’s financial and political elite.
Wirecard’s long-standing auditor EY did not spot the fraud for years, while German financial regulator BaFin protected Wirecard from short sellers and prosecutors took action against critical journalists.
OCBC, the Singaporean bank that was supposedly holding the escrow accounts, told Wirecard’s administrator after its collapse that it never held significant amounts of cash on behalf of the trustee, and that some of the accounts did not exist at all, according to documents seen by the FT.
Prosecutors established that the €50mn sent to Wirecard came from one of its Asian business partners, which had previously borrowed €100mn from Wirecard and sent half the money back via a string of opaque companies to obscure its origin, people familiar with the matter said.
Munich prosecutors and a lawyer for von Erffa declined to comment.
Wirecard: the investigation that brought down a German tech giant
The FT’s Dan McCrum talks about his book ‘Money Men’
This is an audio transcript of the Rachman Review podcast episode: Wirecard: the investigation that brought down a German tech giant
MUSIC PLAYING]
Gideon Rachman
Hello and welcome to The Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s edition is slightly unusual. It’s longer than normal, and it’s about finance. That’s because I’ve taken the opportunity to talk to my FT colleague Dan McCrum, about his extraordinary investigation into Wirecard, which exposed a multibillion-dollar fraud and caused the collapse of one of Germany’s most celebrated firms. As you’ll hear, it’s a story full of skulduggery, which raises disturbing questions about the financial system and the extent of corporate fraud. So, what happened at Wirecard and how many similar frauds are waiting to be discovered?
I work in a different subject area of the FT from Dan McCrum, and for many years I saw very little of him. That may have been partly because he was spending a great deal of time locked away in a secured office, working on a computer that was deliberately not connected to the internet to avoid being hacked. Dan was engaged in a long-running battle to prove fraud at one of Germany’s most successful new companies. Here’s Wirecard’s chief executive in 2019 shrugging off the allegations.
Markus Braun
Do not too much look into controversies of my messages. I think we have a very strong year before us. We concentrate on technology innovations. The whole digital payment area is still early stage. So of course in many areas we are, we are pioneers.
Gideon Rachman
But in 2020, many years of sleuthing came to spectacular fruition.
News clip
Prosecutors have arrested three former top executives of the scandal-hit payments company Wirecard. They were detained on suspicion of running an organised criminal enterprise. The former chief executive of the German payments firm Markus Braun, has been rearrested. He has been accused of committing a multiyear fraud after Wirecard’s collapse in June.
Gideon Rachman
Dan McCrum’s now written a book about his investigation called Money Men, which I found more thrilling than most thrillers — revealing as it did, a strange netherworld of financial speculators, private detectives, bumbling accountants and outright criminals. When Dan joined me in the FT studio, I started by asking him when he first heard the name Wirecard.
Dan McCrum
I was chatting to a hedge fund manager, Australian guy called John Hampton. He knew the sorts of stories I was interested in, which is sort of corporate frauds, companies with a bit of skulduggery about them. And he just says to me: “So, Dan, would you be interested in some German gangsters?” So I say, “Yeah, of course. I mean, who wouldn’t be?” So I checked the name down. Have a look at it. And. Nobody really heard of who I got at this point. It had something to do with payments. Called itself the European PayPal and it was sort of an up-and-coming fintech. But when I looked at this business, it just didn’t make any sense. And so I took a look at it, but I couldn’t really work out what was going on. Then another hedge fund manager gets in touch and surprise, surprise, he’s also looked at Wirecard because it was almost too good to be true because it was growing really, really quickly, but was also incredibly profitable at the same time. It’s quite hard to do both. And what it turned out, there were two theories about what was going on. One was, it’s faking its profits, there’s accounting fraud. But the other, was that maybe it has got a real business, but it’s involved effectively in money laundering. It’s processing payments for every unsavory character that you might find online. So I set to work thinking, OK, there’s definitely something here and sort of came down on the hmmm . . . this looks a bit fraudy.
Gideon Rachman
And at what point do you become convinced there really is something bad going on there? Or is it really quite quickly?
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