Jan Marsalek’s man in Manila was so shocked that, for a split second, he let down his guard. It was mid-May last year and within a few weeks payment processor Wirecard would crash spectacularly into insolvency and Marsalek, its chief operating officer, was on the run.
Based in the Philippines, Christopher Bauer was a former Wirecard employee who had gone on to lead one of the German company’s partner firms that would prove to be fraudulent. He had just been informed that auditors combing through Wirecard’s books wanted to see an interbank transfer of €440m to test whether the company had access to the €1.9bn of cash it claimed on its balance sheet. Neither the bank accounts in the Philippines nor the cash in them ever existed.
“Tell me, have you guys now completely lost your mind?” Bauer scolded in a blunt email to Marsalek.
The exchange between the two men is just one nugget in internal communications that offer a unique insight into the inner workings of the once high-flying start up that in its heyday was worth €24bn but which became one of the most spectacular cases of white collar crime in Europe.
The Financial Times has reviewed emails, internal chats, minutes of supervisory board meetings and other documents, as well as hundreds of hours of witness hearings by Germany’s parliamentary inquiry commission into the scandal.
The picture they paint is striking. In the aftermath of Wirecard’s collapse, it quickly became clear that the company’s top echelon had spent years deceiving investors, regulators, auditors and large parts of its own staff. But what the internal communications also show is that the confused and disorderly scenes of its past few weeks were anything but an isolated incident.
The documents and testimony reveal a company shaped by persistent mismanagement. Wirecard had presented itself as one of Germany’s rare technological success stories; but on the inside, it was a chaotic, byzantine and often ineffective organisation.
In one of the most striking examples of the weakness of Wirecard’s business, many of the operations that actually existed had been lossmaking for years, and some were heavily cash-burning.
Even Alexander von Knoop, the company’s chief financial officer, was not fully aware of the extent of the losses. In one instance, he was outraged when he learned in July 2019 — some 18 months after his appointment — that Wirecard’s relationship with Aldi, the supermarket chain it had boasted about being one of its clients, had generated close to €5m in losses over the previous three years.
“With all due respect for flagship clients, what is the plan to become profitable with Aldi in future?”, he asked his underlings by email. He never received a convincing answer.
‘Phew! Not cool’
The documents are full of insights into the chaotic last days. Bauer, the former Wirecard employee, was in charge of Manila-based PayEasy, one of three of Wirecard’s Asian outsourcing partners that, in theory, accounted for half of the payment group’s revenue and all of its profits.
On paper, these “third party acquiring” operations had generated €1.9bn in cash held in escrow accounts at banks in Asia, Wirecard had told its auditor EY. In previous years, the Big Four firm had accepted documents that were provided by Wirecard’s trustee, who the company said was overseeing the accounts on behalf of Wirecard and its business partners.
However, in May 2020 — after a devastating special audit by rival Big Four firm KPMG had cast doubt over the TPA business — EY demanded additional proof and asked Wirecard to transfer €440m of the cash from Asia to Germany.
When Bauer learned about this request, he wrote his sarcastic email to Marsalek. One month later, EY realised that the escrow accounts, and the €1.9bn purportedly deposited there, were a sham. Within a week, the German payments group collapsed into insolvency, and chief executive Markus Braun was arrested. Bauer was reported dead in the Philippines in July 2020.
But the air of disarray goes well beyond the efforts to deceive auditors. Braun loved to tout Wirecard’s state-of-the-art technology and algorithms to investors — part of the pitch that won the company such a high valuation. But the documents show that, in reality, the IT was clunky and heavily fragmented.
In 2014, after Wirecard lost German carrier Air Berlin as a client, a senior employee explained to Marsalek that poor client support, inefficient IT and incorrect payment settlements were the reasons for Air Berlin’s move. “The requirements of such a big client were simply not dealt with properly [by us]”, the employee pointed out, warning other large clients may jump ship “if we do not manage to set up efficient support and development processes.” Marsalek’s response: “Phew . . . Not cool!”
Five years later, the same flaws remained. In 2019, Wirecard paid penalties to no-frills airline Wizz Air for several months in a row after payments were repeatedly mishandled. “Besides the penalty, it makes me very, very nervous seeing heavy (!) complaints from the merchants on this recurring error. Seems we have a serious problem that we can’t fix,” a senior employee wrote to colleagues.
A month later, Wirecard lost a pitch at Check24, a leading price comparison website which turned to a rival instead. “Honestly speaking, I was bitten once because our current relationship with Wirecard is not satisfactory,” a Check24 executive told Wirecard, adding that Wirecard’s offer during the pitch “was the most expensive one”. A senior employee subsequently remarked drily: “This highlights our biggest weaknesses.”
Deals not sealed
Braun, who held a 7 per cent stake in the company, rarely involved himself in such problems. He was more focused on boosting Wirecard’s share price with a continuous stream of upbeat press releases.
This led to situations verging on the absurd. In July 2014, negotiations over a partnership with an Indian payments firm were still ongoing, but Braun demanded that it was announced nonetheless. “The approval of the release is extremely important,” Wirecard’s head of communications Iris Stöckl informed Marsalek, who was leading the negotiations. “[Markus Braun] demands that it will be sent out tomorrow morning even without [our partner’s] consent. Normally that would not be possible but unfortunately our share price is rather weak at the moment,” she added.
Marsalek’s annoyed response: “Please hang on a few minutes!” The press release was then published on the subsequent day.
Braun had little, if any, tolerance for dissenting views. Rainer Wexeler, the longtime boss of Wirecard Bank, told MPs how he was summoned to the CEO’s office after opposing a highly questionable loan to a Wirecard business partner. “He took off his jacket, and told me: I am the owner, and only the owner can reject [a loan],” Wexeler recalled, adding that Braun accused him of hampering Wirecard’s growth and harming its business, which “pays my salary too”.
Braun even scolded fellow management board members with dissenting views. In November 2018, chief product officer Susanne Steidl took issue in an email with a draft press release which stated that new products launched by Wirecard would soon generate an additional €100m in revenue. “I don’t want to be the party pooper but this simply seems to be too high by a factor of 10,” Steidl argued, pointing out that the new products at that point generated “almost no revenue”.
Braun immediately sent Steidl a terse text message: “I would be very grateful for not pursuing such discussions by mail with a large distribution list!!” One day later, the press release with the highly ambitious revenue target was published.
Braun, one of three Wirecard executives who have been in police custody since last summer, is accused by Munich prosecutors of being the mastermind of a criminal racket. He denies any wrongdoing and argues he is a fraud victim, too.
While the emails do not provide evidence that Braun was informed about balance sheet manipulations, they reveal a cavalier relationship with facts. In an analyst call in early February 2019, he touted Wirecard’s “compliance department”. In reality, Wirecard’s compliance department was only established in the summer of that year, the company’s former head of compliance told MPs.
In early 2019, Braun was also taken to task by Singapore law firm Rajah & Tann for misleading statements over an ongoing investigation into whistleblower allegations that were uncovered by the FT. He repeatedly stated that the probe did not deliver “any conclusive findings of criminal misconduct on the part of any officer or employee of the company”.
Rajah & Tann informed him in a curt letter that his view was incorrect and ordered him not to repeat the argument: “We regret that we are unable to agree with the views publicly expressed by Wirecard AG and/or its CEO,” adding that “many of the initial suspicions [raised by the whistleblower] appear substantiated.”
Wirecard’s concern was not how to set the record straight but that the letter might leak. “Your statement that you disagree with our publicly expressed views does [ . . .] put us in a very difficult situation,” Von Knoop, the CFO, wrote to the law firm, adding that “hostile and most likely criminal forces are currently actively looking for opportunities to damage the reputation of Wirecard! Your letter could be misused for this.”
Another example of Wirecard’s ambiguous relationship with facts arises from its surveillance of external critics.
When the FT reported in 2019 that short sellers were targeted in a sophisticated spy operation, the company denied any involvement.
It acknowledged that private investigators in 2016 surveilled critics but stressed that this happened without its knowledge and claimed that the surveillance was stopped immediately after senior management learned about it.
In fact, however, the emails show that Braun, Stöckl and then-chief financial officer Burkhard Ley were made aware in August 2016 that Kroll, a London-based investigations firm hired by Wirecard, was surveilling London-based short sellers. Kroll was mandated by Wirecard to track down the authors of the anonymous Zatarra report, which accused Wirecard of money laundering and sent its share price down.
In August, Kroll shared surveillance pictures of the two authors Matthew Earl and Fraser Perring. Two months later, it stated in a dossier that they established Perring’s identity through “targeted source enquiries, open source research and surveillance” and “identified [Perring] by comparing a surveillance photo of him with his Facebook page”. The emails do not show any objection by Wirecard to the surveillance.
Wirecard’s London-based lawyers at Jones Day gathered information from Lincolnshire Police about a criminal complaint filed by Perring over alleged harassment by Wirecard. A Jones Day employee informally approached a police officer working on Perring’s complaint and sounded him out.
“At the onset of the call, [the officer] was fairly careful in what he said but he opened up as the call progressed,” Jones Day partner Sion Richards informed Wirecard’s top echelon in an email in January 2017.
After detailing the police’s assessment on the complaints, Richards stressed in bold: “It was made very clear by [the officer] that the information was provided on a confidential basis. Nothing that was said in the course of the conversation can be fed back to Perring or his solicitors or any third party.” On the next day, Braun told Richards: “Well done”. Kroll declined to comment.
Jones Day told the FT that none of its employees engaged “in any inappropriate conduct vis-à-vis the Lincolnshire police (including, for the avoidance of doubt, the provision of any financial benefits)” and declined to comment further. Lincolnshire Police did not respond to an FT request for comment.
‘Proactive defence steps’
When FT investigative journalist Dan McCrum contacted various Wirecard executives for the first time in October 2014, requesting to discuss “a story that I’m working on”, he was ridiculed. “A real nutcase,” Marsalek told Manila-based Bauer, who responded: “Yes, he needs to tell us what he is smoking in the evening.”
A year later, after McCrum’s “House of Wirecard” series was published on FT Alphaville, UK-based law firm Schillings compiled a 19-page “investigative report” about McCrum for Wirecard, noting that his articles about the company were “all negative in tone” and claiming that there was a “question mark over McCrum’s interest” in the company as he gave “no explanation” for it.
While Schillings acknowledged that it might be possible that the articles were triggered by “genuine interest”, they also suggested to Wirecard that he might have been bribed to write them, concluding that this appeared “unlikely” as he would “risk his job and journalistic integrity”. Moreover, Schillings noted they could not “identify any evidence in McCrum’s personal life to suggest he has become more affluent recently”.
The report offered a series of recommendations: Wirecard could do nothing, Schillings could dig deeper, or together the law firm and Wirecard could take “proactive defence steps.”
It also said that depending on circumstances, there may be other options for dissuading McCrum or the FT from publishing further articles of a similar type. Schillings has said it acted entirely properly throughout, in compliance with its legal and regulatory obligations.
Four years on, when Marsalek was discussing how to respond to a McCrum inquiry, a colleague based at Wirecard’s Aschheim HQ suggested in a text message that “his Russians” should deal with “the problem” by “providing silence for us”.
Braun, on the other hand, played down the FT’s reporting until the very end. Last June, McCrum co-authored an article that cited EY saying it had “not formed an audit opinion [about Wirecard] and cannot confirm any conclusions”. Braun responded: “I doubt that anyone did actually talk to him. [ . . .] As it is coming from McDrum [sic], it is obviously not true.”
Nine days later, EY pulled the plug.