By Amechi Idumuebor (AGENDAWATCHDOG) – An accounting scandal at one of Germany’s fastest-growing blue-chip companies has raised doubts about the national financial watchdog and, coming on top of other high-profile cases of fraud, led to questions about the country’s ability to oversee its corporate titans.
Some 1.9 billion euros ($2.1 billion) vanished from payment systems provider Wirecard, until recently heralded as Germany’s emerging giant of the financial tech sector. Its CEO was arrested on suspicion of market manipulation and inflating financial numbers. And on Thursday the company said it was filing for insolvency, a form of bankruptcy protection.
Adding to the damage to Germany’s corporate reputation was the reaction of the financial regulator, BaFin, when media reports last year questioned the company’s accounting. Rather than investigate Wirecard, it targeted investors, banning them from betting on a drop in the share price, which plunged more than 40%.
Corporate wrongdoing is not unheard of in Germany to say the least. Volkswagen was caught rigging diesel engines to cheat on U.S. emissions tests and paid more than 33 billion euros ($37 billion) in fines and settlements, while the chief executive and board chair of industrial conglomerate Siemens quit over a 2006-2007 scandal over bribing foreign officials to gain contracts. Banking giant Deutsche Bank has paid fines for breaking money laundering rules.
Wirecard’s troubles have a specific focus: they call into question the honesty of the financial statements that its investors and creditors relied on. In that sense, it echoes the accounting scandals of the early 2000s that rocked U.S. equity markets such as the one around energy company Enron.