German finance minister denies responsibility for Wirecard scandal

Germany’s finance minister on Thursday denied responsibility for the collapse of payments firm Wirecard in a parliamentary inquiry that will also put Chancellor Angela Merkel in the hot seat.

Once a rising star in the booming fintech sector, Wirecard filed for bankruptcy last year after admitting that 1.9 billion euros ($2.3 billion) was missing from its accounts.

The company’s former chief executive Markus Braun and several other top executives were arrested on fraud and money-laundering charges.

Lawmakers are investigating the political and regulatory failings that allowed the Wirecard cheating to go unnoticed for years, with critics saying early warning signs were ignored.

“The government does not bear responsibility for this large-scale criminal fraud,” Finance Minister Olaf Scholz told lawmakers investigating the case which he described as the “biggest accounting fraud scandal” in the history of post-war Germany.

Asked if he bore personal responsibility, Scholz also emphatically replied: “No.”

The finance minister admitted however that official regulators were “not prepared enough” for the scandal and pledged to “rebuild trust” in Germany as a financial centre.

The focus on politicians’ roles in the drama comes at an awkward time for Merkel’s ruling conservatives and their Social Democratic (SPD) coalition partners, five months before a general election.

– Merkel in China –
Merkel will be quizzed Friday over her role in the scandal after it emerged she promoted Wirecard on a trip to China in September 2019 when the firm was eyeing a foray into the Chinese market.

Her intervention has raised eyebrows because journalists were already voicing doubts about Wirecard’s books at the time.

Merkel should ask herself whether “promoting Wirecard was really appropriate or whether her office should not have looked into the warning signs earlier,” said Frank Schaeffler, an MP from the pro-business FDP party who is on the committee.

Yet Scholz, who also took part in the China visit, denied that the company had been a major topic on the trip.

“Wirecard was not discussed in any of my conversations in Beijing,” he told the committee.

The finance minister, a would-be Merkel successor for the centre-left SPD, has also been accused of reacting too slowly.

Up before lawmakers on Wednesday, state secretary Joerg Kukies had insisted that Wirecard at no point benefited from special treatment from the ministry, which oversees banking regulator Bafin.

Bafin has been criticised for its lax oversight of Wirecard, and notably filed a complaint against two Financial Times journalists who reported about irregularities at the company.

The regulator has in recent months undergone sweeping reforms and a reshuffle at the top, including the dismissal of former chief Felix Hufeld in January.

The reform of the Bafin was part of “our important task to rebuild trust in Germany as a financial centre,” said Scholz.

– ‘Criminal behaviour’ –
With the election battle in full swing, SPD and opposition MPs have sought to shift the spotlight onto the conservative-run economy ministry by highlighting the role of Wirecard auditors.

As Wirecard’s auditor for more than 10 years, accountancy giant EY signed off on the firm’s accounts even as a string of media reports raised alarm about Wirecard’s accounting practices.

As they grilled Economy Minister Altmaier on Tuesday, lawmakers questioned whether the ministry’s auditing watchdog APAS should have scrutinised EY’s work more closely.

Though he denied responsibility for the scandal, Altmaier told the committee that compliance rules at APAS would be tightened.

In a report in March, lawmakers on the committee denounced what they called “a culture of non-responsibility” and said that financial authorities and political leaders had “well-founded indications of criminal behaviour at Wirecard”. (AFP)