A German parliamentary committee investigating the multi-billion-dollar Wirecard fraud scandal began its work on Thursday. It will look at how warning signs were missed and what top politicians knew and when.
Germany’s parliamentary committee of inquiry into the implosion of the financial services company Wirecard began on Thursday with a half-hour session in Berlin. The committee will seek to determine just what happened when the financial services provider Wirecard collapsed and how regulators could have missed all of the warning signs blinking red before it happened.
However, The investigation is scheduled to be completed by mid-2021, just months before German parliamentary elections. On its first day of business the committee passed 137 resolutions requesting various documents as well as presenting an initial list of potential witnesses. Of particular note about that list is the number of top German politicians to be called before the committee to recount what exactly they knew about Wirecard’s troubles and when.
Although, At the top of the list are Chancellor Angela Merkel of the Christian Democratic Union (CDU) and Finance Minister Olaf Scholz of the coalition Social Democratic Party (SPD). Other witnesses will include Economy Minister Peter Altmaier (CDU), the head of Germany’s Federal Financial Supervisory Authority BaFin, former Wirecard CEO Markus Braun and many others. Committee members say the first round of serious witness questioning will not begin until November, with higher-profile witnesses testifying toward the end of the inquiry.
AfD to head committee that could spell trouble for Scholz
Kay Gottschalk of the far-right Alternative for Germany (AfD) was chosen to head the committee in a secret 5-4 vote among its nine members. Gottschalk said he was “interested in the deed” as well as being eager to prove that his party could actually get things done — something that has often been openly questioned in the past.
However, The inquiry could be unpleasant for Merkel, especially considering the fact that she was singing Wirecard’s praises in China shortly before its collapse. This has led observers to ask if she was oblivious to warning signs or if she was actively trying to help the struggling company. Though as unpleasant as the inquiry could be for Merkel, Scholz clearly has far more to lose. The finance minister has political ambitions and will be his party’s likely chancellor candidate next fall. Now he stands accused of being asleep at the wheel as one of Germany’s largest postwar financial fraud scandals unfolded.
Meanwhile, On Wednesday, Scholz went on the offensive, proposing new reforms for Germany’s financial oversight system and promising new legislative proposals to avoid such cases in the future. Critics have accused the vice-chancellor of attempting to divert attention from his own lack of leadership in the affair. Wirecard had been a shooting star on German financial markets — even displacing Commerzbank on the DAX — and it seemed to be making a fortune providing services for cashless online and cash register payment. It turns out, however, that was not really the case.
Market favorite masked problems
It seems the Bavarian company had been padding its books for years and when Wirecard announced in June that it had inflated its bottom line by billions of dollars (€1.9 billion / $2.3 billion), not only did the company slip into bankruptcy, it also badly damaged trust in Germany’s oversight system and in German corporate culture as a whole. However, Preliminary investigations suggest the company had actually been operating at a loss for years and prosecutors in Munich believe Wirecard began cooking its books to show profits as early as 2015. It is estimated that the company may have lost more than €3 billion in all.
Although, That has put pressure on BaFin, the national financial watchdog that failed to notice the company’s massive fraud. Now parliamentary investigators want to find out if authorities were truly unaware they were being played in epic fashion, or if they were simply going soft on the former market darling.
Meanwhile, Wirecard stands accused of fraud, accounting fraud, market manipulation and money laundering. The parliamentary committee is now tasked with finding out who knew what and when, as well as proposing legislative corrections to restore trust in Germany’s finance and business community.