Shareholders of the insolvent payment processor Wirecard feel cheated. The lawsuit against an auditing institute could be unsuccessful.04/13/2024 | 1:45 minutes
When it became known in the summer of 2020 that 1.9 billion euros were missing from Wirecard’s balance sheet, the value of the share fell by 98 percent. Thousands of investors lost a lot of money. They are now demanding compensation from Ernst & Young (EY), whose auditors had approved Wirecard’s balance sheets for years.
The Wirecard case is considered the biggest economic scandal in German post-war history. The shareholders’ claims for damages amount to several billion euros and are being negotiated in a test case.
Background to the Wirecard scandal
An investigation by the Financial Times revealed in early February 2019 that Wirecard employees in Singapore had fabricated customers and sales in order to obtain a business license in Hong Kong and achieve Wirecard’s earnings targets. In October, reports from the Financial Times renewed allegations of manipulation at Wirecard. Internal documents suggest that Wirecard reported excessive sales and profits at subsidiaries.
The auditing firm KPMG was commissioned by Wirecard to carry out a special audit. The result of the KPMG investigation was published at the end of April 2020. Afterwards, not all data could be fully evaluated and therefore the allegations could not be completely dispelled. At the beginning of June 2020, the Federal Financial Supervisory Authority (BaFin) filed a complaint on suspicion of market manipulation, this time against CEO Braun and three other board members; The public prosecutor’s office had Wirecard’s business premises searched. The EY auditing company had been auditing the allegedly falsified balance sheets of the former DAX group for years.
A few weeks ago, after an investigation that lasted three years, the auditor supervisory authority Apas determined that EY had violated professional duties of care when auditing Wirecard’s balance sheets.
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The consulting business will be outsourced
EY Germany is currently restructuring its company. Until now, EY consisted of four business areas: auditing, tax consulting, management consulting and strategy and transaction consulting.
By converting from a GmbH into a GmbH & Co.KG, EY can now convert the various business areas into four legally independent limited liability companies (GmbHs). With the help of a special right of termination, three companies are spun off: tax advice, consulting and strategy consulting – and with them personnel, sales and profits.
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Expert: “Reduction of the liability mass”
Hansrudi Lenz, emeritus professor of auditing and consulting at the University of Würzburg, sees this conversion as “a decisive reduction in the liability pool”.
The injured investors can now only direct their claims for damages against the auditing company.
In the old constellation, the sales and income from the consulting business could also have been used to service the plaintiffs’ claims. But with the new structure this is no longer possible
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Lawyer sees the conversion as a conscious approach
Peter Mattil, who represents numerous Wirecard victims as a lawyer, sees this conversion as a calculation: “In view of this threatened lawsuit, we currently consider this to be an abuse of the law and immoral.”
Mattil continued: “EY is apparently trying to say goodbye to its assets so that we can no longer enforce anything if we are successful. We consider the conversion to be void and we will also incorporate the new GmbHs that have taken over the assets Take liability and sue.”
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EY rejects the allegations
Along with KPMG, Deloitte and PwC, EY is one of the “Big Four” auditing firms that share almost all of the auditing of large, international companies. No other auditing company currently operates as GmbH & Co.KG.
In response to a ZDF request, EY said in a written statement: “With this step, EY Germany is harmonizing its structure with other companies in the international EY network in Europe and worldwide. The changes made to corporate law have no impact on the liability risks for existing and completed mandates or on ongoing civil proceedings.”
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The investor lawyers are now demanding from the Bavarian Higher Regional Court, where the civil proceedings for compensation payments are being heard, that all EY units remain liable for Wirecard’s damages. The first oral hearings are scheduled to take place in the fall.
Christoph Söller is a reporter in the ZDF Bavarian state studio.
2024-04-13 19:23:14
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