Merkel’s government pressed to release Wirecard conversations

Germany’s government is under pressure to disclose the details of conversations between deputy finance minister Jörg Kukies and former Wirecard chief executive Markus Braun, as the fraudulent collapse of the Bavaria-based payment processing company ripples through the country’s establishment.

One conversation between the two took place on the day of Mr Braun’s 50th birthday on November 5 2019. Mr Kukies also talked to Mr Braun on the sidelines of a public conference they both attended last September.

In a letter to the Bundestag’s finance committee seen by the Financial Times, Sarah Ryglewski, another of Germany’s six deputy finance ministers, argued that the content of the conversations could not be disclosed because of “secrecy protection interests”.

This legally means the information has been classified as material that, if released, could be “detrimental for the interests of the Federal Republic of Germany”.

Members of parliament will be able to access a summary of the conversations in the Bundestag’s Secret Record Office but cannot release the information to the public.

“This is just utterly unacceptable,” Fabio De Masi, a lawmaker with the leftwing Die Linke party, told the FT. “Given the scope and scale of the Wirecard scandal and the regulatory and political failure in handling it, the wider public has a fundamental right to know.”

Wirecard last month collapsed into insolvency after disclosing that key parts of its operations in Asia had been misrepresented for years and that €1.9bn in corporate cash “do not exist”. The company is sitting on €3.5bn of debt and its share price plunged 97 per cent, wiping out more than €12bn in shareholder value.

Mr Braun, who was briefly arrested and released on a €5m bail, is one of several former Wirecard executives at the heart of a criminal investigation into fraud, market manipulation and other crimes by criminal prosecutors in Munich. Wirecard’s former second-in-command Jan Marsalek is on the run.

German regulators including financial watchdog BaFin have been harshly criticised for their inaction over early warnings on Wirecard.

The Finance Ministry disclosed in the letter to the Bundestag that BaFin president Felix Hufeld only in mid-June got personally involved and had contacts with Wirecard chairman Thomas Eichelmann and Mr Braun’s successor James Freis.

“BaFin failed to take the many warnings over irregularities at Wirecard seriously for way too long,” Danyal Bayaz, a Green member of parliament, told the Financial Times. “Even if BaFin lacked certain regulatory competencies to crack down on Wirecard, it at least should have flagged this issue much earlier before it was too late.”

Asked by the lawmakers what BaFin could have done to uncover the Wirecard scandal earlier, the finance ministry defended the regulator.

“According to present knowledge, the Wirecard case at its core is a matter of criminal acts that include accounting fraud, forgery of bank accounts and [other] deliberate acts of deception. Criminal acts can only be uncovered by forensic and criminological investigation methods,” Ms Ryglewski argued in her response to parliament. She added that checks and balances with regard to financial reporting would be reformed in the wake of the Wirecard scandal.

Mr De Masi told the FT that such a reasoning came close to a “declaration of bankruptcy” of the regulatory authorities.