BIZweek n°296 26 jun 2020
BIZweek n°296 26 jun 2020
  • Prix facial : gratuit

  • Parution : n°296 de 26 jun 2020

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 9

  • Taille du fichier PDF : 2,4 Mo

  • Dans ce numéro : Wirecard en dépôt de bilan.

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VENDREDI 26 JUIN 2020 BIZWEEK ÉDITION 296 LA TOUR ROUND-TRIP THROUGH MAURITIUS ? Wirecard files for insolvency after ex-CEO arrested in $2 billion scandal Wirecard has filed for insolvency, just days after a $2 billion accounting scandal at the company burst into the open, crashing its stock and leading to the arrest of its former chief executive. Another accounting scandal linked to Wirecard  : why did the German company agree to pay around € 300m for an Indian business only weeks after it changed hands for € 37m ? That 2015 acquisition, which handed huge profits to a Mauritian intermediary, was and still is at the centre of criticism from short sellers, who questioned whether it was part of a giant fraud to inflate Wirecard’s sales and profits The digital payments company, Wirecard, said in a statement Thursday it had opened legal proceedings in Munich « due to impending insolvency and over-indebtedness. » Shares in the company, which have lost 90% of their value in less than a week, plunged sharply in Frankfurt after the announcement was made. Markus Braun, the Austrian tech CEO who built Wirecard into one of Germany’s biggest companies, was arrested earlier this week on suspicion of having artificially inflated the company’s balance sheet and sales through fake transactions. Prosecutors said that Braun may have acted in cooperation with other perpetrators. Wirecard acknowledged on Monday that € 1.9 billion ($2.1 billion) in cash included in financial statements — or roughly a quarter of its assets — probably never existed in the first place. The company withdrew its preliminary results for 2019, the first quarter of 2020 and its profit forecast for 2020. The scandal erupted last week when Wirecard said that its auditor, EY, could not locate the funds in trust accounts and refused to sign off on the company’s financial results. The fallout is raising questions over how the company’s regulators and auditors could have missed accounting irregularities that are already drawing comparisons to Enron, the American energy giant that filed for bankruptcy in 2001. Mystery in Mauritius Wirecard’s software and systems help businesses to take electronic payments, and the India deal was the largest of a string of takeovers that spread its operations across Asia. Hermes and GI Technology had a network of more than 100,000 « Smart Shops », kiosks where Indians pay utility bills, buy train tickets or make money transfers, built by the entrepreneurial Ramasamy brothers. A third of the € 340m acquisition price was set aside as a deferred payment, known as an « earnout ». Yet the Ramasamys and their holding company, GI Retail, did not receive a penny of the earnout. Six weeks before the Wirecard deal was announced, they had sold 99.99 per cent of Hermes for just € 37m. The buyer was a Mauritius entity called Emerging Markets Investment Fund 1A — effectively a middleman — which bundled Hermes together with an unrelated Bangalore chain of currency exchange kiosks, then sold the package straight on to Wirecard for € 326m. What EMIF 1A paid for the Bangalore business, Star Global, is not known but was unlikely to have been a large amount. Star Global was in its second full year of operation, lossmaking, and later required a € 1m capital injection. It employed just 60 of the 900 total staff that worked in the operations Wirecard took over, according to documents seen by the Financial Times. That investment fund proved to be EMIF 1A. Who owns it and banked the outsized profits from the rapid purchase and sale of Hermes remains opaque. Its directors, who are employees of a fund administration company, did not respond to requests for comment from international medias. Wirecard said it « is not in a position to disclose the ultimate beneficial owner of EMIF 1A ». Failure to identify beneficial owners of Mauritius fund A KPMG special audit was launched in October last year after the Financial Times published internal documents that appeared to indicate substantial sales and profits at Wirecard units in Dubai were fraudulently inflated. Wirtschaftswoche subsequently raised a number of questions about the group’s accounting, including figures reported for Hermes, the Wirecard businessin India that was acquired as part of a controversial € 340m takeover. KPMG said it was not able to identify the beneficial owners of the Mauritius fund to which Wirecard paid € 340m in that 2015 deal. The report was plagued by delays. The company failed to supply some of the documents KPMG requested in the course of the investigation, or didn’t supply them until several months after they had been requested, which delayed the investigation overall, according to the report. Wirecard also postponed individual agreed interview appointments several times, and failed to put an internal control system in place for key parts of its operations in Singapore, KPMG said. Balance sheet control Tough questions are now being asked in Germany about what went wrong. Finance minister Olaf Scholz described the scandal as « extremely worrying » on Tuesday, saying the country must act quickly to improve oversight of companies such as Wirecard. « Critical questions arise over the supervision of the company, especially with regards to accounting and balance sheet control. Auditors and supervisory bodies do not seem to have been effective here, » Scholz said in a statement. The Federal Financial Supervisory Authority, or BaFin, said last week that it is actively investigating whether Wirecard violated rules against market manipulation. 3

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