How does a one billion euro fraud take Place?

Wirecard – Worth more than Deutsche Bank 3 years ago

Now worth nothing, Directors missing, People in jail and Auditors in serious trouble

Wirecard with operations in 40 countries, a market capitalisation larger than Deutsche Bank, entry to the DAX 30 and a plan to make an audacious bid for Germany’s largest bank – it all turned out to be one big fraud.

MONEY MEN by Dan McCrum. Dan an investigated journalist at the FT spent 5 years attempting to expose Wirecard. He was threatened, followed, spied on, lied to, had lawsuits against him personally and the FT.

All is revealed in his fascinating book. I did find the book a bit disjointed but the facts and the extraordinary issues that surfaced more than compensated.

In my experience the points I would highlight are – 

1 – If it’s too good to be true it probably is.

2 – If you can’t understand something or get to the bottom of it – it’s probably suspicious and should raise a red flag. Stop negotiating and take a time out.

3 – Go and check things out with your own eyes. Seeing is believing. They operated in 40 countries BUT they barely had an office in many of them. 

4 – If you start using sensory language –  like, “It doesn’t look good, sound right, feels funny, got a funny smells about it or I have a strange taste about this”.

Then your senses are intuitively telling you, perhaps unconsciously, that something is wrong.

5 – Auditors are under huge pressure and audit fees have reduced substantially. Never forget the FD of the company being audited pays the fees and appoints the auditors. Even by a resolution at an AGM, its only ratified.

6 – The auditors in question had signed the accounts off for the last 10 years (it was all right last year syndrome)

7 – The auditors, Ernst and Young had been brainwashed. Had accepted evidence that was forged on face value in good faith because of their lack of time to make available to a very sophistic fraud. There many court cases out gainst 

8 – Just because the German regulator in this Case BaFin said it was OK and there was nothing to worry about, doesn’t mean you shouldn’t. (I remember the old saying, “If it looks like a duck, quacks like a duck it probably is a duck”). 

Almost until the investigating accountants said there was 1 billion missing and it had been missing for a very long time BA Fin was till singing the praises of Wirecard

The regulator was under pressure as this was the largest ever German Fin Tech the German star of the show.

9 – Dan McCrum said in his FT article of June 18^th. You can fake profits, fake cash if people don’t ask too many questions and spend the cash on fake assets. As long as someone doesn’t “count the cash” or “value the asset at the market price.

10 – The Chairman is in jail awaiting a trial and the COO has gone missing. Suspected to be in China or Russia where he had connections

11 – Negotiation tactics. A whole multitude of negotiation tactics were used – most unethical BUT because they weren’t understood, not enough questions were asked, due diligence was not thorough and people were scared off by reverse questioning, threats from intimidators, high powered legal firms and the star players had charisma. Listen carefully to the whistleblowers.

12 – Very similar to other Ponzi style schemes, Maxwell, Queens Moat, Enron, Theranos

Quotes, 

1 – “There is never only one cockroach”

2 – “It’s difficult to get a man to understand something, when his salary depends on him not understanding it” Upton Sinclair  1878 – 1978

11^1h August 2022

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