Wirecard fraud probe leaves unanswered questions

(BLOOMBERG) - Move along, nothing to see here. That's the message from Wirecard AG as it tries to rebut allegations of fraud that have wiped more than 50 per cent off the payment processing giant's market stock price.

Lawyers hired by the company found no evidence of corruption and said there will be no material impact on the business's financial statements from wrongful accounting, Wirecard said on Tuesday. Even so, the clouds haven't cleared entirely.

Investors will be relieved that the key financial statements appear to be unaffected. To reinforce the good news, Wirecard reaffirmed its targets for 2019, including a pledge to post at 740 million euros ($836 million) of Ebitda. The growth story seems to be intact.

Still, it may too early to call time on the debacle. Wirecard - which last year supplanted Commerzbank AG in the benchmark index of Germany's biggest stocks - is still exposed to the risk prosecutors may take a less favourable view of events. And, even if the sums involved may not have been material, it's still not entirely clear who knew what and when.

Just last month, the company had rejected allegations of wrongdoing. In dismissing reports by the Financial Times that a senior company executive in Singapore allegedly used forged contracts for several suspicious transactions, it said neither itself nor its lawyers had found criminal misconduct on the part of any employee.

On Tuesday, it acknowledged that the authorities in Singapore may find "a few local employees" criminally liable for some of the irregularities that were uncovered.

At issue is 2.5 million euros of revenue booked against wrongfully issued invoices by a subsidiary in 2017 that will be restated in 2018. The project eventually took place in 2018 and the delivery period is being revised.

 
 
 

There were other accounting blunders, albeit seemingly minor. A unit wrongfully recorded a 3 million-euro asset in 2018 and corrected it within a week. A further 2.3 million-euro entry in aged receivables at a subsidiary in January 2018 was removed a month later because no transaction has been entered into with the counterparty. Certain payments made between business partners and Wirecard entities couldn't be correlated with agreements between them, the company said.

What's more, what Wirecard's statement didn't touch on at all is whether senior executives in Germany oversaw the transactions that are at the centre of the investigations in Singapore, as alleged by the Financial Times just a few days ago. That the review hasn't identified criminal liability in respect of Wirecard's headquarters under Singapore law doesn't exclude the possibility that the authorities there or in Germany may see things differently.

The shares soared on Tuesday as the sums involved so far - for a company with more than 2 billion euros of annual sales - are clearly immaterial. But before rushing in, investors ought to be comfortable that the matter ends here.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.