Wirecard Sees No Conclusive Evidence of Fraud as Police Start Probe

(Bloomberg) -- Wirecard AG expects an investigation by an outside law firm to dismiss concerns of accounting breaches and validate conclusions already made by an internal inquiry, as it looks to move past fraud allegations.

The digital payments company will publish the key findings of Singapore-based firm Rajah & Tann when the full report is finalized “in the very near future,” Chief Executive Officer Markus Braun said Monday on a conference call. The company’s internal compliance department determined that the allegations were “unfounded. Full stop.”

“We consider this whole issue as resolved” and expect no material revelations from the Rajah & Tann’s final conclusions, Braun said. “Such events do not distract us one minute,” he said, adding the company expects a “strong” 2019.

Shares Rebound

The shares surged as much as 23 percent and were up 15 percent at 3:23 p.m. in Frankfurt, clawing back a chunk of the 7 billion euros ($8 billion) in market value lost last week after the Financial Times published two stories about a senior company executive in Singapore suspected of using forged contracts for several suspicious transactions.

Given its complex business model, “the nerves of Wirecard investors are easily jangled,” said Mirko Maier, an analyst with Landesbank Baden-Wuerttemberg in Stuttgart. “The company was just winning trust, and it is certainly going to take time for grass to grow over this latest episode.”

It’s not the first time that the company has had to defend its reputation. The shares dropped after past claims were published about accounting irregularities in 2008 and fraud allegations in 2016. On Friday, Wirecard tumbled 25 percent -- the worst decline since July 2008 -- despite the company’s repeated denials of wrongdoing.

The company -- which supplanted Commerzbank AG in Germany’s benchmark DAX index last year -- operates in the tangled world of online payments. Founded in 1999, Wirecard initially provided financial services to online gambling and adult websites, barely surviving the dot-com bust. It’s now threatening traditional financial services and until recently was worth more than Deutsche Bank AG, Germany’s largest lender.

On the conference call, the company portrayed its 20-person compliance group as an independent in-house watchdog with far-reaching powers.

“This compliance team has the absolute right -- if the case is necessary -- also to take resources from the IT department, the accounting department etc.,” said Braun, adding that it could even investigate him without his knowledge.

Rajah & Tann, which was officially mandated to conduct a full inquiry last year, is about to complete its investigation after reviewing documents and interviewing a Wirecard employee in Singapore who alleged in April that a member of the company’s finance team engaged in potential accounting breaches.

In a statement posted on Wirecard’s website, the law firm said the inquiry is “ongoing” and “no conclusive findings of criminal misconduct” have been made to date.

At the heart of Wirecard’s strategy is the notion that cash is becoming obsolete. Run by Braun since 2002, the company has made a series of acquisitions including buying Citigroup Inc.’s Prepaid Card Services business in 2016. The stock has quadrupled over the past three years -- making Braun, who owns about 7 percent in the company, a billionaire.

Anonymous ‘Animosity’

The latest alleged breaches took place between 2015 and 2018 and relate to revenue totaling 6.9 million euros, costs of 4.1 million euros and intellectual property valued at 2.6 million euros, said the company, which is based near Munich. Analysts estimate the company generated 2.06 billion euros in revenue last year.

An internal compliance inquiry concluded the claims may have been motivated by “personal animosity.” Braun said he didn’t know whether the individual who made the allegations was still employed by Wirecard, saying whistle-blowers are granted anonymity.

The Singapore police “are looking into the matter,” a spokeswoman for the authorities said Monday. In Germany, financial regulator BaFin is looking at the issue for signs of possible market manipulation, and Munich prosecutors are also reviewing the facts to decide whether to open a probe.

Wirecard, often the target of short sellers, is trying to turn the page and will let authorities determine what, if anything, happens next.

“Our job is to build a strong company,” said Braun. “This is my focus, to bring up innovations etc. So, I personally will not spend one minute on this issue.”

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