Ernst & Young Probed by German Prosecutors Over Wirecard
(Bloomberg) -- German authorities opened a probe into Ernst & Young’s audit of Wirecard AG, adding to the accounting firm’s troubles linked to the missing 1.9 billion euros ($2.3 billion) at the payment company.
Prosecutors in Munich reviewed a letter from German accounting watchdog APAS before taking the formal step of opening the investigation, they said Friday in an email.
The decision to open a probe against EY marks an escalation of the auditor’s problems in the Wirecard debacle, which saw the company’s stock plunge by more than 90% in June. While the Big Four accounting firm has been blasted for failing to spot the missing funds, it argued that the money was part of an “elaborate” fraud that even a rigorous probe might have missed.
EY so far has no indications that crimes were committed and it is cooperating with authorities, it said Friday in an emailed statement.
“EY Germany continues to respect the strict confidentiality disclosure rules of our profession, and is actively working towards a legally effective release from its confidentiality obligations, in December if possible,” the company said.
APAS wrote to prosecutors in September, asking them to investigate EY’s work with Wirecard. That letter became the center of a dispute this week after EY accused the watchdog of failing to properly take into account the thousands of documents it sent to APAS in response to its enquiries. APAS wrote the prosecutors just six days after receiving all those documents, EY said.
While prosecutors didn’t identify which individuals they are investigating, APAS had singled out at least two auditors with ties to EY.
Andreas Loetscher, now Deutsche Bank AG’s top accounting executive, is being investigated by APAS over his previous role as Wirecard’s auditor. Loetscher, a two-decade veteran at the accounting firm, oversaw the Wirecard audits for the financial years 2015 through 2017, filings show.
Martin Dahmen, who took over as the chief auditor of Wirecard from Loetscher, was called to appear before a German parliamentary committee last week to answer questions about Wirecard. Dahmen and Loetscher both have told the German parliamentary committee they are being investigated by APAS, and declined to testify.
‘Feel the Heat’
“Their behavior before the parliamentary investigative committee has shown that they are unwilling to cooperate,” said Wolfgang Schirp, a lawyer representing Wirecard shareholders in a lawsuit against EY. “It is about time that they feel the heat.”
Lawyers for Loetscher and Dahmen didn’t immediately return emails seeking comment. Deutsche Bank said it can’t comment on the specifics of his past employment.
“Many questions continue to be open in the Wirecard case and the presumption of innocence applies as a matter of principle,” the bank said in a statement. “We have full faith in his qualification and ability to fulfill his role.”
EY faces legal headaches elsewhere in Europe. It’s been targeted for legal action by the administrators of trouble hospital operator NMC Health that was audited by EY and entered administration after the discovery of $4 billion in debt.
©2020 Bloomberg L.P.