Merkel Link to Wirecard Laid Out in Testimony by Former Minister
(Bloomberg) -- Less than a year before Wirecard AG went bust, a former minister turned economic adviser briefly spoke with Chancellor Angela Merkel about the payment company’s expansion plans in China and how the government might lend a helping hand.
The conversation about Wirecard on Sept. 3, 2019, lasted no more than two minutes and ended with Merkel signaling her support, though without making any firm commitments. If Wirecard needed help, she said, management should get in touch with her economic advisers, according to her former minister’s recollection.
The episode was recounted by Karl-Theodor zu Guttenberg, who appeared on Thursday at a parliamentary investigation in Berlin seeking to understand what contributed to Wirecard’s collapse earlier this year, and if regulatory mechanisms might have been too lax. Zu Guttenberg said he was deceived like everyone else by Wirecard’s malfeasance, and that he would never betray Merkel’s trust.
“In all the years that I’ve known Chancellor Merkel, I’ve developed a very trustful relationship,” zu Guttenberg said in his prepared opening remarks at the hearing. “I would never put this in jeopardy for a client. Had I had the faintest suspicion of their trustfulness, I would never have spoken with Merkel about Wirecard.”
The fall of Wirecard has become Germany’s biggest economic scandal in recent memory. Politicians and the public want to know how the company’s alleged criminal activity could go undetected for years, and why authorities failed to detect the fraud. As a member of Germany’s benchmark Dax 30 Index, Wirecard was welcomed with open arms in Berlin, where the story of a homegrown technology powerhouse was warmly received.
In truth, Wirecard had been unprofitable for years and relied on fake transactions with overseas partners to cover up the fraud. Former Chief Executive Officer Markus Braun is in jail and his No. 2, Jan Marsalek, on the run. Braun appeared before the committee a few weeks ago but largely refrained from answering questions.
Wirecard had mandated zu Guttenberg’s advisory firm, Spitzberg Partners, around 2016, initially to help scout out takeover opportunities in North America and then to facilitate the company’s market entry into China, the former minister said. Getting the government to support its key industries abroad is normal business practice and in no way scandalous, zu Guttenberg said. In the early years, renumeration was around 10,000 to 20,000 euros a month, which zu Guttenberg said was relatively low.
For its efforts to provide political backing for Wirecard’s Chinese foray, Spitzberg had expected to be handed a success fee, though no money was ever paid, zu Guttenberg said.
“Had we known that the business model was based on fraud, we would not have done this,” zu Guttenberg said of his mandate with Wirecard. “We found this out as late as everyone else.”
Zu Guttenberg served in Merkel’s cabinet between 2009 and 2011, initially as economy minister and later as minister of defense. A star member of her team, zu Guttenberg infused the government with a dose of youthful and aristocratic glamor before being forced out after admitting to partially plagiarizing his doctoral thesis. He moved to the U.S. with his family but has maintained close ties to the political and economic elites back home.
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