Wirecard’s former chief executive, who steered the payments company through its rise and spectacular collapse two years ago, went on trial for fraud on Thursday following a scandal that shook German politics and tarnished the country’s business reputation. The 53-year-old former CEO Markus Braun, who has been in custody since his arrest in 2020, and two other managers of the defunct blue chip firm face charges including fraud and market manipulation.
In his first public appearance in more than two years, Braun walked into the courtroom without speaking wearing a dark turtleneck jumper and jacket and carrying a laptop. He took a seat next to his four defence attorneys. The trial is taking place in Munich’s largest and newest courtroom, a bomb-proof underground hall built in the Stadelheim prison complex.
The accused could be jailed for up to 15 years if convicted. Braun has denied embezzling money from Wirecard and accused others of running a shadow operation without his knowledge.
A verdict is not expected before 2024 at the earliest. Founded in 1999 and based in the Munich suburb of Aschheim, Wirecard’s fairy-tale rise transformed it from a payment processor for pornography and online gambling to a showpiece for a new type of German tech company that could compete with the established titans of Europe’s largest economy.
It displaced Commerzbank in Germany’s DAX blue-chip index and at one point was worth $28 billion, but its demise embarrassed the Germany establishment, placing politicians who backed the company and regulators who took years to investigate it under scrutiny. After batting away suspicions of wrongdoing from investors and journalists and successfully lobbying the German authorities to investigate those who were scrutinising its finances instead, Wirecard was forced to admit in June 2020 that 1.9 billion euros were missing from its balance sheet.
The government of then Chancellor Angela Merkel, which had previously backed Wirecard’s pursuit of an acquisition in China, briefly considered bailing out the company. However, within days, Wirecard became the first-ever DAX member to file for insolvency, owing creditors nearly $4 billion.
The prosecution asserts that Wirecard invented vast sums of phantom revenue to mislead investors and creditors. At the start of the trial, public prosecutor Matthias Buehring accused its management of creating bogus business transactions with partner companies under their control in Dubai, the Philippines and Singapore.
The fraud let Wirecard managers siphon money out of the company with no proper checks and balances. “With this agreement, the gang members laid the foundation for the crimes of false representation, market manipulation, commercial gang fraud and breach of trust that were devised, planned and carried out in the years that followed, at least between the end of 2015 and mid-2020,” Buehring said.
As prosecutors began reading out the indictment, Braun repeatedly stroked his chin or rested his chin on his hands. EVIDENCE
Prosecutors will draw on evidence from Braun’s co-defendant Oliver Bellenhaus, the former head of Wirecard’s subsidiary in Dubai, who became a key witness after turning himself in to German authorities in 2020. Another former executive, Stephan von Erffa, is also on trial. He has publicly expressed regret about the events at Wirecard but denied orchestrating them. His lawyer said von Erffa did not want to comment on the charges.
A key suspect, Wirecard’s former chief operating officer Jan Marsalek, is an international fugitive on Europe’s most wanted list whose whereabouts are unknown. Following Wirecard’s demise, the head of German financial regulator BaFin resigned and the head of Germany’s accounting watchdog also stepped down.
Merkel and her then finance minister, now chancellor, Olaf Scholz faced criticism for bungling oversight of the company. Merkel and Scholz have said they are not to blame. Scholz beefed up BaFin’s powers and installed new leadership in 2021. Scholz also criticised Wirecard’s auditor, EY, for failing to detect the fraud. EY has said it acted professionally.
There are 100 court dates provisionally scheduled until the end of next year in the case.