Balance sheet case: should Wirecard shareholders pay dividends?

Status: 05/05/2022 12:18 p.m.

The Munich Regional Court subsequently declared the balance sheets of the outrageous Wirecard Group null and void – with possible consequences for former shareholders: the insolvency administrator can reclaim the dividends paid.

Wirecard shareholders, who believed in the company until the end, lost a lot of money because of the fall in the share price – they are now threatened with new problems: they may have to reimburse the dividends they received for 2017 and 2018.

Because Wirecard’s insolvency administrator Michael Jaffé successfully asserted his legal action in the Munich Regional Court. Judges upheld his lawsuit and overturned the collapsed payment service provider’s 2017 and 2018 balance sheets. This means that the dividend resolutions for both years are also void. At that time, Wirecard had recorded high profits totaling more than 600 million euros and distributed a healthy 47 million euros in dividends. According to investigations by the Munich public prosecutor’s office, these benefits did not in fact exist.

Ex-boss in prison for almost two years

The basis of the insolvency administrator’s lawsuit was the alleged false reservations with which the managers of Wirecard allegedly inflated the balance sheets with invented billions. The group collapsed in 2020 after admitting fictitious bookings of 1.9 billion euros. Former CEO Markus Braun has been in custody for almost two years.

Presiding judge Helmut Krenek said whether the missing billions existed or not was irrelevant to the verdict. To declare the balance sheets nil, it was enough to declare that the money could not be found where Wirecard said it was booked, namely in the escrow accounts in Singapore. “If the funds had existed, they would have had to be found there,” Krenek explained.

Gale for lawsuits against auditors?

The shareholders’ association DSW welcomed the verdict. According to her, the chances of success of the nearly 1,000 lawsuits against the auditor EY have increased. According to former Wirecard boss Braun, the money is “somewhere completely different”, DSW Vice President Daniela Bergdolt said after the verdict was announced. “But even then Wirecard’s accounting was grossly flawed.” EY reviewers “should have noticed that too”.

Many aggrieved investors are fighting for compensation. They are trying to recover some of the lost money through individual lawsuits, a model case for investors, and a compensation fund. DSW investor protectors want quick compensation for Wirecard investors with a specially created Dutch foundation. According to DSW, more than 30,000 victims have reported damages totaling 1.5 billion euros since filing for bankruptcy.

In addition, outraged shareholders filed complaints against the audit firm EY, which had audited and certified Wirecard’s balance sheets – and approved them for years without objection. The legal administrator Jaffé is preparing a lawsuit against EY. The report of a special auditor appointed by the Bundestag’s inquiry committee concluded that the company had violated auditing standards. EY denies this.

Munich Regional Court declares Wirecard’s 2017/18 balance sheets void

Arne Meyer-Fünffiger, ARD Berlin, 5.5.2022 1.30 p.m.

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