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The Double Life of Wirecard鈥檚 Fugitive Executive - YouTube
Channel: Bloomberg Quicktake: Originals
[11]
The former chief executive
of Wirecard, Marcus Braun,
[14]
has been arrested.
[16]
Auditors revealed that nearly $2 billion
[19]
has gone missing.
[21]
This has been a wild ride for Wirecard.
[23]
You only need to look at the share price
[24]
over the past five days.
[27]
Wirecard is a payment processing company.
[29]
At their height they were
worth 22 billion euros.
[34]
Wirecard was supposed
to be Germany's ticket
[38]
into the high-tech world.
[40]
They were supposed to be
the pride of German fintech.
[44]
Wirecard spectacularly imploded.
[46]
Its stock went to penny stock
level and now it's worthless.
[50]
That is quite remarkable.
[51]
Never before has a company on
Germany's DAX just gone bust.
[56]
Is there a corporate fraud going on here
[58]
or is it something more mundane?
[60]
The business model was fraudulent right
[63]
from the beginning.
[63]
It was bank robbery and
investors and creditors
[67]
they're seeking more than 12
billion euros in repayments.
[71]
The two key players are two Austrians.
[73]
The chief executive, Markus Braun
[75]
and his deputy, Jan Marsalek.
[78]
Right now, Marcus Braun is in jail
[80]
and he's facing charges.
[81]
It's far more difficult to know
anything about Jan Marsalek
[84]
because he's missing.
[85]
There is reason to believe
that he had close ties
[87]
to secret services around the world,
[90]
so he had the means
and obviously the money
[93]
to just vanish without a trace.
[96]
Might he be in Russia?
Might he be in Asia?
[98]
Might he be on some deserted
island? Nobody really knows.
[102]
He's on the most wanted list of Interpol,
[104]
but so far, nobody's been
able to track him down.
[116]
The German economy mostly
builds on car-makers
[119]
and engineering companies,
which is sort of the past.
[122]
Wirecard was that bright
new future-oriented company
[126]
and Wirecard promised
that they would deliver
[129]
electronic payments and in the future
[132]
they would become a super big company.
[133]
They started as a startup, essentially,
[136]
around 2000 and grew up around
the, you know, what some
[141]
people might find, slightly
unappetizing businesses
[143]
of pornographic content and gambling
[146]
and then turned themselves
into a main player
[149]
in the global payment
facilitation business.
[153]
Markus, when you look at Wirecard's
[156]
share price, it's eye-watering.
[158]
The incredible acceleration
[160]
in the valuation of your business.
[162]
I think we are showing enormous growth,
[164]
I have no fear at all
in terms of evaluation.
[167]
Starting in 2010, Wirecard's
profits began to explode
[171]
and show a very, very solid
[173]
and almost too good to believe growth.
[176]
Wirecard at some point replaced
Germany's second largest
[179]
lender, Commerzbank, and its
market value of over 22 billion
[184]
was more than Deutsche
Bank, the biggest lender,
[186]
and Commerzbank combined.
Which showed the significance
[191]
and how things have changed
in the German economy.
[193]
There's a chap called Jan Marsalek,
[196]
who was the chief operating officer.
[199]
There is another guy called
Markus Braun, the CEO.
[202]
And while we know some elements
[204]
of what led to the fall of this company,
[208]
there were some elements
that we didn't know about.
[210]
I met Jan Marsalek just
for a background chat,
[213]
and he was quite frank about his youth,
[215]
that he was mostly interested
in IT and programming.
[219]
I can only assume he was a classical nerd
[221]
when he was younger.
[222]
When he rose through
the ranks at Wirecard,
[225]
he developed a taste for the extravagant.
[227]
He lived the life of a high roller,
[230]
looking back he spent more money
[232]
than what he was earning
as a Wirecard executive.
[240]
Jan Marsalek was close to a commander
[243]
of a Russian mercenary army
who took him to the Syrian city
[247]
of Palmyra right after
that Russian mercenary army
[251]
expelled ISIL from the city.
[254]
He flew in there, he went to the beach
[256]
and fired around Kalashnikovs I was told.
[258]
He even took a small piece of
an ornament back to Germany.
[263]
I saw it, I held it in my own hands.
[265]
Part of the Wirecard
story that we've uncovered
[269]
is a little bit sort of
boys' fantasies - you know
[272]
men in expensive suits and fancy
watches, champagne parties.
[280]
Investors are impressed,
Markus, by the growth.
[282]
If you look of the last 15
years your up 40,000 percent.
[286]
Interestingly, the collapse of Wirecard
[288]
starts around the time where
Wirecard is at its peak.
[291]
And that is when they
joined the DAX Index.
[294]
And that's really a huge achievement
[296]
to be among the 30 biggest
companies of Germany.
[300]
At their height, its
market value was at 20,
[303]
22 and a half billion euros.
[307]
The illegitimate part of
Wirecard was, in large parts,
[311]
a business that happened
far away from headquarters.
[314]
So these were businesses that were in Asia
[317]
or in the Middle East, businesses largely
[319]
where Wirecard had no
sort of operating license
[322]
of its own and, therefore,
relied on partners
[324]
to work with them.
[325]
Unknown to the public and wider audience,
[328]
Wirecard faked profits and transactions.
[331]
How did they do this?
[332]
They had a business that was called
[334]
third party providing business.
[336]
They did business with outside partners
[338]
that processed transactions in countries
[341]
where they had no license.
[343]
And these businesses provided Wirecard
[345]
with fake profit statements
[347]
and fake balance sheet statements.
[349]
Wirecard in reality
didn't turn out a profit.
[352]
If you stripped the profits
from the fake business
[355]
which provided fake revenue
and profit statements,
[359]
it was unprofitable at least since 2016.
[362]
Basically the entire
company was a smoke screen.
[368]
The trouble of the way Wirecard was set up
[369]
was that nobody, or very few people,
[372]
had a global overview of the company.
[375]
A lot of people knew a little sliver.
[377]
The auditors, Ernst & Young, for years,
[381]
signed off on their accounts.
[382]
And so there doesn't seem to
be anything untoward there.
[384]
There didn't seem to be
anything illegitimate,
[386]
but the questions kept coming,
[389]
particularly from the Financial Times
[390]
that started publishing
reports around 2018
[394]
saying that there were problems
with accounting in Asia.
[397]
And every turn Wirecard said,
[399]
"No, this is not true,
this is legitimate."
[401]
They often would raise their forecasts
[404]
as to appeal investors
[406]
and they managed to wiggle
out of this, time and again.
[409]
Let me ask about the scandals
[413]
that we've seen in the stock market.
[414]
I do not, too much,
look into controversies.
[418]
In the Philippines, they had
an account with two banks
[421]
on which about $2 billion were sitting.
[424]
It got from the bank fake
balance sheet confirmations,
[427]
and this is how the entire
smoke screen worked.
[430]
There did, however, come a point
[432]
around the time of 2019, 2020,
[436]
where they enlisted the
help of a second auditor,
[439]
and that was KPMG.
[440]
And KPMG was asked for a
special audit of the books.
[444]
They flew down to Manila
[446]
and initially nobody
doubted the money was there.
[449]
They just wanted to see, can
this be tapped at any time,
[453]
is this free liquidity?
[454]
What we now know is that a
lot of this was fictitious,
[458]
that some documents were outright forged,
[461]
that some employees at these banks
[463]
were not who they said they would be.
[465]
Knowing now that this money never existed,
[468]
that obviously posed a huge
problem for Jan Marsalek,
[471]
who was faced with a
daunting task of coming up
[474]
with several hundred millions of euros
[476]
that he could transfer
from Asia to Europe.
[479]
As we know, that never happened.
[481]
And that was sort of the
beginning of the end of Wirecard,
[484]
as we know it.
[484]
The scandal that has been brewing
[486]
over the last week is
now definitely deepening.
[489]
The initial employees said no money,
[492]
none of Wirecard's missing 2.1 billion
[496]
ever entered into the Philippines.
[497]
The company has temporarily suspended
[499]
its outgoing COO, Jan Marsalek,
[502]
but it seems there will
be further questions
[503]
for the business to answer.
[504]
Jan Marsalek was suspended on June 18.
[507]
Marsalek went into Braun's
office for one last time
[510]
and someone who happened
to stumble into the room
[515]
said there were intense discussions.
[517]
Braun kept talking at Marsalek,
[520]
and soon thereafter Marsalek went missing.
[524]
We're looking at a space of a week,
[526]
from Marsalek existing Wirecard HQ
[530]
to Wirecard going up in smoke.
[532]
More details on this to come, but again,
[535]
a clearly unusual scandal.
[537]
In some ways, Jan Marsalek
[539]
is sort of a mirror image of Wirecard.
[541]
There is the visible, the legal part,
[544]
if you want, of Jan Marsalek,
[547]
which is he's the chief operating officer
[549]
of a large German company,
[550]
and then there is the murkier,
opaque part of Jan Marsalek,
[555]
which is dealing with
mercenaries, traveling to Syria.
[561]
There is one place where
it's easy to get a sense
[564]
of who Wirecard and Marsalek was,
[566]
and that is this opulent villa
[568]
that sits in the middle of Munich.
[570]
This is a place where Jan
Marsalek had his residence.
[574]
He didn't formally live there,
[576]
but he had all the fripperies
that you might want.
[580]
I was granted access to the building
[582]
by someone who was authorized
[586]
and I developed my own little
obsession of finding out
[588]
what was going on.
[588]
There's a room with some artwork,
[591]
but it also has that kind of
appearance now of being a place
[595]
that was hastily and quickly abandoned.
[598]
Most of the furniture was
removed from the place
[601]
but there was still two
intensive care bed units.
[606]
In the basement, there was a huge locker
[609]
with drugs inside uppers,
downers, stimulants.
[616]
Its quite extraordinary to have 2 billion
[618]
lost and not know where it is.
[621]
I was told that Marsalek and his gang
[624]
funneled out 1.5 billion of the company.
[628]
We know he milked the company dry
[631]
by transferring a lot of loans
that the company provided
[635]
to entities that he then
secretly controlled abroad.
[639]
Investors and creditors,
[640]
they're seeking more than 12
billion euros in repayments.
[645]
How can a error, a mistake,
[647]
a scandal of that size,
happen in a DAX corporation.
[651]
We have many questions that
we want to ask the government
[653]
in the following weeks.
[654]
These guys, these companies
have auditors, right?
[657]
Is it time to audit the auditors?
[659]
The decline of Wirecard is
obviously a huge embarrassment
[662]
for a lot of constituencies out there.
[664]
There are the auditors, who signed off
[667]
on these accounts for years.
[668]
And the question that's out there
[670]
and that remains unanswered is,
[672]
why did they not detect what was going on?
[675]
I mean, Ernst & Young is
one of the big auditors.
[677]
They should know what's
going on at these companies.
[680]
This company had all kinds
of signs, reported by media
[685]
going back a year or two now
[687]
and yet people still gave
the company the benefit
[689]
of the doubt, over and
over and over again.
[693]
How did Wirecard get so
much political support?
[697]
The prosecutors have for a long time
[698]
turned a blind eye on Wirecard,
[700]
and for the entire institution
apparatus of Germany,
[704]
it is very embarrassing.
[706]
Investors, first and
foremost, have lost out here.
[709]
And among the investors, spare
a thought for Marcus Brown,
[713]
who was the biggest
investor in the company
[715]
and he went from billionaire
to now sitting in jail.
[717]
So quite a downfall for him.
[719]
Most people might not
have too much sympathy,
[721]
but if we speak of losers,
he's certainly among them.
[725]
Wirecard was fraud probably
right from the beginning.
[730]
It's the biggest financial
scandal in Germany.
[733]
And the amount of money that was lost,
[735]
it was probably the biggest bank robbery
[737]
that happened in this country.
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