Criminal prosecutors in Munich decided not to request an arrest warrant against Jan Marsalek and other executives on the day Wirecard disclosed that €1.9bn of cash was missing. They argued that the potential crime was not serious enough to justify immediate police custody, people briefed on the investigation told the Financial Times.
One day after Wirecard on June 18 last year announced the cash hole in Asian operations overseen by Mr Marsalek, the then-suspended chief operating officer absconded to the Belarusian capital Minsk, where all trace of him was lost.
A week later, Wirecard collapsed into insolvency in one of Europe’s biggest postwar accounting frauds that is sending shockwaves through Germany's financial industry and political establishment.
Munich’s chief prosecutor Hildegard Bäumler-Hösl, who is in charge of the Wirecard investigation, faced questions from MPs in a parliamentary hearing in Berlin on Friday afternoon.
Munich prosecutors also decided against an immediate raid of Wirecard’s headquarters on June 18, the people said. After discussing the logistics with local police, they postponed this by two weeks due to a lack of resources. The premises were eventually raided on July 1.
As well as the prosecutors in Munich, several other institutions face questions over errors of judgment in the Wirecard case. Wirecard’s auditor EY, Germany’s financial regulator BaFin, financial reporting watchdog FREP and German auditor oversight body Apas, as well as anti-money laundering authority FIU, are all under pressure for acting late and indecisively.
BaFin and prosecutors long focused on investigating short sellers and journalists rather than Wirecard executives. A criminal investigation against two FT reporters following accusations of market manipulation was finally dropped several months after Wirecard went bust. From February to April 2019, BaFin also imposed a controversial ban on the short selling of Wirecard shares.
“It would be tragic if Mr Marsalek eluded investigators because they underestimated the magnitude of the criminal case even on June 18,” Florian Toncar, a former Freshfields lawyer who is now an MP for the pro-business Free Democrats, told the FT. He added that neither BaFin nor authorities in Wirecard’s home region, Bavaria, cracked down on the fraudulent company in time.
People familiar with the details of the case said that when Munich prosecutors opened an investigation into the missing cash on June 18, they initially did not suspect that felonies such as aggravated fraud or embezzlement might have been committed by Wirecard executives.
Instead, investigators only looked into a potential misrepresentation of Wirecard’s financial affairs. Under German commercial law, this is an offence punishable with up to three years in prison. On June 18, prosecutors argued that this maximum sentence was too low to justify arrests.
Mr Marsalek is now on Interpol’s “most wanted” list. Investigators suspect the company was looted in the months before its collapse.
Wirecard’s former chief executive Markus Braun, who had travelled to his Austrian home city, Vienna, after resigning at Wirecard on June 19, voluntarily returned to Munich and gave himself up to police.
Fabio De Masi, an MP for the leftwing Die Linke party, told the FT that, in his view, prosecutors acted far too timidly. “When €1.9bn in cash is missing, and the prosecutors are leaning towards the assessment that the executive board acted criminally, one needs to crack down immediately. Every shoplifter receives tougher treatment.”
“I’ve recently read that we acted too hesitantly [with regard to Wirecard],” Ms Bäumler-Hösl told MPs on Friday.
“I hold the firm belief that this is not the case,” she said, adding that she had been looking at Wirecard for 18 months before it collapsed into insolvency. She stressed that while Munich prosecutors knew relatively early on that there was accounting fraud at Wirecard in Singapore, she could not open a case as there was no evidence that the crime had been committed by German citizens or in Germany.
A lawyer for Mr Marsalek did not respond to a request for comment.
Documents seen by the FT show that BaFin’s decision on the short selling ban was based on flimsy oral evidence from Mr Marsalek and a lawyer working for Wirecard. BaFin declined to comment.
In February 2019, the lawyer told Munich prosecutors that “one or several Bloomberg employees” in previous days had called the company, demanding a payment of €6m.
These people allegedly threatened that otherwise Bloomberg would “take up an offer from the FT” and join the British news organisation in its “negative reporting”, as FT employees had offered “significant financial benefits” to the Bloomberg staff.
BaFin and the Munich prosecutors apparently considered this credible, and within three days the regulator imposed the two-month short selling ban, brushing away concerns about it expressed by the Bundesbank.
A Bloomberg spokesperson told the FT there was no evidence that this incident as described by Wirecard ever happened: “This suggestion would be laughable if it weren’t so offensive.”
A spokesperson for the FT said that Wirecard’s allegations that any of its journalists colluded with short sellers or reporters elsewhere were “completely false” and have been refuted.
Danyal Bayaz, an MP for the Greens, accused Munich prosecutors and BaFin of falling into a “siege mentality” as “Jan Marsalek only needed to tell a few bizarre stories about purportedly mean journalists and hedge funds” to prompt the short selling ban. “BaFin had already been keen to believe this fairy tale,” he said.
In recent months BaFin president Felix Hufeld has repeatedly defended the short selling ban, pointing out that based on similar information, he would take the same decision again.