German Financial Reporting Enforcement Panel Defends Actions in Wirecard Collapse

The German Financial Reporting Enforcement Panel or Deutsche Prüfstelle für Rechnungslegung (DPR) has issued a statement defending its actions in the ongoing Wirecard (WPI:DE) scandal. It was recently reported that the German government had terminated its contract with the DRP, private entity contracted by the government, in light of the failure of its job to review the financial operations of Wirecard. The DPR says it learned about the contract termination by reading the news.

Wirecard infamously filed for bankruptcy following the revelation that €1.9 billion had gone missing. The aftershocks were swift as the CEO resigned and was subsequently arrested and the COO was terminated and is missing – apparently somewhere in Asia. Shares in Wirecard went from over €100 to crater to just over €1. Today, shares in Wirecard are trading around €5 as people speculate as to how bankruptcy proceedings will impact the firm.

Both public and private officials have pointed fingers of blame at various entities and individuals that may have failed in their duties. The DRP was one of these groups.

The DPR is now claiming that it did its job according to the guidelines of the Federal Ministry of Justice and
for consumer protection (BMJV) and the Federal Ministry of Finance (BMF). In their exams, the DPR claims there were no apparent “defects.”

Additionally, the DRP states that communication with BaFin, the top securities regulator in Germany, has also taken place to the usual extent and in the established frequency.

The DPR states that it checks the accounting of German companies meaning and whether the balance sheets have been prepared in accordance with the accounting principles. Tracing balance sheet fraud and investigations are not part of the task catalog. Its review also depends on the cooperation of the company.

To this end, the DPR is an association under private law, unlike a government body, which does not have the right of access such as a public prosecutor’s office.

The DPR added that to be able to react faster and more specifically to cases of balance sheet fraud in the future, the DPR is planning “constructive talks with the ministries with regard to
[the] future design of the enforcement system in Germany.” [translated]

The DPR has also provided a Q&A document outlining its work on the Wirecard case – something that may be too little, too late. The DPR review was apparently scheduled to end in July 2020.

In a closed-door session of the Bundestag today, BaFin President Felix Hufeld defended his tenure and the regulatory approach taken with Wirecard, according to a report. Hufeld said that Wirecard was not completely under the supervision of BaFin as it was a Fintech – even though it owned a bank.

 

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