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In advance of a trial that is scheduled for later this year, the former head of accounting for Wirecard has admitted to falsifying documents that KPMG requested during a special audit, according to people familiar with the situation.
In a case brought by Munich prosecutors regarding the spectacular collapse of one of Germany's highest-flying technology companies, Stephan von Erffa is one of three defendants.
Since Oliver Bellenhaus, the head of a Dubai subsidiary, turned himself in to authorities in July 2020 and became the main witness for the prosecution, the 47-year-old is the first senior Wirecard executive to admit wrongdoing.
After acknowledging that €1.9 billion of corporate cash purportedly held in escrow accounts in Asia and half of its stated revenues did not exist, Wirecard crashed into insolvency in June 2020.
One of three Wirecard executives accused of fraud, breach of trust, and market manipulation this year is Von Erffa. This year he, Bellenhaus, and former CEO Markus Braun, who denies wrongdoing, will go on trial.
During a parliamentary investigation into the scandal last year, Von Erffa blamed Wirecard's fugitive second-in-command Jan Marsalek and denied any involvement in the larger fraud. However, the police investigation discovered proof that von Erffa forged documents in early 2020 and shared them with KPMG and EY auditors.
The paperwork was connected to a €50 million payment that Wirecard had allegedly received in 2018 from one of the Asian escrow accounts, wired by a trustee at von Erffa's request.
KPMG conducted a special audit on Wirecard's accounts a year after the payment. The supervisory board started the investigation after the Financial Times raised concerns about potential balance sheet manipulation in October 2019.
Forensic investigators from KPMG demanded to see von Erffa's payment authorisation for the transfer of €50 million. According to people with knowledge of the situation, the top accountant decided to make up a document because there was not one already. He told prosecutors this.
Von Erffa created a back-dated email and a fake "escrow request/authorization form" for the €50 million using a personal computer, both of which were seen by the Financial Times.
People with knowledge of the situation claim that von Erffa told prosecutors that the forgery was a singular and isolated incident. Under intense pressure from KPMG to provide proof, he claimed that the transaction itself had been genuine and he created a document to substantiate it. He emphasized that he had not been eager to falsify records in order to manipulate the company's financial records.
The demise of Wirecard, whose peak market value was over €24 billion, shocked Germany's financial and political elite. Longtime Wirecard auditor EY missed the fraud for years, German financial watchdog BaFin shielded Wirecard from short sellers, and prosecutors prosecuted scathing journalists.
According to documents seen by the FT, OCBC, the Singaporean bank that was purportedly holding the escrow accounts, informed Wirecard's administrator following the company's demise that it had never held sizable sums of money on behalf of the trustee and that some of the accounts were nonexistent.
According to people familiar with the situation, prosecutors were able to prove that the €50 million sent to Wirecard came from one of the company's Asian business partners. This partner had previously borrowed €100 million from Wirecard and sent half of it back through a network of shady companies to hide its true source.
Von Erffa's attorney and the Munich prosecutors both declined to comment.
By fLEXI tEAM