EY partner says firm fell victim to 'criminals' at Wirecard

Auditor failed to spot a €1.9bn hole in German fintech company's accounts

The headquarters of collapsed FinTech company Wirecard near Munich in Germany. The insolvency administrator's sale of assets to Finch Capital's Nomu Pay will preserve about 110 jobs. Reuters

An Ernst & Young partner said his firm fell victim to ‘criminals’ at Wirecard, rejecting allegations that it didn’t do enough to uncover wrongdoing at the now defunct payment processor.

The firm's auditors reacted swiftly in February 2019 after the Financial Times' report of accounting irregularities emerged, Christian Orth, EY Germany's professional practice director, told a German parliamentary committee on Friday. EY's review at the time found the wrongdoing was limited to individuals in Singapore and failed to uncover evidence that Wirecard's top managers in Germany were involved, he said.

“There was a group of criminals that managed to deceive everyone – including us at EY,” said Mr Orth. “This has damaged EY but also the profession as a whole.”

EY, Wirecard’s auditor until the former stock market darling’s collapse last year, has come under fire for a failure to spot €1.9 billion ($2.3bn) missing from the payment company’s accounts. Former chief executive Markus Braun denied accusations of wrongdoing until the company in June was forced to admit in June that the missing cash likely never existed. The company collapsed that month when EY finally refused to sign off on its books.

EY added more staff and devoted more hours to review Wirecard’s 2018 accounts, but there was no basis to not clear them at the time, Mr Orth said on Friday. When signing off on its financials, EY did add some language referring to the Singapore case, Mr Orth said.

Such an addition to the audit opinion was very unusual, the executive said, adding that it amounted to a message to the broader public signaling EY’s concern.

The review of the 2019 accounts had already been affected by a Financial Times article from October of that year, Mr Orth said. The "turning point" came in early 2020, when EY learned that Wirecard had moved trust accounts from Singapore to the Philippines, he said.

“That’s when the fire alarm went off for me,” said Mr Orth.

In subsequent months, EY dug deeper, interviewing Wirecard managers in Manila and the company’s business partners in Dubai, he said. EY asked Wirecard to transfer €440 million in four tranches to prove that the accounts really existed, but the payments were put off for various reasons, Mr Orth said.

EY had been given statements from these trustees’ banks, declaring the accounts were real. But then in interviews, these lenders’ top managers admitted these certifications were “spurious”, Mr Orth said.

EY then told Germany’s financial regulator Bafin and Wirecard’s supervisory board of its findings on June 15. Thomas Eichelmann, Wirecard’s chairman, that day asked several times whether the facts they’d uncovered were really true, adding it was clear this would “pull the plug” on the company, Mr Orth said.