Not all of Germany’s parliamentarians are enjoying their two-month summer break. As many as 41 members of the finance committee met on Wednesday to fire questions at Finance Minister Olaf Scholz and Economy Minister Peter Altmaier. On the agenda: what may be the largest case of corporate crime in European history.
The closed-door session is seen as more of a starting point than a moment for any bombshell revelations. Committee members want to know what and how much the ministers knew about Wirecard’s alleged fraud, when they knew it, and why their ministries’ oversight bodies were slow to pursue repeated credible accusations of company wrongdoing as well as insufficient independent auditing practices that were unable to detect it.
Getting those answers, several committee members told reporters, will be a lengthy and complicated matter that will require verbal and written questioning beyond Wednesday’s session. They face the daunting task of sorting through not only Wirecard’s own multibillion dollar accounting trickery, including accusations of money laundering, but dozens of entities related to Wirecard business.
“Today is a day for intensive discussion of the various aspects,” said Green party member and committee chairwoman Lisa Paus. “It is going to be a long evening.”
Looking into the details
The hearing got off on time, with one hour planned for each minister. Scholz emerged after four hours, saying his focus was reforming oversight mechanisms to give regulators more teeth when looking into suspicious corporate behavior.
“We need more oversight capacity. I’m glad that this is now a discussion for all of Europe. We need to see if we can create oversight infrastructure along the lines of the SEC in the US,” he said, referring to the Securities and Exchange Commission.
Germany’s equivalent agency, BaFin, which falls under Scholz’s Finance Ministry, has been criticized for failing to investigate Wirecard. In some instances, BaFin opened investigations into accusers, including the British newspaper Financial Times, which first raised a red flag in January 2019.
A major sticking point holding up the process has been how to classify Wirecard, which is both a technology company and a financial institution. The gray zone has made it difficult to pin responsibility for Wirecard’s collapse on any particular public authority.
Ahead of Wednesday’s special session, Scholz told public broadcaster ARD that no mistakes had been made. He added that even the respected accounting firm EY, formerly Ernst & Young, failed for years to detect irregularities. That was the anticipated focus for Peter Altmaier’s round of questioning, whose Economy Ministry is responsible for corporate auditing practices.
Both ministers have said they are committed to full transparency in the case, which Scholz has called ”an unparalleled scandal” and a strain on Germany’s reputation for above board finance.
Scholz is under fire for potentially having knowledge of problems at Wirecard months before the company admitted to inflating its books by €1.9 billion ($2.2 billion), which led to it filing for insolvency at the end of June as well as the arrests of CEO Markus Braun and other executives on charges of commercial fraud. Investigators in Bavaria, where Wirecard has its headquarters, say the total fraud may amount to €3.2 billion, which was borrowed to cover unreported losses.
A special inquiry?
Aside from grilling the ministers, finance committee members are tasked with deciding whether to establish a special inquiry. That would allow them to call witnesses and more deeply investigate the affair.
In a survey for the German newsmagazine Der Spiegel, more than three-quarters of respondents said they support a parliamentary investigation into the German government’s role in the Wirecard scandal. A number of parliamentarians are also in favor.
“The government has not properly informed the Bundestag,” committee member Florian Toncar of the business-friendly Free Democrats told Bayerischer Rundfunk before the committee convened. “The matter is well worth an investigative committee.”
Paus, the committee chairwoman, said as long as the government cooperated with the committee’s questions and requests for information, an official inquiry would not be necessary. “I’m so far satisfied with their willingness to participate,” she said.
An investigation needs just one-quarter of the Bundestag to get off the ground. Opposition parties could have the votes, and there is also support among some members of the Social Democrats and conservatives, which run the government.
If approved, the inquiry would come with an expiration date: Germany’s next general election in September 2021. That would likely keep Wirecard in the news through the election campaign. Scholz, who in addition to being finance minister is Angela Merkel’s vice chancellor, is also considered to be a top choice for the Social Democrats’ chancellor candidate.
For the moment that seems far away for Scholz who, after taking just one question from reporters, said he was “looking forward to getting back to vacation.”