Munich court opens door to reclaim dividends from Wirecard investors
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A German court has ruled invalid Wirecard’s final two full-year financial statements in a landmark decision that opens the door for the collapsed payments group’s administrator to reclaim €62mn in dividends and tax.
Thursday’s decision by a trade chamber of the Munich regional court, which was disclosed in a statement, is a new embarrassment for Wirecard’s auditor EY, which signed off the accounts without realising that half the company’s revenue and billions in corporate cash did not exist.
Wirecard, which at its peak had a market capitalisation of more than €24bn, imploded two years ago in one of Europe’s biggest accounting scandals, leaving behind more than €3bn in debt.
Former chief executive Markus Braun, who is in police custody awaiting trial, was this year charged alongside two former colleagues with fraud, breach of trust and accounting manipulation.
EY is under investigation by Germany’s audit watchdog and Munich criminal prosecutors over a potential violation of professional duties. The Big Four firm denies any wrongdoing.
EY said on Thursday that it was not a party or defendant to the legal dispute over the veracity of the financial statements.
People with knowledge of the situation pointed out that the court did not assess who was responsible for the flawed annual financial statements.
However, the ruling makes it more likely that the administrator will also sue EY over its work, according to people familiar with the matter. The auditor is already facing an avalanche of lawsuits from investors who say they relied on the firm’s unqualified audits.
Wirecard’s administrator Michael Jaffé is now likely to reclaim dividend and tax payments made by the company on the basis of the false annual reports.
The biggest single item is €47mn in dividends that were paid in 2018 and 2019. A person familiar with the administrator’s thinking stressed that Jaffé would only try to recover dividends from large shareholders, rather than retail investors, adding that about 75 per cent of the payouts appeared to be recoverable.
“Small and retail investors won’t be significantly affected,” the administrator said in a statement on Thursday.
This is likely to lead to yet another clash with Braun who, as Wirecard’s single largest shareholder with a 7 per cent stake, received about €3mn in dividend payments during 2018 and 2019.
A spokesperson for Braun, who denies any wrongdoing and regards himself as one of the fraud’s many victims, declined to comment.
Large fund managers such as DWS and Union Investment, which suffered huge losses from big positions in Wirecard, may also face claims from the administrator.
Jaffé is also trying to recover €15mn in German corporation tax that Wirecard paid on fake profit.