Former Wirecard chief executive Markus Braun has been accused by Munich prosecutors of committing a multiyear fraud and arrested for a second time following the June collapse of the German payments group.
The prosecutors now suspect Wirecard's accounting fraud began as early as 2015 when Mr Braun and other suspects allegedly agreed to inflate Wirecard's revenue in an attempt to deceive investors.
Investigators have broadened their investigation into the downfall of the company to include other former executives, the prosecutors said, with Wirecard's former finance boss, Burkhard Ley, and the group's head of accounting, Stephan von Erffa, taken into custody.
The new arrests mean four Wirecard employees have now been detained by German authorities. Mr Braun's €5m bail has been revoked.
Once a standard-bearer for Germany's tech sector, Wirecard collapsed last month after acknowledging a multiyear accounting fraud and warning that the €1.9bn of cash on its books probably did "not exist".
The new arrests came as the German government revealed that a former official in the German chancellery had personally lobbied for the disgraced payments company, a revelation that could prove embarrassing to the administration of Angela Merkel.
Klaus-Dieter Fritsche, who used to co-ordinate the work of the German intelligence agencies in the chancellery, set up a meeting with Lars-Hendrik Röller, Ms Merkel's senior economic adviser, and senior Wirecard executives in September 2019.
The get-together, on September 11, was attended by Alexander von Knoop, Wirecard's chief financial officer, and Mr Ley, as well as Mr Röller and Mr Fritsche. The chancellery described it as a "getting-to-know-you" session, though Wirecard also informed the officials about its business activities in the Far East.
According to a detailed summary of contacts between the chancellery and Wirecard, seen by the FT, Ms Merkel also met one of the company's lobbyists, Karl-Theodor zu Guttenberg, a former German defence minister who is now chairman of Spitzberg Partners, an investment and advisory firm headquartered in New York. The meeting took place on September 3, 2019, ahead of Ms Merkel's 12th official trip to China, and Wirecard came up during their conversation.
Government officials insist that the chancellor was unaware of problems at Wirecard at the time of the trip. However officials have acknowledged that Olaf Scholz, the finance minister, was made aware of suspected irregularities at the company in February 2019 — almost a year and a half before it collapsed.
MPs are to interrupt their summer recess to grill Mr Scholz and economy minister Peter Altmaier at a special session of the Bundestag's finance committee next week. Some opposition politicians have called for a parliamentary inquiry into the regulatory failings that led to the Wirecard debacle. German regulators, including financial watchdog BaFin, have been harshly criticised for failing to act on early warnings on Wirecard.
Munich prosecutors said that in the last five years banks and other investors put €3.2bn into Wirecard. "Due to Wirecard's insolvency, those funds are most probably lost," said Anna Leiding, a prosecutor on the Wirecard investigation. "In interrogations, we were told about a strictly hierarchical system that was shaped by an esprit de corps and pledges of allegiance to the chief executive as a leader."
Mr Braun has previously denied wrongdoing. Lawyers for the former chief executive did not immediately respond to a Financial Times request for comment.
Jan Marsalek, the company's former chief operating officer, has vanished but is wanted under an international arrest warrant.
Earlier this month, Oliver Bellenhaus, the Dubai-based head of a Wirecard subsidiary at the core of the fraud, reported himself to Munich prosecutors. A lawyer for Mr Bellenhaus said last week that Mr Bellenhaus "was facing his individual responsibility — unlike others".
The prosecutors said that one suspect had turned into a chief witness and that this person's co-operation had helped to significantly advance the investigation. A person familiar with the investigation told the Financial Times that Mr Bellenhaus was the chief witness. Mr Bellenhaus's lawyer declined to comment.
Mr Ley, a 61-year-old former banker, was Wirecard's chief financial officer between 2006 and 2017 and, according to his profile on corporate networking site Xing, continued to work as a senior adviser to Wirecard's management board until June 2020. When he retired as CFO in 2017, Mr Braun thanked him for an "extraordinary performance".
Mr von Erffa, who joined Wirecard some nine years ago, alongside Mr Braun, Mr Marsalek, Mr Bellenhaus and other senior Wirecard employees earlier this year briefed KPMG about the arrangements with third parties during a special audit by the accounting firm, according to documents seen by the Financial Times.
Written by: Olaf Storbeck in Frankfurt and Guy Chazan in Berlin
© Financial Times