Wirecard's ex-head of accounting has admitted to forging documents requested by KPMG during a special audit, ahead of a trial that is set for later this year, according to people familiar with the matter.
Stephan von Erffa is one of three defendants in a case brought by Munich prosecutors over the spectacular downfall of one of Germany's highest-flying technology companies.
The 47-year-old is the first senior Wirecard executive to admit wrongdoing since Oliver Bellenhaus, head of a Dubai subsidiary, turned himself in to authorities in July 2020 and turned chief witness for the prosecution.
Wirecard crashed into insolvency in June 2020 after admitting that half of its stated revenues and €1.9 billion ($3.1b) of corporate cash purportedly held in escrow accounts in Asia did not exist.
Von Erffa is one of three Wirecard executives who were charged with fraud, breach of trust and market manipulation this year. He, Bellenhaus and former chief executive Markus Braun, who denies wrongdoing, are set to face trial this year.
Von Erffa denied any involvement in the wider fraud and blamed Wirecard's fugitive second-in-command Jan Marsalek during a parliamentary inquiry into the scandal last year. However, the police investigation found evidence that von Erffa in early 2020 forged documents that were then shared with auditors at KPMG and EY.
The documents were linked to a €50 million payment that Wirecard had received in 2018, purportedly from one of the Asian escrow accounts and wired by a trustee at von Erffa's behest.
One year after the payment, KPMG scrutinised Wirecard's accounts in a special audit. The investigation was launched by the supervisory board after the Financial Times in October 2019 raised questions about potential balance sheet manipulation.
KPMG's forensic investigators wanted to see von Erffa's payment authorisation for the €50m transfer. As no such document existed, the top accountant decided to fabricate one, he told prosecutors, according to people familiar with the matter.
Using a private computer, where von Erffa set back the system date to December 2018, he generated a back-dated email and a sham "escrow request/authorisation form" for the €50m, both of which have been seen by the FT.
Von Erffa told prosecutors that the forgery was a single and isolated case, according to people familiar with the matter. He said that the transaction itself had been genuine and he created a document to substantiate it under immense pressure from KPMG to supply evidence. He stressed he had not been willing to forge documents to doctor the company's accounts.
The collapse of Wirecard, which at its peak was valued at more than €24b, sent shockwaves through Germany's financial and political elite. Wirecard's long-standing auditor EY did not spot the fraud for years, while German financial regulator BaFin protected Wirecard from short sellers and prosecutors took action against critical journalists.
OCBC, the Singaporean bank that was supposedly holding the escrow accounts, told Wirecard's administrator after its collapse that it never held significant amounts of cash on behalf of the trustee, and that some of the accounts did not exist at all, according to documents seen by the FT.
Prosecutors established that the €50m sent to Wirecard came from one of its Asian business partners, which had previously borrowed €100m from Wirecard and sent half the money back via a string of opaque companies to obscure its origin, people familiar with the matter said.
Munich prosecutors and a lawyer for von Erffa declined to comment.
Written by: Olaf Storbeck
© Financial Times