Olaf Scholz defends German government’s record on Wirecard

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Olaf Scholz, German Finance Minister, said the government was not responsible for the Wirecard scandal, in testimony that marked the culmination of a six-month parliamentary inquiry into the worst case of corporate fraud in the history of the post-war country.

Scholz is the most senior politician questioned to date by the Wirecard Commission of Inquiry – an investigation which revealed deep weaknesses in Germany’s system of financial supervision.

Scholz, the Social Democrats’ candidate for chancellor in the September elections, has come under increasing criticism over his role in the affair. As finance minister, he oversees financial regulator BaFin, which has been accused on several occasions of failing to step in to stop the fraud at Wirecard, despite a profusion of warning signs.

Instead, he banned the short-selling of Wirecard shares and filed criminal complaints against FT journalists who initially reported irregularities at the company.

But Scholz rejected the suggestion that he or his department was to blame for the Wirecard debacle. “The government does not bear responsibility for this large-scale fraud,” he said in an opening statement to lawmakers. He also rejected the idea that his department had tried to protect Wirecard as an “absurd fairy tale”.

Instead, he blamed EY, which has given the disgraced tech group unqualified audits for more than a decade and failed to point out flaws in its accounting practices.

But opposition members were not convinced. Danyal Bayaz, a member of the opposition Greens, said his protests of innocence were “peculiar to someone who is ultimately in charge of financial regulation”.

Fabio De Masi, MP for the left-wing Die Linke party, said the public was frustrated by politicians’ reluctance to acknowledge their failures in the Wirecard affair. “I think at some point someone has to explain to the small investors who made a mistake in Germany,” he said.

Wirecard announced last June that 1.9 billion euros was missing from its accounts and collapsed shortly after in insolvency. Munich prosecutors accuse its former chief executive, Markus Braun, of carrying out a criminal racketeering that has led to “billions in frauds”. Braun, who has been in police custody since last summer, denies any wrongdoing.

Scholz has defended BaFin’s actions in the Wirecard case, saying she acted correctly in early 2019 when she tasked the German accounting watchdog FREP with investigating the accounts of the payment company. “It was the correct procedure at the time,” he said. “I had no doubts about the ability of FREP to accomplish this task.

He also stressed that he had not been informed in advance of BaFin’s short-selling ban, stressing the regulator’s independence from the finance ministry. He acknowledged that there were now “significant doubts” as to whether the ban had been a good idea.

The information provided by state prosecutors who prompted BaFin to impose the ban turned out to be “ill-founded”, he said, undermining “the whole rationale” for the decision.

Asked by MP Florian Toncar about the criminal complaint against FT journalist Dan McCrum on his Wirecard cover, he said it was “not right”. Toncar asked if he had apologized personally to McCrum: Scholz replied that he had “let him know that the [complaint] was wrong ”.

Scholz acknowledged the weaknesses of the German regulatory system, saying: “With the knowledge and insight we have today, it is clear that the state’s supervisory and regulatory structures are not sufficiently equipped for such attack.

But he said the authorities had acted quickly to rectify the situation, carrying out sweeping reforms of BaFin that would give it more power. Scholz recently poached Swiss regulator Finma chief Mark Branson to lead the beefed up watchdog.

“My goal is a financial watchdog who can play globally in the Premier League,” he said. “The most important task is to restore confidence in Germany as a financial center.”

Matthias Hauer of the ruling CDU asked him if he bore “personal responsibility” for the fact that the scandal had not been revealed sooner. Scholz replied: “No.” Asked about the role of his colleagues at the Ministry of Finance, he said: “They are very good people who have done a remarkable job.

Scholz also faced allegations from MPs that he withheld private Wirecard emails from the investigation. Lawmakers had unearthed three emails sent from his private account, although he said in his opening statement that all communications regarding Wirecard were made from his business account.

Finance Ministry officials insisted that Scholz provided all private and business electronic correspondence to the investigation and withheld nothing. Jens Zimmermann, a Social Democrat deputy on the committee of inquiry, dismissed complaints about the email problem as a “political coup and a distraction”.


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