By John O’Donnell and Tom Sims
FRANKFURT (Reuters) – In February 2019, after Wirecard’s share price plummeted, German authorities launched a criminal investigation against short sellers and journalists accused the company of fraud. and prohibits investors from betting against the company.
Documents Reuters saw for the first time show that the only independent information – apart from Wirecard’s representatives – that Munich prosecutors who launched criminal investigations received was the third report of events from a convicted money launderer, Daniel James Harris.
Reasons for the decision of prosecutors and regulators to launch criminal investigations and the ban on short sales, and whether they are overly enthusiastic about supporting Wirecard, are questions. The subject of focus is being investigated by a parliamentary investigation of the company’s biggest post-war collapse in Germany. fraud scandal.
The crime probes and the ban on short sales were put in place by the authorities after Wirecard complained that it was being targeted by unidentified speculators, who they deemed ties to Two Financial Times journalists were foreseen about a negative report that they said was blamed for accounting manipulation.
Some Wirecard executives were in fact engaged in a sophisticated global scam at the time, the German government, prosecutors and regulators said last year after the company bankruptcy filing payments, debtors nearly 4 billion dollars.
Treasures seen by Reuters included thousands of pages of email messages, chat messages and memos provided by German authorities for the parliamentary investigation, culminating this week with the Prime Minister’s testimony. Angela Merkel on Friday.
According to documents, witness testimony from Harris was provided by Wirecard, with a company attorney submitting a two-page written statement to a prosecutor on February 14, 2019, according to the documents.
In the statement, Harris identifies himself as an equity trader in Essex, south of England and says he met his broker, with whom he has not identified, on January 30, 2019. , the day Wirecard’s share price fell to 22%.
The broker said he was informed that investors were trading in anticipation of a negative FT report on the company, published that afternoon, according to a Reuters statement.
“He told me he spoke to a friend of his,” Harris said. “My broker said this friend told him that an article is about to be published about Wirecard.”
In his statement, Harris said he was not acting on this news. However, Wirecard argues that the market discussion of a pre-published negative article is evidence that investors are trading on inside information and perhaps collusion with traders. newspaper. At the time, the FT denied this, calling the Wirecard claims a “smoke screen”.
Reuters was unable to contact Harris or his attorneys for comment.
Harris was sentenced to two years in prison in February 2017 for money laundering for drug dealers running motorcycle deliveries in London and Essex, according to the British National Crime Agency.
A spokesman for Munich state prosecutors said Harris’s statement corroborated Wirecard’s claim that it was unfairly targeted by speculators.
“The affidavit has been used by Wirecard’s legal representatives to justify the legal claim,” she added.
In February this year, the state prosecutor told a congressional investigation that he did not speak to Harris without giving details.
Munich prosecutors canceled their investigation with journalists last year, concluding that there was no evidence of any collusion with investors, while there was no action against some. The short seller is investigated.
‘A LOT OF INFORMATION ABOUT CONCRETE’
Documents Reuters saw included letters from executives and officials from Wirecard, BaFin prosecutors and financial regulators to lawmakers.
The prosecutor’s office emailed Harris’s statement to BaFin on February 15, 2019, a Friday the documents showed that, and on Monday, BaFin announced the first short-selling ban against a single stock in German history.
The BaFin ban is a turning point in the story, according to lawmakers, who have said it tacitly verified the company’s credibility, while also preventing investors from doubting it.
A BaFin spokesperson said the Harris witness’s statement “played no role” in the ban on short selling, but it was consistent with testing market manipulation behavior.
However, Sebastian Kimmer, a member of BaFin, who corresponded with Munich prosecutors, testified before lawmakers in February this year that Harris’s statement provided “very specific information. can “support Wirecard complaints.
Kimmer said the prosecutors’ information was taken as serious and reliable by the regulator. He added that Harris’s statement, along with the charges from Wirecard forwarded by prosecutors, was transferred to his superiors.
No details of Harris’ claims have been disclosed to the public.
Munich prosecutors have previously defended their role, saying they acted carefree in warning BaFin of Wirecard’s concerns that it would be a target for short sellers.
Felix Hufeld, then chairman of BaFin but resigned after the scandal, defended a ban on short selling as a way to maintain confidence in Germany’s stock markets.
But three lawmakers in parliament’s investigation say actions by prosecutors and BaFin in February 2019 show their willingness to join Wirecard against critics, even in the face of with what they consider fragile evidence.
Florian Toncar, one of the lawmakers, said Munich prosecutors showed a tendency to “take a one-way view on the Wirecard case”.
“They kept the unsigned manuscript of a vague testimony … like a plausible story,” he added.