2 Wirecard managers arrested, ex-CEO back in custody

German prosecutors said Wednesday they had rearrested former Wirecard Chief Executive Markus Braun and arrested two board members on suspicion of "commercial fraud.”

Munich prosecutor Anne Leiding said the company's chief financial officer and its former head of accounting were those newly arrested in Munich. However, in keeping with German privacy standards, the two were identified only as L. and von E. respectively.

Read more: Wirecard executive pledges to help German prosecutors

Leiding added the case against former CEO Marcus Braun had been expanded and the court had ordered him to remain in custody. Braun had been arrested previously over market manipulation and falsifying financial results before being freed on bail.

The head of a Dubai subsidiary, identified only as the managing director of Cardsystems Middle East FZ-LLC, was arrested earlier this month on suspicion of being involved in the scandal. 

All four suspects face a range of charges including fraud, breach of trust, misrepresentation and market manipulation.

Prosecutors believe that the four arrested, along with others, decided in 2015 to inflate the DAX-listed company's balance sheet by falsifying income, which made the company more attractive to investors.

"The company was to be presented as financially strong and attractive to investors and clients, so that loans could be obtained from banks and other investors on a regular basis, as well as keep it generating its own income," Munich prosecutors said.

"In reality, it was clear to the suspects that by the end of 2015 at the latest, that Wirecard was losing money overall with its actual business."

Prosecutors have urged others who participated in the massive fraud to come forward in exchange for leniency should they be convicted.

Merkel chancellery's contacts with Wirecard under scrutiny

German Chancellor Angela Merkel's office had repeated contact with representatives of the now insolvent financial services provider from late 2018 onwards, a government spokesperson confirmed on Wednesday.

Several meetings between the online payment giant and chancellery advisers took place, with former intelligence service commissioner Klaus-Dieter Fritsche and former Defense Minister Karl-Theodor zu Guttenberg involved in arranging the meetings, the spokesperson told German news agency dpa.

Read more: Germany to overhaul regulator after Wirecard scandal

During a September 2019 trip to China, Merkel promoted the online payment company's planned takeover of Chinese company AllScore Financial. The chancellery spokesperson said that Merkel had no knowledge of Wirecard's improprieties and irregularities at the time of the bilateral meeting with Beijing.

Germany's parliamentary finance committee is set to hold a special closed-door hearing related to the Wirecard scandal on July 29, in which Finance Minister Olaf Scholz and Economy Minister Peter Altmaier are expected to be questioned. Opposition parties are calling on Chancellor Merkel to also appear before the committee.

The Financial Times drew attention to apparent wrongdoings in January and February 2019. The UK-based newspaper accused company executives of shuffling cash between Asian subsidiaries to artificially inflate balance sheets and sales.

The reports eventually triggered the company's downfall. Last month, Wirecard's in-house auditors EY accused the company of an "elaborate and sophisticated fraud" after discovering a €1.9 billion ($2.2 billion) hole in its accounts.

jlw/msh (AFP, Reuters, AP, dpa)