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It's time to regulate the regulators

Kommentatorenbild *PROVISORISCH* - DW Reporterin Kate Ferguson
Kate Ferguson
April 30, 2021

Germany's Wirecard debacle is just one example of a scandal that could have been avoided if those in charge of oversight had actually done their job, says Kate Ferguson.

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Wirecard logo
The Wirecard collapse is the most recent example of oversight failure in GermanyImage: picture-alliance/SvenSimon/F. Hoermann

What would you do if you were confident you could get away with it? Perhaps you'd rob a bank, or have a wild affair. Or maybe you'd subsist on nothing but candy floss for the rest of your life.

The chances are you won't, though. The risk of being arrested, destroying your marriage or becoming a diabetic are simply too high.

For most of us, the question is destined to remain hypothetical. After all, life has taught us that bad behavior does not generally go unpunished.

Generally doesn't mean always 

There are notable exceptions to the rule, though. In recent years, three major scandals in Germany have provided pleasingly concrete answers to the question.

First, there's Volkswagen, which flouted environmental tests by installing cheat devices in up to 11 million vehicles. Then there's the young German reporter named Claas Relotius who forged a successful journalism career by fabricating stories or elements of his stories. Finally, there's Wirecard, the payment company that built its business on €1.9 billion ($2.3 billion) of assets that did not exist.

In all cases, the deception was richly rewarded. In Volkswagen's 2014 annual report, the carmaker boasted about receiving numerous awards for environmental protection. Meanwhile, Relotius was winning prestigious prizes for his reporting, and Wirecard rose to become the tech darling of Germany's financial world.

Supported by many

Approval came from especially high places. The year before the emissions scandal broke, Autotest, the influential magazine for car buyers, and Ökotrend, an environmental research institute, named two Volkswagen passenger cars "the most environmentally friendly vehicles" across all classes. Relotius was named CNN Journalist of the Year, and went on to receive the European Press Prize and the German Reporter Award no less than four times. Meanwhile, Wirecard was receiving approbation from the highest political ranks, including from German Chancellor Angela Merkel, who advocated for the company during a trip to China in 2019.

The lies continued unabated for years. Fact-checkers at Der Spiegel, widely considered to be the pinnacle of German journalism, did not uncover Relotius' fictions. EY, one of the largest accountancy firms in the world and responsible for auditing Wirecard, gave the company a clean bill of health. Germany's financial regulator, BaFin, continued to offer the company its firmest backing.

A exhaust pipe coming from a VW car, with the VW logo in the background
The Dieselgate scandal has cost German carmaker Volkswagen dearlyImage: picture-alliance/dpa/J. Stratenschulte

Large-scale deception

In each case, the scandal was uncovered by an unlikely and relatively powerless source. Three students at the Center for Alternative Fuels Engines and Emissions in the US state of West Virginia unwittingly discovered Volkswagen's deception when they published data on nitrogen oxide emissions in two VW models. Their study had been out for a year and a half before the Dieselgate scandal broke.

DW columnist Kate Ferguson
DW columnist Kate Ferguson

Juan Moreno, a freelance journalist from Spain, who enjoyed nothing close to the professional standing of Relotius, sounded the alarm about the German reporter's work. At first, editors at Der Spiegel didn't believe him.

Similarly, when two journalists at the Financial Times reported on suspicious activities at Wirecard, Germany's financial regulator, BaFin, responded by filing a criminal complaint against them, accusing them of market manipulation.

The truth did eventually come out and in all three cases, and the downfall has been spectacular. Several Volkswagen executives have been charged with crimes, two have been imprisoned and the company has had to pay out tens of billions of dollars in damages.

Claas Relotius suffered a humiliating fall from grace and was stripped of his journalistic accolades. Wirecard collapsed spectacularly and is now the subject of a German parliamentary inquiry.

Acting with impunity?

Yet none of these scandals could have happened if experience had not taught each party to act with impunity.

If Volkswagen had been scrutinized instead of idolized, its cheating may have been uncovered far earlier. If editors at Der Spiegel had interrogated instead of unquestioningly revered Relotius, his lies would not have been published. If EY and BaFin had been diligent, Wirecard would not have been able to commit large-scale fraud.

In the world of business and media, the question of what you would do if you were confident you could get away with it should always remain a hypothetical one. The moment it isn't, someone isn't doing their job.