Report: EY Whistleblower Called Out Wirecard For Fraud Years Before It Went Bankrupt
An Ernst & Young (EY) whistleblower has alleged the global accounting firm was warned as far back as 2016 that senior managers at Wirecard may have committed fraud and one had tried to bribe an auditor, the Financial Times (FT) reported.
The German payments company filed for bankruptcy protection in June and is already facing an investigation by APAS, the body that oversees auditing firms in Germany. The new information will likely make EY the target of lawsuits from companies that lost billions of euros, FT reported. EY was Wirecard’s auditor for more than a decade.
An audit by KPMG, a global auditing firm, criticized Wirecard’s lack of transparency. KPMG said it was unable to obtain the data it needed for the audit and criticized the company for an unwillingness by its third-party partners to contribute to the report.
The KPMG probe found that an internal whistleblower at EY raised fraud allegations against Wirecard four years ago and documented that the company had attempted to bribe an auditor in India, according to FT.
The details of the unnamed whistleblower are contained in a 61-page unpublished addendum to a special audit by KPMG from April, which FT said it has seen. The details were not part of the audit, but they were included because the auditing team considered them important enough to report.
In a letter to EY’s headquarters, the whistleblower focused on a series of acquisitions in India that Wirecard had closed in 2016, according to FT. Wirecard paid the Emerging Market Investment Fund 1A 340 million euros ($399 million). The whistleblower wrote Wirecard’s senior management held stakes in the company that made the sale, a conflict of interest. The letter also accused Wirecard managers of artificially inflating the operating profit of the Indian businesses in an attempt to raise the acquisition price.
In addition, the whistleblower wrote that Wirecard manager offered an EY employee “personal compensation” provided the auditor agreed to sign off on manipulated sales numbers.
EY’s global chairman and CEO recently expressed regret over the accounting firm’s failure to uncover fraud sooner at Wirecard. In a letter to clients, Carmine Di Sibio pledged the accounting firm will do a better auditing job as the London-based professional services network recovers from the fallout from its role as auditor in the Wirecard scandal.
But an apology may not be enough. Marc Liebscher, a lawyer with the Berlin firm representing Wirecard investors, called EY’s auditing “a disaster” and said the firm should stand trial.