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Wirecard CEO steps down after accounting scandal

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Wirecard CEO Markus Braun stepped down from his position over the German payment firms latest accounting scandal. Yahoo Finance’s On The Move panel shares the details.

Video Transcript

ADAM SHAPIRO: Edmund Heaphy joins us from London with the latest on what happened to the CEO because of the accounting scandal.

EDMUND HEAPHY: Yes, Adam, yesterday German payments giant Wirecard, which has long been a darling in Germany and Europe revealed that $2.1 billion was apparently missing from its bank accounts. And this came after a disclosure from accounting firm EY which refused to sign off on the company's latest set of accounts. And today then, two banks in the Philippines, which were meant to be holding the money on behalf of the company, said that they did not have that cash and never did.

So after almost two decades as CEO and its largest shareholder, Markus Braun resigned today with immediate effect. Wirecard is obviously now likely to face a cash crunch and is holding emergency talks with banks to secure a financial lifeline. And now, Adam, this might seem like a fast-moving story, but this scandal has been running for over a year at this point. It was in May 2019 that a whistleblower told "The Financial Times" about financial and accounting irregularities at the payments firm.

And on top of issuing an almost outright denial of the report in "The FT" Wirecard had actually accused the newspaper of being involved in market manipulation. But I suppose it was not a smart move to go to war with a paper that buys salmon pink ink by the barrel. In October, "The FT" then published a follow up based on internal spreadsheets and correspondence that appeared to indicate a concerted effort to fraudulently inflate sales and profits at various Wirecard divisions.

And this revealed a lot of suspect things. One spreadsheet appeared to show that 4.2 billion euro in payments routed through one Dubai subsidiary was producing more profit than 62 billion euro worth of transactions routed elsewhere in the company. The chairman Wolf Mathias after this initially dismissed calls for an independent audit of the company, calling discussion about its accounting practices an annoyance. And he quickly relented obviously, appointing KPMG then to conduct an audit. And that found a series of irregularities and prompted longtime auditors EY to look more closely at the company's accounts.

But I think one lesson, Adam--

ADAM SHAPIRO: Edmund?

EDMUND HEAPHY: Yes?

ADAM SHAPIRO: Let me stop you there. You just brought up EY. I mean, accounting is not something that just happens out of the blue. It's supposed to happen on a regular basis. So isn't this potentially going to ensnare the accounting firms that have been signing off on these books for several years?

EDMUND HEAPHY: I think there is serious potential for that, Adam. As you said, EY had consistently, year after year given the green light to the company's accounts. And there was no real semblance of any scrutiny from EY even after the initial "FT" report in May last year. And as I said, it wasn't until KPMG was basically-- until the company was forced to appoint KPMG to conduct an independent audit that EY has now discovered these irregularities and problems across the company.

ADAM SHAPIRO: It would seem one of the silly but simple questions that an accountant could have asked was to call the banks, allegedly in the Philippines, and say, do you have these clients, do you have those moneys. We'll keep following this. Thank you very much.