Thu. Sep 17th, 2020

Pressure from activist on chairman Eichelmann after KPMG says it is unable to verify profits

Chris Hohn, manager of the $24bn Children’s investment fund, has called on Wirecard’s supervisory board to fire chief executive Markus Braun after KPMG said it was unable to verify whether large portions of the fintech’s profits were real. 
The call by the activist short seller, one of Europe’s best known and most successful investors, adds to the pressure on Thomas Eichelmann, Wirecard chairman, after auditors at KPMG said they faced delays and obstacles while conducting the six-month probe. 
Shares in the payment specialist, a member of Germany’s Dax 30 index, plunged 26 per cent on Tuesday when it published the results of the audit commissioned after the Financial Times reported whistleblower allegations of accounting fraud centred on the group’s relationship with third parties. 
In its report on the audit published on Tuesday, KPMG said it had “informed the Supervisory Board in a letter about a considerable delay in Wirecard AG’s submission of the documents requested by us”. It added that the company had “repeatedly postponed individual agreed interview appointments with key Wirecard internal contacts”. 
Mr Hohn warned that the supervisory board “has wide-ranging legal obligations” to oversee the management board, and “is legally obliged to intervene. In our opinion, the necessary intervention is now to remove the CEO from all management duties,” he said, in a letter posted on the TCI website late on Tuesday.
Wirecard faced repeated questions from analysts on Tuesday about the company’s co-operation with KPMG. Mr Braun said the audit was independent, had found no evidence of balance-sheet misrepresentation and took time because of the complexity of the data involved.
The call for action from TCI, which has sold short 1 per cent of Wirecard’s stock, came as other investors expressed dissatisfaction with the results of the special audit. Ingo Speich, head of sustainability and corporate governance at Deka Investment, which holds a 1.3 per cent stake in Wirecard, called for a further investigation into Wirecard’s third-party acquiring on Thursday. “Wirecard needs to act as soon as possible and finally create transparency to avert further damage,” he said.
Wirecard has said part of KPMG’s work, the examination of data for the month of December 2019, will continue. Mr Hohn said that if the supervisory board were not to remove Mr Braun then, at the very least, it should “remove Wirecard’s management from all involvement in this audit until all of the allegations have been fully resolved”.
The investor also raised concerns about Wirecard’s compliance with the anti-money laundering regulations, following KPMG’s inability to identify some Wirecard customers at the heart of whistleblower allegations of fraud. “How is it possible to comply with these regulations if Wirecard either does not know or will not disclose who its customers are?” Mr Hohn asked. 
Wirecard has always said it complies with all applicable rules and regulations.
The investor has fought previous activist battles in Germany, including a fight over executive compensation at Volkswagen in 2016 and an earlier campaign to oust the chief executive of Deutsche Börse when the investor was described as a hedge fund “locust”. 
Wirecard has sued the FT for misuse of trade secrets in Munich relating to stories published in January and February 2019. The FT stands by its reporting and is defending the lawsuit.