Markus Braun reported himself to Munich prosecutors on Monday evening. Photo / Getty Images
Markus Braun reported himself to Munich prosecutors on Monday evening. Photo / Getty Images
A worsening accounting scandal at German payments group Wirecard may have repercussions for its New Zealand subsidiary which has relied on its parent for financial support in recent years.
Wirecard's founder Markus Braun was this week arrested on suspicion of false accounting and market manipulation, two days after the fintechgroup admitted that €1.9 billion (NZ$3.32b) of cash reported on its balance sheet likely never existed.
The group's shares have fallen 80 per cent since the revelation and later statements that previous financial statements may be inaccurate.
Wirecard New Zealand, which runs an office of about 20 staff in Auckland, has yet to make public its financial statements for the December 2019 year but did file its 2018 accounts to the Companies Office in March this year.
Those statements showed the firm made a loss of $8 million in 2018, worse than the $1.2m loss reported the previous year.
The accounts stated that Wirecard NZ was dependent on continued support from its parent company – including a €10m letter of support for five years beginning April 2019.
A note under the heading "subsequent events" highlighted a court dispute with an Australian company that it was defending and a recapitalisation event in December 2019, whereby the German group increased the New Zealand company's share capital by €7.51m.
Wirecard NZ used this to settle "all outstanding loans" with Wirecard Technologies GmbH, the note said.
Since then the New Zealand firm has borrowed an additional NZ$1.85m from its parent company.
The accounts also noted a recharging of costs incurred by the company's Greek branch "if those costs are not related to the company's products or activities but are instead incurred as a result of work undertaken on Wirecard group products or activities."
On that basis, $4.01m was recharged to Wirecard Technologies GmbH during the year ended December 2019, the note said.
Shares in Wirecard have fallen more than 80 per cent since last week, when the company revealed cash was missing. Photo / AP
Wirecard NZ's director and vice-president of finance and administration, John Nicholson, is now based in Australia, according to local staff.
Efforts to contact him led the Herald to the company's global public affairs team, who did not respond to questions about the New Zealand subsidiary.
Wirecard's latest public statement about the current situation talked about future funding and potential global restructuring that could potentially affect subsidiaries like Wirecard NZ.
"Wirecard continues to be in constructive discussions with its lending banks with regard to the continuation of credit lines and the further business relationship, including the continuation of the current drawing coming due at the end of June.
"In addition, the company is examining a broad range of possible further measures to ensure continuation of its business operations, including cost reductions as well as restructuring, disposal or termination of business units and products segments."
Wirecard's New Zealand accounts showed it paid wages and salaries of $8.6m in 2018.
The firm does not appear to have received support under the Government's Covid-19 wage subsidy scheme, based on a search of the Ministry of Social Development's web page.
Wirecard's Asia headquarters last year were raided by Singapore police after the Financial Times reported whistleblower allegations that staff in the city state had forged documents to deceive regulators and auditors. Police investigations there are ongoing, the FT reported this week.
Last year the Herald reported two of Wirecard's NZ directors – Andreas Kazamias from Cyprus and Arne Matthias of Singapore – resigned on February 28, 2019.
Wirecard NZ's remaining three directors are Singapore-based Jeffry Ho and Fook Sun Ng, and Nicholson.
Wirecard was founded in the late 1990s and then expanded through acquisitions, initially in Eastern Europe and then in Asia.
It established a foothold in Australia and New Zealand by buying Auckland-based payment company GFG Group in 2014.
