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The collapse of Wirecard revealed a gap in the heart of Germany, Inc.



The collapse of Wirecard revealed a gap in the heart of Germany, Inc.
Journalists, whistleblowers and skeptical investors have all been questioning Wirecard accounting for years, but executives can dismiss their expectations. Wirecard (WCAGY) received protection from the country’s banking regulator, who pushed back forcefully against critical hedge funds and investigative journalists, but failed to find anything wrong at the company.

In the end, the destruction only took seven days. Wirecard admitted last week that around a quarter of his assets – € 1.9 billion ($ 2.1 billion) in cash – might never have existed. CEO Markus Braun resigned and was quickly arrested on suspicion of inflating the company’s balance sheet and sales through fraudulent transactions. Wirecard filed for bankruptcy on Thursday.

Braun, who had been released on bail, consistently denied making mistakes, instead stating that Wirecard was a victim of highly sophisticated fraud. But a picture of a valuable technology company was encouraged by the authorities rather than researched, and a supervisory board that failed to act as a check on the chief executive was widely regarded as a visionary. The accounting firm EY accelerated the downfall of Wirecard by refusing to sign the final results for 2019, after more than a decade of auditing the company.

“You have a lot of evidence of sinners, observers, of all kinds of guilty parties,” said Christian Strenger, academic director of the Corporate Governance Center at the HHL Leipzig Graduate School of Management.

Wirecard was the first member of Frankfurt’s DAX elite stock index to file for bankruptcy. But the explosion follows a series of scandals over the past five years that have embarrassed the German government, regulators and business community, raising questions about the strength of corporate governance and financial regulation in the world’s fourth largest economy.

Volkswagen (VLKAF), the world’s biggest carmaker and German manufacturing champion, admitted in 2015 that millions of diesel vehicles had been equipped with software to cheat on emissions tests. German bank (DB), the country’s largest lender, has paid tens of billions of dollars in fines related to the sale of toxic mortgage assets, interest rate manipulation, and Russian money laundering schemes.
Two more German corporate snafus have produced global headlines this week: more than 1,500 workers tested positive for corona virus in factories owned by meat processing giant Tönnies Group, forcing local officials to re-apply locking to more than half a million people in the surrounding area; and Bayer (BAYRY) agreed to pay more than $ 10 billion to settle claims that Roundup, a product it owns thanks to the acquisition of Monsanto, caused cancer.

The outbreak at the Tönnies factory highlighted the poor working and living conditions faced by foreign workers in this industry, and the German government responded by promising to ban the use of subcontractors and double the fines for violating regulations on working hours.

Bayer settlement comes after investors voiced deep concern about the acquisition of Monsanto, and questioning whether management has understood legal risks correctly. Bayer’s shares have lost about one third of its value since the purchase of Monsanto was announced in September 2016.
Giant meat packing company in the heart of Germany's new coronavirus hotspot

The company operates in various industries, but with the exception of the Tönnies Group, they are publicly listed and run by a management board with responsibilities for day-to-day operations and overseen by a supervisory board that includes workers’ representatives. Critics say surveillance breaks down when boards become too comfortable, which can occur when top executives move into supervisory positions. Investors complain that their interests are too often overtaken by other considerations, such as politics or the company’s internal dynamics.

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Strenger said that German corporate governance has improved significantly in recent decades, but shortages by executives and directors are still too common. Additional protection would be relatively easy to install, he said, such as changing stock market rules to prevent companies from delaying their financial results, as Wirecard did.

“We have made good progress … but there is still room for human error, or to try to believe in people who appear in convincing ways. [Wirecard] traded among analysts and investors as the next SAP (SAP), and who doesn’t want to join in? “he said, referring to the software giant which is also listed on DAX.
Former Wirecard CEO Markus Braun is considered by many to be a technology visionary.
The collapse of the Wirecard made waves far beyond Germany. Panic searches for lost funds reached the Philippines, where the central bank denied that money had entered the country’s financial system. US card issuer MasterCard (MA) and Visa (V) is considering whether it will allow Wirecard to continue processing payments on their network, according to Bloomberg, and the British regulator has moved to protect Wirecard client funds.

The German government is now paying close attention. Finance Minister Olaf Scholz described the Wirecard scandal as “very worrying,” saying the country must act quickly to increase oversight. “Critical questions arise over corporate oversight, especially with regard to accounting and balance sheet control. Auditors and regulatory bodies appear to be ineffective here,” Scholz said in a statement.

The German Federal Financial Supervisory Authority, or BaFin, is actively investigating whether Wirecard violates rules against market manipulation. But regulators are now under close scrutiny, with critics who argue that it should do a better job of overseeing the Wirecard banking unit, even if it does not have direct supervision of a larger company.

Mastercard and Visa are reportedly reconsidering their relationship with Wirecard after an accounting scandal

Observers also want to know why BaFin issued a temporary ban in 2019 that prevented investors from borrowing Wirecard shares to sell them in anticipation of falling prices, and why BaFin filed criminal complaints against journalists in the Financial Times, which published a series of open accounting articles and management irregularities in the company . BaFin chief Felix Hufeld described the scandal earlier this week as a “total disaster.”

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The European Commission has asked its main market watchdog to conduct an initial BaFin investigation. Valdis Dombrovskis, European Union official in charge of financial services policy, told the Financial Times that the bloc must be ready to launch an official inquiry if necessary.

“We need to clarify what’s wrong,” he said.

EY, who has faced criminal complaints from the German shareholders’ association SdK, said Friday that the collapse of the Wirecard was the result of “complicated and sophisticated fraud, involving many parties around the world in different institutions, with the purpose of deliberate fraud.”

“Collusive fraud designed to deceive investors and the public often involves extensive efforts to create false documentary traces,” the auditor added in a statement. “Professional standards recognize that even the most powerful and expanded audit procedures may not reveal collusive fraud.”

– Chris Liakos, Eoin McSweeney and Stephanie Halasz contributed reporting.

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Portuguese historical films will premiere on 29 December.



Portuguese historical films will premiere on 29 December.

Method Media Bermuda will present the documentary FABRIC: Portuguese History in Bermuda on Thursday, December 29 at the Underwater Research Institute of Bermuda.

A spokesperson said: “Method Media is proud to bring Bermuda Fabric: Portugal History to Bermuda for its 5th and 6th showing at the Bermuda Underwater Observatory. In November and December 2019, Cloth: A Portuguese Story in Bermuda had four sold-out screenings. Now that Bermuda has reopened after the pandemic, it’s time to bring the film back for at least two screenings.

“There are tickets For $ 20 – sessions at 15:30 and 18:00. Both screenings will be followed by a short Q&A session.

Director and producer Milton Raboso says, “FABRIC is a definitive account of the Portuguese community in Bermuda and its 151 years of history, but it also places Bermuda, Acors and Portugal in the world history and the events that have fueled those 151 years.

“It took more than 10 years to implement FABRIC. The film was supported by the Minister of Culture, the Government of the Azores and private donors.

Bermuda Media Method [MMB] Created in 2011 by producer Milton Raposo. MMB has created content for a wide range of clients: Bermuda’s new hospital renovation, reinsurance, travel campaigns, international sports and more. MMB pays special attention to artistic, cultural and historical content.

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Maestro de Braga is the first Portuguese in the National Symphony Orchestra of Cuba.



Maestro de Braga is the first Portuguese in the National Symphony Orchestra of Cuba.

Maestro Filipe Cunha, Artistic Director of the Philharmonic Orchestra of Braga, has been invited to conduct the Cuban National Symphony Orchestra, as announced today.

According to a statement sent by O MINHO, “he will be the first Portuguese conductor to conduct this orchestra in its entire history.”

In addition to this orchestra, the maestro will also work with the Lyceo Mozarteum de la Habana Symphony Orchestra.

The concerts will take place on 4 and 12 March 2023 at the National Theater of Cuba in Havana.

In the words of the maestro, quoted in the statement, “these will be very beautiful concerts with difficult but very complex pieces” and therefore he feels “very motivated”.

From the very beginning, Rachmaninoff’s Piano Concerto No. 2 will be performed by an Italian pianist (Luigi Borzillo), whom the maestro wants to bring to Portugal later this year. In the same concert, Mendelshon’s First Symphony will be performed.

Then, at the second concert, in the company of the Mexican clarinetist Angel Zedillo, he will perform the Louis Sfora Concerto No. 2. In this concert, the maestro also conducts Tchaikovsky’s Fifth Symphony.

“This is an international recognition of my work. An invitation that I accept with humility and great responsibility. I was surprised to learn that I would be the first Portuguese member of the Cuban National Symphony Orchestra. This is a very great honor,” the maestro said in a statement.

“I take with me the name of the city of Braga and Portugal with all the responsibility that goes with it, and I hope to do a good job there, leaving a good image and putting on great concerts. These will be very special concerts because, in addition to performing pieces that I love, especially Rachmaninov and Tchaikovsky, I will be directing two wonderful soloists who are also my friends. It will be very beautiful,” concludes Filipe Cunha.

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