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Comment by sneeze-slayer | Hacker News Reader

NPR's Invisibilia did a really interesting show/podcast on one of the biggest short sellers of Wirecard and how he has been harassed for the past few years. I highly recommend people listen to if if they are interested in this crazy Wirecard tale! It's titled "Trust Fall"

https://www.npr.org/transcripts/868001948

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This was one of the groups hired to conduct some of his harassment: https://citizenlab.ca/2020/06/dark-basin-uncovering-a-massiv...

I wonder who hired them. Sure, it could be the CEO of Wirecard, but it could also be another large shareholder. Given how ridiculous this story is and how Germany's regulator BaFIN has done such a horrendous job looking over Wirecard, I would believe it if they were somehow complicit. I guess only time will tell, though.

Any shortseller with a lot of money would have an interest in bringing them down sooner rather than later.

Their financial trickery was exposed in early 2019 and then was overwhelmingly confirmed by the end of 2019.

If you were trying to make some money on their stock tanking, timing it would have been anywhere from extremely difficult to impossible.

The KPMG report was a good moment. As was earlier this week when EY refused to attest the 2019 balance sheet. Maybe not perfect, but still enough profit potential if you ask me.

Short sellers seem to be a much more reliable indicator of something corrupt going on in a company than the big auditors. You could be forgiven for thinking they are in on the scam and working to keep the director's bonuses rolling in right until the final months before a company collapses.

I suppose governments couldn't ignore the obvious forever and they are being forced to actually doing their job now.

In the UK Carrillion comes to mind as a big one, and more recently Thomas Cook. There have been many others.

https://www.parliament.uk/business/committees/committees-a-z...

One notable exception appears to be Tesla. But is it being shorted by the same (apparently quite rational) people?

I suppose there are a lot of reasons to short sell a stock, and as a laymen I always felt it was just traders manipulating the stock market casino at the cost of real businesses.

Not sure who was/is shorting Tesla, maybe they just don't like Elon, or maybe there is something going on.

With the "big four" accountants/auditors seemingly being corrupt, and governments ignoring this, or worse being complicit, how else can the financial health of a company really be known?

It now comes down to a hedge fund with the skills to do so realising a company is cooking their books, shorting it as quietly as possible. Then they drop their PDF on Twitter and watch everyone else get screwed.

Rather than EY/KPMG etc. doing their job and warning investors/regulators before the problem gets so big it crashes the stock.

Another example, NMC Health being shorted by Muddy Waters at the end of last year, a FTSE 100 company with EY as the "auditor" since 2012.

https://www.telegraph.co.uk/business/2020/02/17/nmc-health-f...

My understanding is, that short sellers look for reasons to assume a company is over-valued (for whatever reason), calculate an more reasonable evaluation and then short sell for that value.

Doesn't mean it is always fraud. Oesn#t mean they are always right. But more foten thn not, they seem to be very rational about it. Given the amount of money they are moving around, they better are.

For Tesla, it means that, more likely than not, it has nothing to do with Elon. And more with things like:

- Is Tesla a car manufacturer or a "tech" comapny? If the former, it is over-valued, if the latter, it is much less so.

- Some, I'd say questionable, business deals. E.g. the Musk family bail out of Solar City, the sometimes not so clear intercomapny lending between Musks enterproses (SpaceX, Tesla,...)

- Musk seeming lack of focus on Tesla, he does work drectly on a lot f other ventures in parallel

- Musk's pubic behaviour, which seems of compared to other CEOs. Especially in the car industry, which has again a ot to do with the first point

- Corporate governance, that seems to be abit strange in Tesla's case. Normally, when publicly traded comapnies have that kind of trouble with the SEC, it is a bad sign.

Sure, Musk plays a role in all of that. But liking or not liking him is, IMHO, the least reason why someone would put millions at the table to short Tesla.

Regarding the big four, so. If you think back to the time before Enron and SOX, it was a lot worse. Since then, the Big Fur had split up operations, auditors have to change every coupe of years.

That being said, they could a lot stricter. I was way to deeply involved in one audit once, and I wouldn't have signed of balance sheet. Well, they kind of did only bcause the subsidiery I was involved in contributed a tiny fraction and everthing else added up. But still.

Also, Wirecard is a German company, so a lot of the SEC rules don't apply. Doesn't make it any better so.

If you think Tesla is an exception, perhaps you should revisit your assumptions. Their story is not over,it is just beginning.

These stories all work the same way: "Obviously there is no fraud here, this is a short seller scam!" to "this company was always a fraud, obviously." Most people have their head in the sand on the way up, and pretend they knew all along when it implodes.

Every major fraud looks that way.

BaFIN is very much shorthanded, their typical approach is to let go until things get out of hand, they simply do not have the manpower to do pro-active oversight.

Lots of companies that you would expect to be regulated operate entirely on self regulation, and that of course doesn't work at all in the longer run. Increasing the BaFIN budget and making their salary structure comparable to industry salaries would do a lot of good in this respect.

This guy literally called them, multiple times, to their whistleblower hotline asking "Do you speak english?" "Of course, what's up?" "So I've been looking into Wirecard..." "Oh sorry, no, we don't speak english" (hang up).

That's not being short handed, that's being negligent. They knew something was up with Wirecard, and they actively tried to ignore all the warnings, and now all stakeholders have lost ~80% of the share value.

So yeah, the DAX is a joke and Germany is a banana republic.

That's not negligent, that's malicious.

German regulators in short: "we see no evil, we hear no evil. We will only rain penalties if someone else does ALL the work/investigation, and the shit will hit the front page of some major newspaper/website, in which case we cannot play dumb any more." (these are airquotes - not actual statement)(to avoid any lawsuits).

Just have a look at the penalties that DB have been hit with over the years, the dieselgate fiasco and you get the spirit on how they work. External auditors for German companies follow the same approach. It is not negligence, it is complicity.

At the same time they have the super tough privacy rules, I had to fly to Germany for a client (not DB or VW), to review some SOX docs, just to realize they were doing (what I call) "photocopy audit", they just copied last year's tables, they used tipp-ex to change dates and remove names and signatures, and they were the same files to send outside Germany. Oh the shock and horror when I asked for the originals (client couldn't say no anymore)(I wasn't removing/copying data, just reviewing and taking sanitized notes with me).

They cannot be that stupid. I don't buy this.

Not only German regulators are like that... The bigger the country, the more absurd things get... Think Madoff, mortgage-crisis, etc.

“The Big Short” and “Fooling Some of the People All of the Time” are quite interesting reads in that respect.

And as one Finance professor once put it: “If you do business or buy stock in ‘the far east’, P/Ls and Balance Sheets are just fake”. Having seen what is done in some countries - yes, it’s insane.

“ Increasing the BaFIN budget and making their salary structure comparable to industry salaries would do a lot of good in this respect.”

Alternatively, it might just bump up the salary and bonus of existing employees while truly smart people avoid it due to structural issues.

I am wary of the default line that “Thing that sucks is due to poor funding.” Sometimes that is true. But I would like to see more support for that line of reasoning to better understand.

I don’t think money is the only motivator and I’ve worked with organizations that claimed that money was the cause for poor morale and poor performance. But when I dug into it more, even the areas where money was the same as other orgs the morale and performance off.

Often the bad salary is why something sucks, but raising it isn't enough to fix the problems that salary stagnation caused.

The one example is Singapore, where it is possible for civil servants to do so well that they earn millions of dollars annually, and the country does rank extremely high on most development and performance metrics.

In many cases people quit managers

> Alternatively, it might just bump up the salary and bonus of existing employees

I am afraid that this won't help. The current employees are already used to this passive and unchallenged/unchallenging mode of work, giving them a raise will not move the needle. You need (sorry for the Dilbert-ism) a paradigm shift. Either get 10 contractors and they can define a new baseline-speed, or get 1 director, 2-3 managers, 5-10 new staff from the private sector, that they will redefine processes/speed/scope etc. and the existing staff will either have to pick up their pace or slowly be substituted (one-at-a-time). I have seen this happening many times in the private sector when a M&A happens.

It wasn't just short sellers. Journalists at the Financial Times were also harassed and threatened, including by the German authorities, for their skeptical reporting on Wirecard. There were absolutely abysmal performances by German regulators, Ernst & Young auditors, and the vast majority of the financial media, who ran cover for the fraud long past the point where it became pretty obvious.

The fact that Wirecards claims against the FT weren't laughed out of court, well at the front door, is just stunning. I guess Germany was just happy to have a high profile, highly successful FinTech. And that resulted in some reluctance to look too closely. Not acceptable, either way.

“Never threaten to cost someone more than it would cost to have you killed.” is a reasonable rule to live by.

That seems like a rule that would have a terrifying chilling effect on a lot of legitimate lawsuits.

You also have to factor in the feasibility of that someone being able to get away with murder, then you must factor in how valuable a couple decades in prison is worth to them, and how prone they are to taking such risks.

> You also have to factor in the feasibility of that someone being able to get away with murder

How would it matter to the person in this example? They're already dead...

I was just pointing out it is not just a monetary issue and most of the successful criminals are intelligent actors.

I disagree, this discounts the martyr

With the important caveats of 1) the implicit costs of murder-for-hire are probably pretty high (risk of going to jail, e.g.) and 2) killing someone doesn't necessarily make the lawsuit go away—though that doesn't help the person being killed.

So the utility formula is something like:

  (p[c] * c[f] + c[a]) ÷ p[l] > c[l]

  where:
  p[c] = probability of getting caught
  p[l] = probability of the lawsuit being dropped
  c[f] = value of your freedom
  c[a] = cost of an assassin
  c[l] = cost of losing the lawsuit

You can layer in additional probabilities—like the probability of the assassination being successful, or the probability of winning the case. This is just fun to talk about the utility formula of assassinations on HN.

But it's probably true that as c[l] increases, c[f] increases as well, and p[l] drops. So it's rarely (never?) worth this trade-off.

You forgot 'probability that your opponent reasons matters like this out rationally', which is a big one I think.

Which, if you want to get pedantic—and yes! let's get pedantic!—probably correlates with a lower probability that the assassination isn't successful. Because if they're irrational, they're going to end up meeting an undercover cop in the parking lot of the local K-Mart or something.

See also: Tiger King. Which is probably the best citation and the best thing I'll type all day.

Ah yes, Tiger King, a well balanced documentary that presents an in-depth look at the practices of murder for hire, and not a lurid tale of entertainment so Netflix can make more money. Popular media, especially shows like CSI and Law and Order, have an incentive to show the rich white folk how resolute the government is, and just how much no one could ever get away with murder. The reality's a bit different, and as recent events have shown, the police aren't above murder anyway. They protect their own and accept murderers in their ranks. So, an ex-cop or current cop is probably the best person to properly incentivize to commit murder.

For them, `p[c] = probability of getting caught` expands to a[c] = probability of getting caught a[b] = probability of there being no repercussions despite getting caught.

But if we're gonna base today's lesson on how to get away with murder on the show Tiger King, the two step lesson it teaches is: 1. own a tiger sanctuary. 2. feed your husband to the tigers for lunch.

One of them was convicted, and the other wasn't. Sure that's not proof of anything, but it's more than just the netflix documentary that says he did it.

They might also try to kill you themselves. Honestly I think most murderers (or would-be-murderers, or people who [try to] hire murders) are probably not thinking about their situation rationally. Phrased another way: most murders are not rationally motivated. Therefore I don't think the 'rational analysis' approach to predicting who might try to have you dead is likely to work well.

There are exceptions to everything but I think in general the more erratically somebody behaves, the more you should be concerned.

Your daily lesson in economics and its utter lack of morality!

But wait! It's not just the basic lesson of despair, here we have a bonus lesson: it's an equation where the actual values are impossible to determine, just like virtually every economic equation.

Logical, and I host most of us are able to live a life of such privilege. In desperate times, however, there are those who are forced to stand up for what they believe is right, and not to simply roll over. The fight with my HOA on my right to put in a trampoline is not worth killing over, but people like President Lincoln, Mahatma Gandhi, Martin Luther King Jr., and Alexander Litvinenko have faced problems that were.

I had an idea for how to deal with that sort of harassment. There's no point in the harassment unless the harassee knows where it's coming from. But revealing that would allow Wirecard to be caught. So you have to play a game of "WHAT'S THAT? I'M HARD OF HEARING! YOU'LL HAVE TO SPEAK INTO THIS MICROPHONE!" And make public pronouncements that you don't know who's harassing you. Could make a good premise for a comedy. Willful ignorance.

If what people say matters to me depends on who they are and what things they've accomplished (relevant to the context) Anything that doesn't follow that format just makes me laugh.

> There's no point in the harassment unless the harassee knows where it's coming from.

The harrasser doesn't have to say they're doing it, though. The victim probably knows who it's from even if it's completely anonymous.

That's the point of the pronouncements.

If the harasser thinks you haven't put two and two together yet, they have two options.

1. Quit 2. Be more obvious

1 is what you want, 2 is better evidence in court, win-win.

Or they can not play your game and keep doing what they are doing as it is working. Just because you say they only have two options doesn't mean it is true. There are almost always more options available to others than you can think of, and in this case it is fairly obvious.

> Or they can not play your game and keep doing what they are doing as it is working.

I was assuming a hypothetical where you can convince them you actually don't know who is doing it. Obviously if they think you do know, the whole thing changes.

> There's no point in the harassment unless the harassee knows where it's coming from. But revealing that would allow Wirecard to be caught.

Not really. If you look at the circumstances around this fraud, it's clear that "they are harassing short sellers" would have been just one more grain on the pile of evidence that was willfully ignored as it was going on, or one more legal violation for authorities to look the other way on.

It's not just Wirecard, there are very often media reports of short sellers or whistleblowers being targeted for harassment by companies while they are engaged in ongoing fraud and it rarely makes any difference to broad public perception or regulator action.

Makes me think of a big US automaker that doesn't like short sellers.

Chilling! That would scare the heck out of me.

That was fun to listen to but NPR programming always seems to have a grating turn in the middle of "gosh isn't it crazy how people in society don't trust anyone any more??? Not professionals or the government or even police!" and it's like, yep, institutions have continued to epically fail people at large, please stop playing clueless NPR.

If any story shows the utter untrustworthiness of (the vast majority of) the media and government authorities, it's Wirecard. This will probably be further reinforced by a relative lack of serious consequences for everyone involved.

At one time, I listened to NPR for hours every week. After 2016, something in them seemed to snap, and after listening to one of their anchors going after the 538 guy as if he and his industry were fully responsible for Trump's election, and demanding some sort of apology I resolved to give them a dew months to come back to their senses. I still listen to them regularly, they regularly put out good journalism. But when I came back to them they just sounded absurdly out of touch with the rest of the world.

I'm still not entirely sure whether it's because my worlview expanded, or because theirs narrowed.

If all one has is CNN, MSNBC, Fox, and NPR then NPR feels like a (somehow calming) ocean of truth. I think starting circa 2013 there were a few huge stories which made people realize that the "hard-hitting" journalism they were reading wasn't all that hard-hitting. Snowden revelations, all that money in the cayman islands, then the whole lot of nothing being done about either.

Below is a comment I made a year ago on HN about my favorite NPR story:

------

Growing up I though of NPR as a bastion of the left but the older I get the more cynical I become. Your take reminds me of the most infuriating story I heard on NPR about Amazon Seasonal workers.

They spotlighted a retiree couple would supplements their income with it in the winter and drives south to gamble in the summer and it just sounded like a profile of a charmed life, somehow I imagine that isn’t the case for most people who work there...

They have monthly fundraising drives where they ask listeners to pay up for fearless journalism but a lot of it sounds like it was written by and for entrenched industries. https://www.marketplace.org/2017/12/21/business/holiday-seas....

Meh, I don't think it's necessarily 'hard-hitting' to point out that seasonal work doesn't provide a year-round paycheck. There's a whole lot of work in this world that inherently falls way outside of full-year full-time 9-to-5 Mon-to-Fri norms -- and there's not anything inherently wrong with that.

I recognize that not everyone has to live in a cookie cutter mold of my preferred lifestyle. I personally think that an exposé of workers who are underemployed better belongs in a story about social policy, education, culture, or small business than it does in a story about Amazon. Amazon is hardly the inventor of seasonal work, and they pay considerably above market for an unskilled job.

My point of about hard hitting stories was that NPR either doesn't have them or or when they do they remove the teeth by virtue of the perspective they choose.

Take this Wirecard NPR story, Matt owns the Shadowfall company which itself holds 500 million in assets[1]. His situation feels awful, and you should empathize with the man, but god after listening to NPR for several years you wonder why so many protagonists are millionaires.

Bringing up the Amazon-NPR story was just tying together where I think NPR especially fails: I don't think NPR lies, or even covers the wrong topics, they just cover them with an establishment centered perspective.

Take Amazon seasonal workers: why not cover how Amazon extracts huge wealth out of communities and in place gives jobs that pay little with littler benefits?

Take Wirecard story: perhaps short selling is an awful way to hold companies accountable and what we actually need is a SEC company with teeth.

Another favorite of mine which I think pulls it all together was during the passing of the Trump Tax Cuts. All Things Considered's lead story was that the cuts were good and just at the wrong time. I heard this during rush hour, so NPR prime time![2] During a time of great change in fiscal policy the radio station Trump supporters most loathe is out there politely questioning the timing of his decisions.

[1] https://www.companysearchesmadesimple.com/company/uk/oc41560...

[2] https://www.npr.org/2017/12/04/568392909/is-this-the-right-t...

Why is anyone downvoting this--can one not express a personal experience? It you disagree, comment.

I definitely don't want to dismiss your experience but I have a hard time understanding:

"after listening to one of their anchors going after the 538 guy as if he and his industry were fully responsible for Trump's election, and demanding some sort of apology".

I'm sure Nate Silver wasn't actually blamed for election results and I'm sure no one actually demanded an apology. Can you smooth the hyporbole a bit and explain what they actually said that made you feel that way?

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