How the biggest fraud in German history unravelled
newyorker.com
newyorker.com
A passage from the article:
> On February 18, 2019, Germany’s financial regulator, known as BaFin, issued a ban on creating new short bets against Wirecard, citing the company’s “importance for the economy.”
> The same day, prosecutors in Munich confirmed to a German newspaper that they had opened a criminal investigation. But they weren’t going after Wirecard—they were going after the F.T.
Your job as a government regulator/agency isn't "to believe", it's to be impartial, do your due diligence and apply the law indiscriminately. Selectively looking the other way is blatant corruption.
Ask any accountant at any company. They double check everything. If you miss something and fuck up you can't just tell your boss "well, I didn't check it because I believed there couldn't be anything wrong here". It doesn't matter what you believe, your job is to check.
Same goes for being complicit in a crime. Just by doing some things in good faith, you can’t be complicit. For example: if you help somebody carrying stolen goods, you are not a complicit, if you don’t know (and don’t have to suspect) that it’s stolen.
See Wikipedia: In law, fraud is intentional deception to secure unfair or unlawful gain, …
Fraud and conspiracy require intent. So yes, if you are accused of fraud, “I didn’t check as I didn’t suspect anything was wrong” is a defence.
How is selectively not doing your job carefully enough a.k.a. looking the other way, different than corruption?
That's literally corruption. You bribe people or pull strings for authorities to look the other way when you comit your illegal activities.
When the scam collapsed in 2000, "Big Manni" was living in a palatial mansion on 15 acres of land [2], had houses in Cannes, Miami, Ibiza and St. Moritz, and owned a 55 meter yacht that previously belonged to the prince of Brunei. He had 2 private jets and a helicopter to fly him 10 km to work every day. In total, FlowTex had received over 4 billion DM (over 2 billion euros) of loans for buying fake machines. It quickly became clear that people in the ministry of finance and the tax office knew about the scam for years and did nothing to stop it. FlowTex paid taxes on the money "earned" from selling the fake machines to the leasing companies, politicians were proud to have such a successful company in their home state, and he was a large donor to the governing parties. I recall seeing a documentary once where it was hinted that even people inside the banks at least suspected it, but profited from provisions for giving out the loans and did not raise any alarms.
[0] https://en.wikipedia.org/wiki/FlowTex
I think you meant DM here.
Kinda weird how they celebrated it, but I think Nutella burnt it into my brain :)
(edit: didn't noticed that drachma autocorrected to dharma)
How would most politicians know?? They are going to do an audit. Why would they? Make the minister of finance might know, but you didn't say that.
In both of these cases, it is just stupidity to blame the politicians when the experts were fooled.
And the media must be free to publish things like scandals. the fear of public outrage will often prevent such things.
I see sitcom potential here. Maybe an episode of Seinfeld: George, actually trying his hand at being a real importer/exporter for once, manages to stumble upon a similar idea, that of buying and renting drilling equipment, shipping it, etc. Of course then he overbooks and has to play elaborate games to hide the systems when customers come looking for it, etc. etc.
I like how we all seem to accept this as a fact, like Germany couldn't actually have a great financial company, and seem to completely ignore the possibility of good old real corruption. But yeah, corruption luckily doesn't exist in this country.
what, Deutsche Bank doesn't count?
On the other hand, the investment bank side of DB... Sigh, that is another story. Wildly incompetent management. (See also: Credit Suisse) I cannot believe that the regulator or Bundestag (Parliment) did not force them to spin out the IB. If the corporate bank sinks with the IB, it would cause serious economic damage in Germany.
I say this as a Canadian. Our culture has the same problem for different reasons.
Google could never have arisen in Canada. Not Tesla.
This is such a bizarrely popular statement on here. It's a huge claim and usually presented without evidence or nuance. Just start deconstructing it by asking simple things like, "what are the biggest innovations to come out of Europe that Google relies on?" and start from there.
And it's true. Europe is great at inventing the stuff that the US then uses to make billions.
And this:
high taxes stifle innovation
I would chalk it up to size of internal market -- only ~30 million -- more than anything else. Canada has produced loads (loads!) of brilliant computer scientists over the years. Sadly, they all seem to move to the US and get rich.
My argument is not against high taxes through personal income tax and property tax. It's against corporate tax and VAT/sales tax.
There's a fair chance you even used an ARM-powered device to do it. Also British.
Tesla, of course, based their first car on a Lotus. British.
It makes it easy for the golden-child to skate off their early reputation for years, before it comes time to really ask whether they became the golden-adult everyone expected them to become.
Really just go back and read a "30 under 30" or "40 under 40" list 5 years later and I'm sure you'll find a handful on the list, every time.
It's interesting how The New Yorker still made the "links to Russian intelligence" the lead in their headline. Foreign boogiemen are always more palatable than blaming regular old politicians/businessmen domestically. Or at least the more juicy tidbit for clickbait.
I don't see Russia anywhere in the headline, only a passing mention in the subheadline after mentioning the German elite and a facade of innovation. The subheadline correctly prioritizes the two according to how they appear in the story, in the exact manner which you suggest it does not. Lol.
You, on the other hand, were very quick to "Russia Hoax!" post. Agenda much?
It's relevant you think anyone questioning this well established instinct by national papers is pro-Russian though. Pretty standard these days. I don't feel the need to defend my support of Ukraine or being anti-Russia or w/e, I've done that enough elsewhere. I tend to give HN enough credit where I don't feel the need to make that sort of thing apparent (similar to using /s for the subset who always miss the obvious). But I guess nuance is potentially lost among Twitter-brained social media users which risks derailing threads.
It provides additional evidence to the hostility of the russian government to western countries long before the Ukraine war which is of public interest.
But this does not absolve the german corrupt poltical and buerocratic underbelly of this affair.
Do you have a source for this ?
It looks like he was living there and had at least one Russian passport in 2021. The Dossier Center site is funded Khodorkovsky for anyone who cares this seems to be the source for several of the other articles about him being in Moscow.
It's not just “the longing for a digital national champion”, but also the idea that american startups are more successful because they are more ruthless, more willing to lie, to commit fraud, an idea which I also see on this forum.
Incredibly rare to see self driving cars outside of the Bay Area. Up here in Canada I have my doubts about ANY self driving car achieving true autonomy in our conditions, and I live in the part that doesn't see much snow.
Which brings me to my point: adapt to local circumstances don't assume society will adapt to yours because they've been around a thousand years longer and sooner or later you will be crushed.
Meh, these seem like lame excuses for what is basically blatant corruption at the level of government authorities. Try not paying your taxes in Germany as a small time freelancer and watch how fast the tax man comes after you. If I tell him, "please look the other way, I'm trying to build you a national tech champion" I'm pretty sure it's not gonna fly. Probably because I'm not politically connected well enough at the higher echelons like wirecard was.
Hey Germany, if you're so longing for a digital champion, why aren't you massively lowering taxes for start-ups, flooding them with funding and cutting their red tape, instead of aiding the corrupt enterprises of well connected crooks?
>“the German mentality toward non-Germans”
The truth has been spoken. This skepticism towards anything non-German is one of the reasons the SW sector and digitalization in Germany is in such a dire shape.
>“German supervisory authorities are not fit for the ‘Internet Age"
Here here. You can add to that the courts too and the politicians who need to have their "internet printed".
"Wirecard scandal: German Finance Minister questioned" - https://www.dw.com/en/wirecard-scandal-german-finance-minist...
What makes you think opening a firehouse of funding isn't going to be immediately siphoned up by corrupt enterprises of well-connected crooks?
In Germany the „Michelin“ tires are pronounced in a German way in advertisements (and not in French, like in most other countries), because Germans wouldn’t buy something that has a name that doesn’t sound German.
Michelin is a company with a very long history, with an active presence Germany dating back well over a hundred years. They were already large by then. Maybe German pronunciation made things more palatable for consumers, but it was certainly well know that the company was French. And by now, it's an established brand that has a fixed pronunciation.
As the obvious frame of reference in this case is the notoriously "open to all things not from here" USA: remind me again how Americans pronounce Volkswagen or Continental, let alone Huawei. (Or _any_ foreign or even British word)
Curiously, Germans generally try to use the "French" pronunciation of Guide Michelin.
Anyway point being people everywhere pronounce things the way they do because it puts the least strain on their cognitive and physical vocal system. Your example doesn't support the (possibly valid) point you're trying to make the point that Germans have a bad attitude toward foreign concepts, things and people.
The US law allows for more so that's not exactly unjustified...
> “the longing for a digital national champion,”
Ultimately, you get what you incentivize.
The German tax regime is not friendly to start-ups and entrepreneurs, to put it very mildly, and infrastructure is lacking. Fertile ground it sure isn't. (There are other issues, like a digital economy that's not concentrated in one region but is diffuse around the entire nation -- and public attitudes, which are best described as being "staid," and favor employment at large existing firms or at research institutions.)
Legitimate entrepreneurs -- especially the good ones with foresight and low time preference -- will leave for greener pastures. And you can bet your last Euro that many of those who remain are grifters merely preying upon “the longing for a digital national champion.”
What I'm noticing is that we buy a lot of German motors, valves, optics, automation equipment. Even things like terminal blocks, hand tools, etc. etc. We all prefer them even to American brands, much less Asian. My well-off coworkers drive German cars unless they are pickup truck guys.
Maybe it's good to have a high-power economy based on conservative tech alongside our US high-risk but ultimately amateurish approach. Best of both worlds. Having said that I would never consider going [edit: move] back to Germany, for different reasons.
Being risk-averse is, perhaps, exceptionally valuable when you are concerned with fine-tuning production of hellishly expensive factories producing precision-engineered physical goods. Tolerances are tight and error is the enemy because the cost is so high.
Risk-friendliness, on the other hand, addresses a different problem. When new things can be made quickly, iterated rapidly, and each round is cheap? You can prioritize avoiding failure, but you can afford to fail.
These categories map pretty well to manufacturing and software, respectively.
I've already claimed this for my tombstone
In Germany my impression is more "get your ducks in a row before you startup", which does make sense and has some advantages. I don't even think that it is that much easier to startup in the U.S., if all the rules (tax and otherwise) were enforced all the time. However, because in the U.S. you aren't (usually) as harshly punished for not having your ducks in a regulatory row before starting, the company is able to get big enough to afford accountants, lawyers, etc.
I'm not saying the American "system" here is perfect, or even really a designed system at all, but it does have the effect (normally) of requiring more regulatory compliance as you grow in size, much like we as individuals are allowed to do things when 2 years old that we are sanctioned for if we do them when adults.
All varies a lot by sector, etc. of course, but that's the general trend.
That's the impression you'll get as a foreigner who spent a little time in Germany, but if you're long timer deep in the system you'll realize that "rules are rules" is only true for the little guy whereas the wealthy elite and old-money individuals and companies can and do bend and break the rules with the help of regulators, politicians and courts all the time who kindly look the other way because they are directly or indirectly invested in those companies or tied to the individuals who run the companies.
High level corruption in Germany is rampant and the scandals are numerous. VW, Wirecard, Deutche, Axel Springer, real estate giants, basically pick any rich big German company, chances are they have powerful friends in politics greasing the gears for them making sure the regulatory authorities are always looking the other way.
And, I agree of course, the rich have a better system.
Meh, that's just a rule OCD public façade since people are watching and so kids don't learn bad habits and get killed by cars, but privately many Germans are more than willing to break rules if it benefits them and nobody is looking and won't find out about it, just that they don't openly talk about such things since the Germans are super private about their personal affairs and finances, and you also won't hear about such things if you only hang abound in bubbles of SW devs and other repeople with corporate jobs in big cities.
My favorite is them not paying taxes on cash earnings. Cash is king for a reason in Germany: many small businesses, self employed or side hustles love doing business in cash since they can dodge the tax man and pad their incomes with untaxed earnings.
Please tell them that "rules are rules" when it comes to paying their taxes on cash earnings and they'll tell you to shut up and piss off because "everyone is doing it" and "it's always been like that".
Financial transparency is a big thing in Scandinavian countries where cash is basically non existent and you can view the tax returns of others, and they still have GDPR and no tyranny while having low corruption and high government transparency. It's the sign of a fair and high trust society.
So I'm not baying it.
Is there anywhere this isn’t true? The later bit (which I haven’t quoted) about corruption of politicians and courts might be less true in other locations, but it’s certainly a lot easier being wealthy.
Bojo was brought down by (amongst other things) having had some colleagues drinking at his official residence during Covid (and lying about it) and questions over who had paid for the wallpaper at his official residence (and lying about it).
The press in the UK usually does what it’s meant to, and sniffs out corruption and unfairness and then makes a huge deal out of them if it was someone from the other side.
EDIT: that said, the UK desperately needs to revise non-dom rules and libel laws, which are waaay too favourable to those with power money as compared to your regular joe.
Biggest fraud in German history I don't know either, what about the Hitler diaries or the (political instrumentalization of the) Reichstag fire, on this date 90 years ago btw?
Sure. Of course, many of these things are the responsibility of german legislators, and their longing for a german tech success story might be at least in part explained by a desire to avoid thinking about them.
1- https://www.ft.com/content/3c561ccf-2e95-46f7-ac43-a8e04db21...
2- https://www.bloomberg.com/news/articles/2021-04-23/billionai...
Wirecard is without a doubt the worst company I worked for. Nevermind the legacy ball of mud, the whole work environment was toxic. Blaming, finger pointing, sexist and racist remarks weren't rare. This is the only company where I've seen people screaming out of their lungs and slamming doors during meetings.
Back in the day I used to think Wirecard was a living example that you don't need a good tech stack or working enviroment to be a successful company.... oh boy was I wrong.
I honestly doubt that anyone but a very few selected people were privy to what was happening there. For the rest of us it was just a dysfunctional-trying-to-be-cool "startup".
https://www.bloomberg.com/opinion/articles/2023-02-27/wireca...
That's the legal part.
Then there's the questionable.
I quit a company when I learned the higher up staff was billing government contracts at full time (40 hours) while working about ten. Happy customers, so all is fine, right? I also discovered they would each take on 2-4 contracts billing a full 40 hours on each. $75/hr X 4 is an easy half million.
By the time they were discovered, six to 18 months later, they left the company.
[0] https://www.business-standard.com/article/companies/adani-gr...
Moreover anonymous Hindenberg,crazy George Soros are more credible than LIC and SBI!!
That's how a lot of people became a software engineer. (Personally, I also wanted to be a lawyer, USSC justice, scientist, artist, business person, etc., but computer programming had much lower barriers to entry, including less class gatekeeping.)
Deutsche Bank being raided for laundering Russian money was an annual happening before the 2022 Russian invasion of Ukraine.
Wirecard may have been the German case, but more than one country has fallen prey to this problem.
the fine totals are higher, but I guess that's multiple companies and punitive measures so maybe the negative externality of air quality is lower?
German top politicians pushing legislations and projects for Russian gas, then going to work directly for the Russian companies anyone ?
Interesting. I had not heard this nugget before.
But it’s just speculation, no real evidence backing it up (yet).
https://www.bloomberg.com/opinion/articles/2023-02-27/wireca...
https://www.independent.co.uk/news/uk/home-news/hitler-diari...
I think you'd have to call that a bigger fraud.