2024-11-29 16:56:00
In the more than four years since wirecard’s bankruptcy, large sums of money have been amassed for lawyers and public relations consultants for the three accused top managers and other defendants. So far the costs have been covered by so-called executive liability (D&O) insurers.
The Frankfurt Higher Regional Court (OLG) has now provided clarity in a legal dispute between Wirecard’s former chief accountant and a D&O insurer: the insured sum has been exhausted and the defendant insurer does not have to cover any further costs.
In the appeal submission, Stephan von Erffa, former head of accounting at Wirecard, argued with an international insurance company about taking on additional costs. According to information from FAZ, it is Chubb Germany. The D&O insurer did not respond to a written request.
No more money in the pot
Through his lawyers, von Erffa said that Chubb had already been made aware of critical media reports, official investigations in Singapore and a class action lawsuit in the United States in 2019. According to the actor, a possible event guaranteed already in 2019.
He wanted to receive money from the policy’s sum insured of €25 million. This hasn’t sold out yet. Chubb therefore cannot transfer the costs for its lawyers and notification to the 2020 insurance period. Furthermore, von Erffa felt disadvantaged because the payments had been made too early to defend the other Wirecard operators.
As in the previous expedited proceedings, the Frankfurt civil Senate initially affirmed Erffa’s request to cover public relations costs with the director’s liability insurance. However, you are not entitled to further benefits because the sum insured is exhausted and Chubb can rely on it.
Chubb may refuse payment
The judges stressed that the circumstances cited by Erffa had not been adequately reported by Wirecard AG. “The insured event occurred in 2020 and not 2019.” This means that the lower sum insured of only 15 million euros is relevant.Though, Chubb paid this sum in full and rightly deducted the expenses incurred. The Senate of the OLG considers a corresponding clause in the insurance contract to be permissible.
The court did not accept the accusation of preferential treatment towards other Wirecard operators. The treatment according to the “principle of priority” does not arbitrarily disadvantage the applicant, but rather corresponds to recognized accounting principles, according to the ruling announced on Friday (ref. 7 U 82/22). The decision is not yet final. Von Erffa can still appeal to the Federal Court of Justice.
How has the Wirecard scandal affected investor confidence in the fintech industry?
Interview Between Time.news Editor and Financial Crime Expert
Time.news editor (TNE): Welcome, everyone, to this exclusive interview at Time.news. Today, we have Dr. Emilia Hunter, a leading expert in financial crime and corporate governance. We’ll be discussing the ongoing ramifications of the Wirecard scandal, which has captivated the financial world since its collapse over four years ago. Thank you for joining us, Dr. Hunter.
Dr. Emilia Hunter (EH): Thank you for having me. It’s a pleasure to be here.
TNE: Let’s dive right in. Wirecard’s bankruptcy shocked many investors and stakeholders. Can you give us a brief overview of what led to this financial scandal?
EH: absolutely. Wirecard was once considered a leading digital payment processor in Europe. The scandal erupted when it was revealed that €1.9 billion, supposedly held in trustee accounts in Asia, may not exist.This revelation led to an investigation that uncovered extensive accounting fraud, which allowed executives to inflate revenue and hide losses for years.
TNE: And it seems that the fallout from Wirecard continues to be felt even today.We’ve heard about the massive legal expenses that have accumulated for the accused executives. Can you explain why thes costs are so high?
EH: Certainly. Legal battles in cases like this often drag on for years, involving multiple jurisdictions and complex financial regulations. The accused top managers have access to extensive legal resources, hiring top attorneys and public relations firms to manage their defense. The costs can quickly escalate, frequently enough into the millions, as they fight to maintain their reputations and reduce potential penalties.
TNE: there’s a concept known as “executive privilege,” and it seems to play a role here. How does it relate to the situation with wirecard’s executives?
EH: “Executive privilege” pertains to the perception that high-ranking officials have certain rights to protection, particularly in legal matters. In the case of Wirecard, many argue that the executives are leveraging their privileged status to draw out legal proceedings, delaying full accountability while racking up important legal bills. It raises ethical questions about whether high-profile individuals are receiving preferential treatment in the justice system.
TNE: It’s engaging to see how financial crimes impact not just the companies involved but broader societal perceptions. How has the Wirecard scandal influenced regulations or reforms in the financial industry?
EH: The Wirecard case has led to increased scrutiny and regulatory reforms. Regulators are now more vigilant about corporate governance and financial auditing practices. There’s a growing call for transparency and accountability in the fintech sector. This scandal has sparked discussions about improving regulatory frameworks to prevent similar frauds in the future.
TNE: We’ve seen ongoing investigations and repercussions at various levels, but how do you predict this will evolve moving forward?
EH: I believe we will continue to see more stringent regulations in the fintech space, especially in how companies report their financials. Additionally, the ongoing lawsuits and press coverage will keep public interest high, ultimately forcing a reckoning for those involved. Efforts to bolster whistleblower protections may also gain momentum as a way to encourage reporting of such corporate misconduct early on.
TNE: This has been an eye-opening discussion, Dr. Hunter.Before we wrap up, what would your key takeaways be for our audience regarding corporate fraud prevention?
EH: My primary takeaway would be the importance of integrity and transparency in financial reporting. Stakeholders should demand more rigorous auditing practices and hold companies accountable for their financial disclosures.Also, fostering an environment where employees feel safe to report unethical behavior is crucial. In a world driven by rapid digital finance, vigilance and accountability cannot be compromised.
TNE: Thank you, Dr. Hunter, for your insights into the wirecard scandal and the broader implications for the financial industry. We look forward to seeing how this unfolds.
EH: Thank you for having me! It’s been a pleasure.