SCHIRP & PARTNER Rechtsanwälte mbB: Wirecard insolvency: class action lawsuits against BaFin and the German Financial Reporting Enforcement Panel (FREP) for state liability

The Berlin attorneys Dr. Marc Liebscher (Dr. Späth & Partner Rechtsanwälte) and Dr. Wolfgang Schirp (Schirp & Partner Rechtsanwälte) have been commissioned by Wirecard investors to prepare the filing of class action lawsuits against the Federal Republic of Germany on the grounds of state liability. The reason is the failure of the German regulatory authorities in the Wirecard AG case.

"It is clear from the press reports and statements made by those responsible that BaFin and FREP have made blatant mistakes. We will therefore sue the Federal Republic of Germany for damages on behalf of our clients. Class actions for state liability are already in preparation," says attorney Dr. Marc Liebscher.

"We have already sued BaFin for damages because of P&R and will now sue again. A violation of European law is in the offing, so that a possible liability privilege of the BaFin, which is in any case contrary to European law, will not apply. And there is no liability privilege for the FREP anyway," says attorney Dr. Wolfgang Schirp.

The media reports are undisputed: As early as February 2019, the German Federal Financial Supervisory Authority (BaFin) saw grounds for investigating Wirecard AG for balance sheet manipulation. In accordance with German supervisory law, which has a two-tiered structure in this area, it passed the investigation mandate on to the German Financial Reporting Enforcement Panel (FREP). The FREP is an association organized under private law, which is entrusted with sovereign duties in this area. The FREP seconded a single employee to Wirecard for the examination. This employee failed to submit an audit report until the collapse of the Wirecard Group in June 2020, i.e. within a period of one and a half years. For its part, BaFin protected Wirecard for a long time in 2019 by prohibiting the short selling of shares. This was despite the fact that even then very substantiated accusations had been made against the company's accounting, primarily by the Financial Times, but also by other media. These accusations pointed to a fraudulent inflating of the balance sheet. All in all, a blatant failure of supervision is evident. Federal Finance Minister Scholz has expressly admitted this. The head of BaFin, Felix Hufeld, has also already admitted mistakes. It is therefore not unexpected that tomorrow, Monday, the responsible ministries will terminate the agreement between the Federal Republic of Germany and the FREP according to media reports. EU Vice Commissioner Valdis Dombrovskis has also announced an investigation. It is to be examined whether Germany has violated EU law due to insufficient supervision. Above all, the peculiar division of responsibilities between BaFin and the FREP is the focus of criticism by the EU.

"However, this is not enough as a political reaction. Wirecard has uncontrollably destroyed billions of euros in investor money. The reputation of Germany as a financial center has been damaged to an unprecedented extent worldwide. Consequences must be drawn and responsibility must be taken," said lawyers Schirp and Liebscher.

Lawyer Dr. Wolfgang Schirp sees a parallel in the renewed failure of supervision to the giant insolvency of the container provider P&R, where the BaFin also watched for years as investor money was destroyed.

Dr. Wolfgang Schirp, Berlin, who is already conducting official liability proceedings against BaFin in the matter of P&R: "The state tries to protect BaFin from any official liability. Such a liability privilege has been specifically included in par. 4 para. of the Financial Services Supervision Act (FinDAG). However, this is not only deeply indecent, but also violates European law. How can it be that an authority whose supervision millions of investors have to rely on for existential decisions never has to answer for even the most blatant failure? Such quasi-medieval privileges do not exist anywhere else! We call for EU intervention, and we demand that pending German legal disputes against BaFin be referred to the European Court of Justice so that the latter can declare the liability privileges null and void and restore order. However, it is also clear that the FREP has not regulated such a liability privilege: Wirecard investors should sue."

Dr. Marc Liebscher, Berlin, who has been following the work of the FREP critically for years: "There are scandalous conflicts of interest within the FREP. A private-law association, the FREP, is involved in the sovereign supervision. And the President of the FREP - the so-called balance sheet police - simultaneously sits on the supervisory boards of three large corporations, where he even chairs the audit committee. Prof. Dr. Ernst has been President of the FREP since July 2011 and is also Chairman of the Audit Committee at TUI, Vonovia and Metro. This is a first-rate conflict of interest! This is to put the fox in charge of the henhouse. I am curious to see when the opposition in Federal Parliament will wake up and demand an investigative committee - in the decisive year of the Chancellor's election. It can not be, that the millions of private and institutional investors from Germany and abroad must pay for blatent failure of supervision. In Germany we finally need effective control structures in line with international standards. Proposals have been on the table for years."

For further information please contact us:

Dr. Wolfgang Schirp, Schirp & Partner Rechtsanwälte mbB, Leipziger Platz 9, D-10117 Berlin, Tel. 0049-30-326170 und 0049-179-5320213, Mail: schirp@schirp.com, URL: www.schirp.com

Dr. Marc Liebscher, LL.M. (Washington, D.C.), Dr. Späth & Partner Rechtsanwälte mbB, Kurfürstendamm 102, D-10711 Berlin, Tel. 0049-30-326170 und 0049-176-93150194, Mail: liebscher@dr-spaeth.com; URL: www.ey-klage.de