9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

Companies Chanticleer

Chanticleer

Wirecard fraud saga exposes the enablers

The spectacular collapse of the German payments
processing company opened a window into the use of
respected firms by fraudsters.

Sep 16, 2022 – 7.10pm

The release this weekend of a Netflix documentary about investigative journalist

Dan McCrum’s seven-year take-down of German payments processor Wirecard will
expose the professions shielding fraudulent companies from scrutiny.

We are talking global law firms, multinational public relations agencies, big four
audit firms, and prominent management consultancies, all of which were happy to
take the Wirecard cash while seemingly ignorant of McCrum’s work at the
Financial Times exposing white-collar crime.

Financial Times reporter Dan McCrum’s seven-year pursuit of Wirecard was frustrated by “professional
enablers”. David Rowe

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9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

The documentary, Skandal!, should be riveting if it is anywhere near as good as

McCrum’s book about his pursuit of Wirecard, called Money Men. The book
revealed that the Wirecard investigation started with a tip-off from Australian
hedge fund manager John Hempton [https://www.afr.com/link/follow-20180101-p57cwp].

Hempton was attending an FT conference when the two met at the back of the
room, and Hempton said to McCrum: “Would you be interested in some German
gangsters?”

Chanticleer has not seen the Netflix documentary, but it is hoped Australian
viewers get to hear about the role played by Alex Turnbull, son of former prime
minister Malcolm Turnbull.
Hempton said in a blog post that Turnbull, who is a friend, visited a company that
Wirecard had acquired in Jakarta only to find “a nondescript office up a dusty road
full of what look like illegal enterprises controlled by the Indonesian military”.

“There was no way this was worth what Wirecard claimed was paid for it,”
Hempton said.

McCrum, who was subject to spying, dirty

tricks and implicit threats, relied on the gutsy
actions of the FT’s Singapore-based reporter
Stefania Palma to undertake a similar door-
knocking exercise to Turnbull, except in the
Philippines.

It was her work that contributed to the

ultimate killer revelation that €1.9 billion of
Wirecard cash allegedly sitting in a couple of
Former Wirecard COO Jan Marsalek.
Philippine banks was fictitious.

That exposed Wirecard’s insolvency on the same day its chief operating officer, Jan
Marsalek, disappeared on a chartered jet. He has apparently been sighted in
Moscow [https://www.afr.com/link/follow-20180101-p55bvu].

Two years after Wirecard went under, it is worth asking why so many respectable
companies were willing to work for it. Were they enablers of its fraudulent activity?
Should they have done their due diligence by simply reading the FT?

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9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

Legal industry must be accountable

McCrum says the Wirecard fraud “exposed the complacency of Germany’s
governing class: the auditors, bankers, regulators, prosecutors, investors and
politicians who should have heeded the many warnings that something was rotten
in Bavaria”.

“It also exposed the many professional enablers in London who were delighted to
pocket Wirecard’s dirty money, and these firms should be held to account for the
work they do shielding the rich, the powerful and the criminal from public
scrutiny,” he adds.

Wirecard’s primary law firm of choice in London until 2019 was Schillings. It was
replaced by Herbert Smith Freehills. The interaction between the FT and both
firms is well documented in McCrum’s book.

These firms would no doubt argue that the ability to seek and receive confidential
legal advice is a critical element of the rule of law.

Standards published by the United Nations and International Bar

Association state that: “Lawyers shall not be identified with their clients or their
clients’ causes as a result of discharging their functions.”

These principles were adopted by the Eighth United Nations Congress on the
Prevention of Crime and the Treatment of Offenders in Havana, Cuba, in 1990.

In the same year, the International Bar Association adopted the Standards for the
Independence of the Legal Profession, which says: “The lawyer is not to be
identified by the authorities or the public with the client or the
client’s cause, however popular or unpopular it may be.”

This defence is lame, according to McCrum, who bizarrely was investigated for
market manipulation by the German financial regulator, BaFin, for his work
reporting on Wirecard [https://www.afr.com/link/follow-20180101-p55yfa].

“Unless you’re a criminal barrister handed the next case in line, lawyers and law
firms choose whom to work for and should bear the consequences of renting their
reputation and expertise in causes that damage society,” McCrum says.

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9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

“The legal industry rests on a fiction that a lawyer’s character and behaviour is
everywhere unimpeachable and that blind service to a corporate client is some
sort of honourable principle.

“Prospects for change are better than they have been in a very long time.

“Thanks in part to Putin’s war, the UK’s Solicitors Regulation Authority has been
shaken out of its slumber to address abuses by lawyers such as unfounded
demands for confidentiality and the use of ‘without prejudice’ to issue threats with
no intention of reaching a negotiated settlement.”

Similar sentiments are expressed by the two journalists who exposed the 1MDB
sovereign wealth fund scandal in Malaysia, [https://www.afr.com/link/follow-20180101-
p5bc76] allegedly masterminded by businessman Jho Low, who is a fugitive in
China.

Tom Wright and Bradley Hope were working at The Wall Street Journal when they
exposed the role of Goldman Sachs [https://www.afr.com/link/follow-20180101-p59x7o] and
other professional services firms. Their investigation resulted in the brilliant book
Billion Dollar Whale.

Wright and Hope, who now run a website devoted to investigative journalism
called Whale Hunting, copped it from Schillings.

Wright tells Chanticleer that “too often law firms stray from representing clients to
performing public relations or lobbying for them with foreign governments”.

“In our case, Jho Low’s lawyers sent a wave of aggressive letters to bookshops
threatening legal action if they stocked Billion Dollar Whale,” he says.

“Fortunately, these tactics failed, and it shone a light on the dubious practices of
these law firms.”

Wright says Jho Low has been indicted in Singapore, the US and Malaysia and is on
the Interpol Red List. He was last sighted at the Shanghai Disneyland in December
2019, a photo of which is on the Whale Hunting website.

McKinsey’s due diligence

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9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

Global consulting firm McKinsey & Co is mentioned in McCrum’s book. It warned

Wirecard more than a year before the payment group’s collapse that it should take
“immediate action” to deal with an absence of controls at its largest business,
according to McCrum’s book.

McKinsey is actually an example of a professional services firm that has learnt

from its past mistakes. It was involved in controversial work for the Gupta family in
South Africa, and prepared a strategy on the benefits of larger doses of opioids for
the Sackler family in the United States.

The Australian and New Zealand managing partner of McKinsey, Angus Dawson,
says these two events were “incredibly traumatic for McKinsey, which is a values-
based institution”.

“After these issues came to light, we realised that whatever the letter of the law
said, we need to look at the spirit of what we did, and this was work we’re not
proud of,” he says.

“We’ve gone through an enormous lifting of our standards. For example, in my role
in Australia, any new client institution, as well as specific engagements that we
take on, I need to personally sign off.

“We conduct deep due diligence on that institution, stepping through a structured
process which we call our CITIO framework: the country, the institution, the topic,
the individual and the on-the-ground reality of serving them.

“That doesn’t mean we won’t engage in serving companies that are in trouble. In
fact, often we will if we think it’s set up right and we can make a positive difference
through our work.

“We will not do work if we feel like we’re being called in to gloss over. It’s only
where we believe the conditions for impact are right and it’s being set up the right
way.

“When we say ‘no’ to situations, we often do it early.

“And then you have specific issues across certain industries where we step back
and say: ‘OK, we’ve got to be particularly careful about that’. For example,

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9/20/23, 3:31 PM Wirecard fraud exposes the enablers, says Financial Times journalist Dan McCrumb

vulnerable populations, regulated industries and alcohol, we are very cautious

about what we do.

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“McKinsey has invested a lot of resourcing behind it. I’ve got a fantastic risk team.
The questions we always asked are: ‘Is the work going to have an impact or not? Is
that impact a good thing or bad thing for the world?’

“That’s the way we want to think about it. And I think we used to do a lot more on
the first, and the second was more implicit.”

In Australia, it is noteworthy that this week’s Bell inquiry report into The Star
Entertainment [https://www.afr.com/link/follow-20180101-p5bhlp]and the earlier
government inquiries into Crown Resorts would not have occurred without the
investigative work of journalists at The Age, The Sydney Morning Herald and Nine’s
60 Minutes.

It was the journalists – Nick McKenzie, Joel Tozer, Nick Toscano and Grace Tobin –
not the casino regulators, who blew the whistle on the illegal activities at the Star
and Crown.

Tony Boyd is the former Chanticleer columnist. He has more than 35 years' experience as a
finance journalist. Connect with Tony on Twitter. Email Tony at tony.boyd@afr.com

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