Wirecard has asked the High Court in London to dismiss a civil suit in which the German payments specialist is accused of fraud in its largest takeover.
A separate complaint over the 2015 deal to buy an Indian payments business for €326m, just weeks after it changed hands for €36m, is being examined by Munich prosecutors.
Tuesday’s hearing came as the high-flying technology group prepares to release delayed full-year results on Thursday. The Dax-30 member faces legal and regulatory questions after a KPMG special audit failed to resolve whistleblower claims of large-scale accounting fraud.
That special audit was unable to identify the beneficial owners of a Mauritius fund central to the allegations in the UK civil action. In September 2015, the fund paid €36m for Hermes, an Indian payments business. The following month Hermes was sold to Wirecard for €326m.
Former minority shareholders in Hermes, who sold their shares at the lower valuation, allege the back-to-back sales involved a conspiracy to defraud them, and have asked for a full civil trial. Stephen Midwinter QC, acting for the claimants, said “to put it simply, there is something about this transaction that does not add up. It is deeply suspicious”.
Wirecard has denied any wrongdoing. Jeffrey Chapman QC, acting for the company, said the claims were “hyperbole” and the “case is just tissue thin because it does not have any documentary foundation for it”.
Wirecard’s position is that Hermes was sold by its founders to the Mauritius Fund, Emerging Markets Investment Fund 1A, which stripped out the travel operations of Hermes and so made the company an attractive takeover target when bundled together with two small, related payments businesses. It has said it does not know the identity of the beneficial owners of the fund.
“EMIF was represented by Linklaters, who we can assume made the necessary enquiries,” Mr Chapman said.
The former investors have also sued Hermes’ founders and their advisors. Their claim against the Indian founders was dismissed on jurisdictional grounds last year. Litigation against the advisors, who have denied any fraudulent conduct, continues.
Wirecard’s evidence contradicts statements made by the defendants in those suits, the claimants allege. Speaking in the online hearing on Tuesday, Mr Midwinter said the documents formulating the two sales were negotiated in parallel, and “there are serious disputed questions of fact about what the defendant did, about what it knew, and when”.
Mr Chapman said: “Wirecard executives are truthful men who have signed witness statements.”
One of those executives was Jan Marsalek, Wirecard’s chief operating officer, who negotiated the Indian takeover. He is also one of four senior executives under investigation by Munich prosecutors on suspicions of market manipulation in relation to statements made by the company ahead of publication of KPMG’s report. They have all denied any wrongdoing.
Sir Ross Cranston, the High Court judge hearing Wirecard’s application to dismiss the suit, said the parties could expect his decision in the next two weeks.