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Wirecard – The “German Enron”, and a personal history

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Re: Wirecard – The “German Enron”, and a personal history

#61

Post by C1sc0cat »

blibble wrote: post #11
chewz wrote: post #2

> Lessons to be learned * even a pretty obvious fraud can go on much longer than one would think if the organizers are ruthless enough. My original short position would have gone against me 25x over 12 years and the share price even after today’s disaster would be higher than back in 2008 (just to be clear: the company is worth ZERO in my opinion) * a company that goes against people who write negative articles as ag…

amusingly: back in 2019, when journalists pointed out irregularaties in the company's accounts, the German Financial regulator's reaction was to ban short selling of their shares... and then issue legal proceedings against the journalists > On Monday, BaFin banned further short selling of shares in Wirecard, the Dax-listed payments services group. The stock has dropped steeply after FT reports raised questions over t…

And sadly that attitude is why you got the Bunga Bunga Parties scandal that VW and IG Metal Where involved in.

Re: Wirecard – The “German Enron”, and a personal history

#62

Post by C1sc0cat »

bradleyjg wrote: post #14
luckylion wrote: post #9

> In 2019, the boss of the supervisory board hired KPMG mainly to independently confirm that everything is splendid at Wirecard (E&Y is the auditor of Wirecard). So, will anything happen to E&Y, or do they just get to say "we didn't know that was fraudulent, we just did what we got paid to do"?

Arthur Andersen went out of business after Enron and the big five became the big four. Maybe that was a good outcome in terms of accountability but there needs to be some effective process for promoting new members if we are going to keep culling this club.

One of the big 5 was banned from Uk government work for decades over the Delorean Scandal.

Re: Wirecard – The “German Enron”, and a personal history

#63

Post by 420codebro »

tnolet wrote: post #44
nabla9 wrote: post #13

Earlier quoted context omitted.

Another: * They tie big names into the firm to get credibility. Hire them into the board, or pay them good money for short term consulting gigs. Examples: 1) Gen. James Mattis was in Theranos board. So was Henry Kissinger and George Shultz. 2) Enron paid Paul Krugman $50,000 to attend at least two times in advisory board meetings, nothing related to Enron business. What Enron really bought was the ability to say Paul…

The book on Theranos (Bad Blood) actually makes the argument that no “real” big names were in Theranos: Kissinger, Mattis and Schultz knew nothing about health care or medicin. They are/were career politicians. The book argues investors with actual experience in the industry staid far away.

Lots of companies have directors from a wide background.

In Theranos' case, the fact that Kissinger, Mattis, and Schultz were on the board was probably more useful to Ms. Holmes than having some reality-center doctor investors.

Re: Wirecard – The “German Enron”, and a personal history

#64

Post by mrep »

deleuze wrote: post #55
allendoerfer wrote: post #26

I personally know people, who invested considerable amounts of money into Wirecard after the COVID-19 crash and even one, who invested last week on the day the stock took its first dip. At the first point in time the shortselling, the FT articles and the ongoing BAFIN investigation were known. At the second point in time it was known, that they hired there buddies from KPMG, who could not find anything wrong, but eve…

I mean, yeah, as you point out with TINA, can you really blame them? When the Federal Reserve essentially states that it will engage in any amount of QE to keep equities afloat, how is that not a pyramid scheme?

How do you get that? The FED is mostly just buying our own governments debt through treasury securities and citizens home debt through mortgage back securities [0]. They haven't touched equities and have barely purchased any corporate bonds.

[0]: https://www.federalreserve.gov/releases/h41/current/h41.htm

Re: Wirecard – The “German Enron”, and a personal history

#65

Post by blibble »

allendoerfer wrote: post #52
LunaSea wrote: post #50

Earlier quoted context omitted.

Isn't Deutsche Bank the largest bank in Germany?

Right now it is again. Deutsche Bank has a market cap of around € 17 billion, Wirecard has (as of writing this) around € 3 billion.

for size comparisons: banks are typically compared by the sum of their assets (not market cap)

Re: Wirecard – The “German Enron”, and a personal history

#66

Post by tnolet »

nabla9 wrote: post #51
tnolet wrote: post #44

Earlier quoted context omitted.

The book on Theranos (Bad Blood) actually makes the argument that no “real” big names were in Theranos: Kissinger, Mattis and Schultz knew nothing about health care or medicin. They are/were career politicians. The book argues investors with actual experience in the industry staid far away.

Could briefly comment what you think I meant with big name?

Well known, powerful folks but also experts in the field or respected in the specific industry they are investing in / are board members of.

Re: Wirecard – The “German Enron”, and a personal history

#67

Post by intuitionist »

Nextgrid wrote: post #45
yellowstuff wrote: post #17

Earlier quoted context omitted.

Enron is one example of how these things can turn out, but Herbalife (HLF) is another. HLF is a multi-level marketing company; they're a shady company in an inherently shady business; they have far-flung operations; they aggressively went after people expressing negative information; they had questionable accounting; and there were eventually regulatory rulings against them. But they also are a profitable business th…

> they also are a profitable business that sells stuff that people want to buy [citation needed] Just like the other MLMs (or rather pyramid schemes, because that's what they really are), they sell a (unprofitable) lifestyle using deceptive marketing. The products are secondary (they're just there to keep regulators at bay) and are always sub-par and inferior to what can be found off-the-shelf.

There’s nothing illegal, or inherently unprofitable (for the business), about selling people a lifestyle. Louis Vuitton sells people a lifestyle. Harley-Davidson sells people a lifestyle. Apple sells people a lifestyle. All of these companies have products, sure, but the products aren’t really the point.

Re: Wirecard – The “German Enron”, and a personal history

#68

Post by catalogia »

tnolet wrote: post #44
nabla9 wrote: post #13

Earlier quoted context omitted.

Another: * They tie big names into the firm to get credibility. Hire them into the board, or pay them good money for short term consulting gigs. Examples: 1) Gen. James Mattis was in Theranos board. So was Henry Kissinger and George Shultz. 2) Enron paid Paul Krugman $50,000 to attend at least two times in advisory board meetings, nothing related to Enron business. What Enron really bought was the ability to say Paul…

The book on Theranos (Bad Blood) actually makes the argument that no “real” big names were in Theranos: Kissinger, Mattis and Schultz knew nothing about health care or medicin. They are/were career politicians. The book argues investors with actual experience in the industry staid far away.

None of this went unnoticed as soon as the company came to public attention. One of the first discussions on HN about Theranos had people being impressed with the big names on the board, and other people noting that it lacked connections to the healthcare industry.

> That is a pretty stunning board of directors as well. I don't doubt their CEO can get an introduction to, and lunch with, nearly anyone on the planet.

> This board seems heavily geared to do deals for defense-related applications. That's fine; getting deals with the Armed Forces and VA is feasible and quite rewarding. What they overtly lack is connections to the healthcare world. I'm surprised they aren't publicly roped into Cleveland Clinic, Mayo Clinic or Kaiser, as they to support novel technologies in this space. I suppose you can argue that the business model is fundamentally incompatible, but I've seen Mayo and Kaiser go in anyway; they can acquire these labs and roll them into operations pretty easily.

> That BOD is stunning with heavy national security/ military operations. I almost thought it was a CIA cover company.

> So, it's a health testing company that will keep all my blood-related health information and make it "actionable", with the backing of James Mattis, William Perry and none other than Henry Kissinger. There are more soldiers in that board there than doctors. The only way I'd give them my blood would be to infect them with a disease.

> Wow. She must be a pretty amazing woman to have collected such strong allies. I'd have lunch with her.

[This last one was downvoted, but is probably the sort of reaction Theranos was hoping to engineer.]

Re: Wirecard – The “German Enron”, and a personal history

#69

Post by linuxftw »

zpeti wrote: post #32
allendoerfer wrote: post #26

I personally know people, who invested considerable amounts of money into Wirecard after the COVID-19 crash and even one, who invested last week on the day the stock took its first dip. At the first point in time the shortselling, the FT articles and the ongoing BAFIN investigation were known. At the second point in time it was known, that they hired there buddies from KPMG, who could not find anything wrong, but eve…

Unfortunately the same reasoning could be applied to Hertz selling stock in a bankrupt company, which would have been impossible 5-10 years ago, but maybe even a few months ago. I think the markets have been completely messed up by stimulus since 2008, and it's only getting worse. Governments are buying company bonds for gods sake. Stocks aren't about market pricing any more. They are some vanity metric that governme…

Honestly, Hertz selling stock didn't seem that crazy to me. "We need more money, or we're going under." They're basically asking for new investors to make the business solvent. How is this any different than a startup asking for more investors prior to closing shop?

Frankly, not unreasonable either. The entire travel industry was destroyed overnight, so it's entirely possible they could emerge from insolvency with an infusion of capital and be just fine. I'm not putting my money on it, but it's not the most outlandish thing I've heard either.

Re: Wirecard – The “German Enron”, and a personal history

#70

Post by seanhunter »

C1sc0cat wrote: post #5
9nGQluzmnq3M wrote: post #3

Earlier quoted context omitted.

The first one really is key here. Exhibit A is "stablecoin" Tether, which has more red flags than a Kremlin May Day parade and steadfastly refuses to get audited, but has nevertheless been puttering away for several years now. When will the penny drop? https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/

How do you avoid getting audited for several years ?

If you're not a public company then in many/most jurisdictions it's up to the owners/investors to decide whether or not to have audited financials. If they are a 100% legit and have assets to back their tether there really isn't much of a reason not to have that audited and published on a website. For example bullionvault.com publish an audit of physical metal reserves daily.
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