[HN Gopher] How the biggest fraud in German history unravelled
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How the biggest fraud in German history unravelled
Author : tysone
Score : 118 points
Date : 2023-02-27 12:46 UTC (10 hours ago)
(HTM) web link (www.newyorker.com)
(TXT) w3m dump (www.newyorker.com)
| cultureswitch wrote:
| Not to be overly dramatic, but that's hardly the biggest fraud in
| German history.
| monero-xmr wrote:
| Also the Netflix documentary is pretty good
| https://www.netflix.com/title/81404807
| eternalban wrote:
| This story was as stinky as the subject. It even went out of its
| way to paint a bunch of obvious certified a-holes as heroes.
| snapcaster wrote:
| How does paying short sellers to close their positions work?
| Doesn't that just encourage others to open them to collect the
| "bribe"? Maybe that's where the "turkish boxers" come into play
| amadeuspagel wrote:
| Wirecard wasn't trying to pay short sellers to close their
| position, but trying to pay FT journalists to stop reporting.
| The short sellers were just intermediaries.
| mhb wrote:
| Wirecard Had a Wild Run by Matt Levine
|
| https://www.bloomberg.com/opinion/articles/2023-02-27/wireca...
| r9295 wrote:
| Very interesting that they did the same thing India is doing with
| Adani. Defending them as "local champions", talks of suing the
| entity that exposed them and stopping shorting
| paxys wrote:
| I remember reading about the Wirecard scandal when it happened,
| and the key learning wasn't that it was some very complex
| financial scam that no one could have seen coming (quite the
| opposite in fact), but rather that the entire state machinery -
| politicians, regulators, intelligence agencies, banks - was
| complicit in the fraud because they wanted to take credit for a
| German company making its name among the silicon valley elites.
|
| A passage from the article:
|
| > On February 18, 2019, Germany's financial regulator, known as
| BaFin, issued a ban on creating new short bets against Wirecard,
| citing the company's "importance for the economy."
|
| > The same day, prosecutors in Munich confirmed to a German
| newspaper that they had opened a criminal investigation. But they
| weren't going after Wirecard--they were going after the F.T.
| lqet wrote:
| A similar thing happened with FlowTex. FlowTex was founded in
| 1994 by Manfred "Big Manni" Schmider [0] and Klaus Kleiser as a
| business for selling horizontal drilling machines. After a few
| years, they claimed to have sold over 3000 machines, each for
| 1.5 million marks. In reality, they had only sold around 270.
| They sold non-existing machines to leasing companies and
| immediately leased them back, without ever delivering the
| machines. This made it look like there was actually demand for
| these machines, which encouraged banks to give FlowTex more
| loans to buy (non-existing) machines. When the banks wanted to
| see the machines, they showed them a few in one hall and then
| served dinner. During dinner, they replaced the serial numbers
| on the machines, drove them to the next hall, showed them again
| to the bank representatives, created another disruption,
| replaced the serial numbers again, and so on. This went on for
| years.
|
| When the scam collapsed in 2000, FlowTex had received over 2
| billion euros of loans for buying fake machines. It quickly
| became clear that people in the ministry of finance and the tax
| office knew about the scam for years and did nothing to stop
| it. After all, FlowTex paid taxes on the money earned from
| selling the fake machines to the leasing companies. I recall
| seeing a documentary once where it was hinted that even people
| inside the banks at least suspected it, but profited from
| provisions for giving out the loans.
|
| [0] https://www.bbheute.de/fileadmin/news/56352147.jpeg
| andix wrote:
| They were probably not complicit in the fraud. They just looked
| the other way, because a scam in that scale was unthinkable for
| them. As far as I know there are no cases of bad faith or
| corruption known. They ,,just" didn't do their job carefully
| enough.
| whatshisface wrote:
| If that's the public attitude it's going to keep happening.
| andix wrote:
| Sure, but technically you need to know about the fraud, or
| at least that you are doing something wrong, to be
| complicit in it. I think they genuinely though they were
| doing the right thing.
| Mizza wrote:
| Selectively prohibiting certain types of bets in an allegedly
| "free market" system is complicity regardless of knowledge.
| Rules for thee but not for me!
| usrusr wrote:
| Just like parent wrote: complicit for wanting to take credit,
| not (necessarily) complicit for participation in a material
| sense. They wanted to believe, wanted to believe very hard.
| cm2012 wrote:
| Matt Levine had an excellent analysis of this today
| amadeuspagel wrote:
| > A German parliamentary inquiry held a hundred witness hearings
| and reviewed nearly four hundred thousand pages of documents,
| concluding that the behavior of Wirecard and its enablers was
| "the largest financial scandal in the history of the Federal
| Republic of Germany." The report blamed "collective supervisory
| failure," "the longing for a digital national champion," and "the
| German mentality toward non-Germans"--specifically, Quadir and
| McCrum. "German supervisory authorities are not fit for the
| 'Internet Age,' " the report concluded.
|
| It's not just "the longing for a digital national champion", but
| also the idea that american startups are more successful because
| they are more ruthless, more willing to lie, to commit fraud, an
| idea which I also see on this forum.
| ChuckNorris89 wrote:
| _> "the longing for a digital national champion,"_
|
| Meh, these seem like lame excuses for what is basically blatant
| corruption at the level of government authorities. Try not
| paying your taxes in Germany as a small time freelancer and
| watch how fast the tax man comes after you. If I tell him,
| "please look the other way, I'm trying to build you a national
| tech champion" I'm pretty sure it's not gonna fly. Probably
| because I'm not politically connected well enough at the higher
| echelons like wirecard was.
|
| Hey Germany, if you're so longing for a digital champion, why
| aren't you massively lowering taxes for start-ups, flooding
| them with funding and cutting their red tape, instead of aiding
| the corrupt enterprises of well connected crooks?
|
| _> "the German mentality toward non-Germans"_
|
| The truth has been spoken. This skepticism towards anything
| non-German is one of the reasons the SW sector and
| digitalization in Germany is in such a dire shape.
|
| _> "German supervisory authorities are not fit for the
| 'Internet Age"_
|
| Here here. You can add to that the courts too and the
| politicians who need to have their "internet printed".
| amadeuspagel wrote:
| How many people do you think Wirecard bribed? Why did
| everyone else look away?
| luckylion wrote:
| For the same reason why they all looked away when Scholz
| was bribed by Warburg: they were following orders.
| belter wrote:
| "...Russian consulate in Munich, where he held meetings
| with spies and government officials..."
|
| "Wirecard scandal: German Finance Minister questioned" -
| https://www.dw.com/en/wirecard-scandal-german-finance-
| minist...
| vkou wrote:
| > Hey Germany, if you're so longing for a digital champion,
| why aren't you massively lowering taxes for start-ups,
| flooding them with funding and cutting their red tape,
| instead of aiding the corrupt enterprises of well connected
| crooks?
|
| What makes you think opening a firehouse of funding isn't
| going to be immediately siphoned up by corrupt enterprises of
| well-connected crooks?
| bell-cot wrote:
| THIS. If you've had a crappy environment for ~honest,
| competent young business leaders for a long time - then
| your local ecosystem will be dominated by the other sort.
| Like watering & fertilizing a field that has mostly been
| seeded with weeds, then expecting a good harvest.
| andix wrote:
| > ,,the German mentality toward non-Germans" This skepticism
| towards anything non-German is one of the reasons the SW
| sector and digitalization in Germany is in such a dire shape.
|
| In Germany the ,,Michelin" tires are pronounced in a German
| way in advertisements (and not in French, like in most other
| countries), because Germans wouldn't buy something that has a
| name that doesn't sound German.
| rossdavidh wrote:
| You're not totally wrong, but it's a bit more nuanced than
| that. What I see, from living in America and from spending a
| very small amount of time in Germany, is that in Germany the
| rules are the rules, whereas in America it is not quite like
| that. Small companies, especially new ones, employ "better to
| ask forgiveness than permission" a lot. However, as they grow,
| they are required to ask forgiveness, and this is given, but
| then you have to start following rules which are not enforced
| (usually) on small startups. Some, such as Uber/Lyft, grow so
| quickly that they can achieve some size before finding out that
| cities and states can impose requirements on you, but in the
| end regulation does come for them (perhaps not perfectly, but
| much more than when they were starting up).
|
| In Germany my impression is more "get your ducks in a row
| before you startup", which does make sense and has some
| advantages. I don't even think that it is that much easier to
| startup in the U.S., if all the rules (tax and otherwise) were
| enforced all the time. However, because in the U.S. you aren't
| (usually) as harshly punished for not having your ducks in a
| regulatory row before starting, the company is able to get big
| enough to afford accountants, lawyers, etc.
|
| I'm not saying the American "system" here is perfect, or even
| really a designed system at all, but it does have the effect
| (normally) of requiring more regulatory compliance as you grow
| in size, much like we as individuals are allowed to do things
| when 2 years old that we are sanctioned for if we do them when
| adults.
|
| All varies a lot by sector, etc. of course, but that's the
| general trend.
| ChuckNorris89 wrote:
| _> spending a very small amount of time in Germany, is that
| in Germany the rules are the rules, whereas in America it is
| not quite like that_
|
| That's the impression you'll get as a foreigner who spent a
| little time in Germany, but if you're long timer deep in the
| system you'll realize that "rules are rules" is only true for
| the little guy whereas the wealthy elite and old-money
| individuals and companies can and do bend and break the rules
| with the help of regulators, politicians and courts all the
| time who kindly look the other way because they are directly
| or indirectly invested in those companies or tied to the
| individuals who run the companies.
|
| High level corruption in Germany is rampant and the scandals
| are numerous. VW, Wirecard, Deutche, Axel Springer, real
| estate giants, basically pick any rich big German company,
| chances are they have powerful friends in politics greasing
| the gears for them making sure the regulatory authorities are
| always looking the other way.
| InCityDreams wrote:
| Fairly long-term .de resident. Just try crossing the road
| against the red man......"rules are rules", to the nth
| degree.
|
| And, I agree of course, the rich have a better system.
| ChuckNorris89 wrote:
| _> Just try crossing the road against the red
| man......"rules are rules", to the nth degree_
|
| Meh, that's just a rule OCD public facade since people
| are watching and so kids don't learn bad habits and get
| killed by cars, but privately many Germans are more than
| willing to break rules if it benefits them and nobody is
| looking and won't find out about it, just that they don't
| openly talk about such things since the Germans are super
| private about their personal affairs and finances, and
| you also won't hear about such things if you only hang
| abound in bubbles of SW devs and other repeople with
| corporate jobs in big cities.
|
| My favorite is them not paying taxes on cash earnings.
| Cash is king for a reason in Germany: many small
| businesses, self employed or side hustles love doing
| business in cash since they can dodge the tax man and pad
| their incomes with untaxed earnings.
|
| Please tell them that "rules are rules" when it comes to
| paying their taxes on cash earnings and they'll tell you
| to shut up and piss off because "everyone is doing it"
| and "it's always been like that".
| ilyt wrote:
| > but also the idea that american startups are more successful
| because they are more ruthless, more willing to lie, to commit
| fraud, an idea which I also see on this forum.
|
| The US law allows for more so that's not exactly unjustified...
| A_D_E_P_T wrote:
| > "collective supervisory failure,"
|
| > "the longing for a digital national champion,"
|
| Ultimately, you get what you incentivize.
|
| The German tax regime is not friendly to start-ups and
| entrepreneurs, to put it very mildly, and infrastructure is
| lacking. Fertile ground it sure isn't. (There are other issues,
| like a digital economy that's not concentrated in one region
| but is diffuse around the entire nation -- and public
| attitudes, which are best described as being "staid," and favor
| employment at large existing firms or at research
| institutions.)
|
| Legitimate entrepreneurs -- especially the good ones with
| foresight and low time preference -- will leave for greener
| pastures. And you can bet your last Euro that many of those who
| remain are grifters merely preying upon "the longing for a
| digital national champion."
| zwieback wrote:
| Ok, so it seems like the German preference for stability over
| risk-taking is still the same as when I left Germany in the
| 90s. I only worked at a few startups and have been at a
| stable company for 20 yrs now.
|
| What I'm noticing is that we buy a lot of German motors,
| valves, optics, automation equipment. Even things like
| terminal blocks, hand tools, etc. etc. We all prefer them
| even to American brands, much less Asian. My well-off
| coworkers drive German cars unless they are pickup truck
| guys.
|
| Maybe it's good to have a high-power economy based on
| conservative tech alongside our US high-risk but ultimately
| amateurish approach. Best of both worlds. Having said that I
| would never consider going [edit: move] back to Germany, for
| different reasons.
| jaspa99 wrote:
| May I ask the reasons why you will not set foot in Germany
| again?
| zwieback wrote:
| Oh, I visit regularly, should have clarified, but would
| not move back there. I very much enjoy the lack of
| bureaucracy and the amount of open space here in the NW
| of the US.
| trylfthsk wrote:
| > Ultimately, you get what you incentivize
|
| I've already claimed this for my tombstone
| tannhaeuser wrote:
| Idk about ruthless, but clearly the market size, investment
| possibilities, the labor and tax laws and maybe also
| immigration laws are favorable to US startups.
|
| Biggest fraud in German history I don't know either, what about
| the Hitler diaries or the (political instrumentalization of
| the) Reichstag fire, on this date 90 years ago btw?
| amadeuspagel wrote:
| > Clearly the market size, investment possibilities, the
| labor and tax laws and maybe also immigration laws are
| favorable to US startups.
|
| Sure. Of course, many of these things are the responsibility
| of german legislators, and their longing for a german tech
| success story might be at least in part explained by a desire
| to avoid thinking about them.
| rcme wrote:
| American start ups are definitely more willing to ignore
| regulations in the name of growth, but not sure that's fraud.
| WeylandYutani wrote:
| Cough Uber cough Airbnb.
| rcme wrote:
| What part of taking an Uber is fraudulent?
| carlmr wrote:
| Selling self-driving technology with a next-year time horizon
| for 7 years seems quite fraudulent.
| boc wrote:
| Except it's hard NOT to see a self-driving car (including
| cars without anyone inside) if you walk around SF these
| days. Please don't conflate Musk and Tesla with the Waymos
| of the world.
| jakzurr wrote:
| https://en.m.wikipedia.org/wiki/Wirecard
| Magi604 wrote:
| So I had no idea what I would be reading when I started, but WOW
| what an amazing story. I could not stop. Halfway through I
| thought to myself this would make an amazing TV series as it
| seemingly has everything: finance, politics, spies,
| assassinations, backdrops of the UK, Germany, Libya, Singapore,
| Philippines, Russian mercenaries, private mansion gatherings, a
| cunning mastermind (Marsalek)...I'll just call it now and say
| that one day a production company will make a killer TV series
| out of this (a movie is too short to do it complete justice).
| andix wrote:
| There may have even been Russian involvement on a state level.
| Parts of Wirecard were maybe a Russian FSB operation. Jan
| Marsalek was from Vienna, which is still one of the most
| important FSB outposts in Europe. There are some threads
| connecting Marsalek and the Russians to the government and the
| administration in Austria, that may be connected.
|
| But it's just speculation, no real evidence backing it up
| (yet).
| boeingUH60 wrote:
| Related fact: German entrepreneur Christian Angermayer was paid
| EUR13 million for arranging SoftBank's investment in Wirecard
| [1]. He's well-known for hyping Bitcoin, Psychedelics, and SPACs
| [2]...the perfect financial woo-woo combo.
|
| 1-
| https://www.ft.com/content/3c561ccf-2e95-46f7-ac43-a8e04db21...
|
| 2-
| https://www.bloomberg.com/news/articles/2021-04-23/billionai...
| mistrial9 wrote:
| you say that like its a bad thing ?
| LastNevadan wrote:
| Matt Levine's blog at Bloomberg also discusses Wirecard
|
| https://www.bloomberg.com/opinion/articles/2023-02-27/wireca...
| no1groyp wrote:
| Biggest? Hear me out...
| 0xDEF wrote:
| Germany has its own share of big shady fraud and corruption
| cases.
|
| Deutsche Bank being raided for laundering Russian money was an
| annual happening before the 2022 Russian invasion of Ukraine.
| suction wrote:
| [dead]
| WA wrote:
| We have a chancellor who has acute Alzheimer symptoms when it
| comes to CumEx.
|
| https://en.wikipedia.org/wiki/CumEx-Files
| heipei wrote:
| If you're into that I suggest watching the SWR documentary
| around Big Manni / FlowTex.
| eqvinox wrote:
| > "In an 'accident,' he'd routed all of the company's internet
| traffic through his own PC, rather than the dedicated hardware in
| the server room--a set-up ideal for snooping." But Marsalek, a
| talented hacker, couldn't be fired; [...]
|
| Interesting. I had not heard this nugget before.
| Upvoter33 wrote:
| "Biggest Fraud in German History" -> would be careful with that
| bit of hyperbole ...
| jvans wrote:
| I have always thought the most troubling aspect of these
| frauds(Theranos/Madoff/Enron/Wirecard) is the fact that they are
| not sophisticated, are complete and total frauds, and yet they
| persist for years or decades. It makes me wonder how much
| companies get away with when they only do a little bit of fraud.
| WeylandYutani wrote:
| We aren't counting Hitler I assume?
|
| In before "don't mention the war".
| ikinsey wrote:
| https://archive.is/ztXde
| AlbertCory wrote:
| When I saw the title, I thought it must be about the Hitler
| diaries:
|
| https://www.independent.co.uk/news/uk/home-news/hitler-diari...
|
| I think you'd have to call that a bigger fraud.
| TedDoesntTalk wrote:
| What an interesting read. I don't know about the Hitler
| diaries.
| fsckboy wrote:
| Wirecard? I came here to read about diesel emissions!
|
| the fine totals are higher, but I guess that's multiple companies
| and punitive measures so maybe the negative externality of air
| quality is lower?
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