Managerial Social Responsibility

Major Case Analysis

The wire-cards Scandal

Case Facts

Wire cards was considered one of Germanys greatest technological star two years ago. Wire
cards was managed by Markus Braun who joined in 2002, during the time of Markus the
company achieved a market capitalisation of more than Ps19bn which accredited them as the
country’s most valuable financial service business surpassing their competitor Deutsch Bank.
Although today Wircard is faced with a different reality from two years ago. They had put
themselves in a blackhole for a total of Ps1.7bn in the firms account throwing their future into
doubt.

After a while the bosses admit that the investigation of where the missing money had reached
a dead-end in the Philippines where according to the company it was supposed to be held in
trust account at two Asian banks. After the research came into a dead-end, they admitted that
the missing money ‘may not exist’ which made the Wirecard fall into a Ps2bn due to the
action, the market shares had been freefall since Thursday. In addition, editor EY refused the
signed the wirecards books after it was discovered that there might be a potential fraud case.
After they knew that there might be a potential fraud, the chief executive and chief
technology since 2002 Braun, resigned the next day marking a stunning fall from grace for
the 51-year-old man. He was credited as the world most successful CEO because he
transforms wirecards from a small operating payment for pornography and gambling
websites and transformed it to the world most successful technology firm.

Wirecards was founded in 1999 and it was based in Munich, Germany which also employs a
total of 5,8000 staff and they profit from processing ten of billions of pounds in digital
payments. Although, wirecards had been battling allegation of fraud for years when the
Financial times newspaper claimed or informed the audience that the divisions in Singapore
and other Asian countries have been cooking the books by inflating revenues and profits.
However, before the news that there was a total of ps1.7bn was missing from the balance
sheet, they have accused the Financial Times news journalist of irresponsible and fake
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reporting and had taken legal actions against them, and EY who is the firm’s auditor, always
given a clean bill of health until recent times. Many people still believe that wire cards were a
legitimate company and people were confident until April when an independent probe by
KPMG was unable to confirm the existence of more than 1bn euro in revenue from 2016 to
2018. Hence, Britain’s Sir Chris Hohn demanded the removal of Braun since the report was
seized by Chris. Moreover, after one-week EY who is the auditor was unable to confirm or
verify that the money, which was held by Asian banks existed, making wirecard finances to
unravel overnight.

Fraser Perring and Matthew Earl claimed in an anonymous report that wire cards were linked
to a money laundry scheme for offshore poker website based in the US where online
gambling was still illegal at the time. Moreover, their allegation was dismissed because they
did not have enough information and it was baseless, but they were accused of share price
manipulation by the Frankfurt’s Federal Financial Supervisory authority, better known as
Bafin, they have also launched similar cases against the Financial times journalist after they
claimed that wirecards reports of accounting fraud at the company. Although now that Wire
cards is being investigated by fraud and market manipulation the firm based in Munich had
been raided by Bafin on June 5 and its board have been named in legal proceedings. Earl
claims that if the Bafin had done or put in 10% in researching better all the claims made to
wire cards they could have prevented this accusation and problems before. Finally, the public
prosecutor office had applied for and received an arrest warrant for Braun from the
responsible investigating judge of the Munich District, and the company went into
bankruptcy.

Case Issues

The decision maker in this particular case would be Mark Braun and EY, but In this
particular case the decision maker will be EY because there are not many penalties for the
CEO of the company so EY would be the decision maker because he had the opportunity to
inform the social media about the scheme that Wirecards was making throughout the years of
allegation

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Ethical Dilemma

The ethical dilemma of the wire cards scandal case is:

To inform the social media about the scheme of wire cards manipulation of the market and
fraud

Or

To not inform the social media about the scheme of wire cards manipulation of the market
and fraud

Alternative will result in punishment, hence, is the ethical dilemma. If EY had inform the
media about the scheme that was happening in wire cards he would be fired as well as loss of
credibility and no other firm will hire him due to all the bad reputation and referrals he would
get, but if he decided not to inform there will be more punishment because he would have
become an accessory to a criminal case.

Utilitarianism

Affected Parties:

 Markus Braun
 Bafin
 EY wirecards auditor
 Financial times journalist
 Sir Chris Hohm
 Fraser Perring
 Matthew Earl
 Frankfurt’s Federal Financial Supervisory authority

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Consequences for informing the social media about the scheme wire cards manipulation
of the market and fraud

 EY who is the auditor for wire cards would be fired from the company as well as
having a reputation of being an associate of a criminal fraud and scheming people for
money.

 He will also be prosecuted for fraud, scheming and manipulation of market shares.
 Possible jail time as a consequence for his actions
 Lawsuits from every investor/ client

Consequences for not informing the social media about the scheme wire cards
manipulation of the market and fraud

 Jail time for laundry money to the us illegal online gambling websites
 Never be able to work in a business that operate money due to the faulty reputation
gained
 Prosecuted as a criminal for money laundering, fraud, manipulation of market shares
 Lose reputation as an untrusty person
 Stake holders can claim their money back and he would have more criminal charges
for not advising or providing the proper and legal information
 Prosecuted as well for criminal negligence and the violation of basic human rights

The utilitarianism analysis concludes that the decision which will generate the greatest good
for the greatest number would be to inform the media about the scheme happening in wire
cards. Both scenarios have consequences for EY but that is the entire definition of an ethical
dilemma, but if he comes forwards about the scheme or fraud by Wire cards, many citizens,
investor, clients will not suffer economic problems, because many people rely on the
trustworthy information provided by Wire cards to manage their economic life. As well as he
would be charged with less conviction if he is the one who declares the scheme, he might
even get immunity in order to testify in court against wire cards.

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Kantian Analysis
The primary duty in the Wriecards case could be owed to either Frankfurt’s Federal Financial
Supervisory authority, or Bafin because in all decision regarding the disclosure of money
laundering or money scheme the Frankfurt’s Federal Financial Supervisory authority have the
responsibility to regulate the industry to avoid cases like fraud and illegal actions to happen
and protect customer.

Ethical Dilemma

To always ignore autonomy

Or
To never ignore autonomy

“To always ignore autonomy”.

1. Universalizable = No

The outcome would be that everyone would always ignore the autonomy of others. The
logical end point of which would be that all decisions are made based on deception, coercion
or manipulation. This is a self-defeating outcome.

2. Respect for rational beings = No

The sole intent of the decision-maker is to deny Frankfurt’s Federal Financial Supervisory
authority the right to autonomy to avoid punishments. This is a selfish intent.

3. Respect for Autonomy = No

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By always ignoring autonomy, the intent of the decision-maker is to deny the Frankfurt’s
Federal Financial Supervisory authority the ability to make free and informed choices. This is
disrespectful of their autonomy.

The maxim fails all three Categorical Imperative tests; therefore, it is unethical.

“To never ignore autonomy”.

1. Universalizable = Yes

The outcome would be everyone would always respect the autonomy of others. The logical
end point being that all decisions made are free of deception, coercion or manipulation. This
is a self-fulfilling outcome.

2. Respect for rational beings = Yes

By never ignoring autonomy, the decision-makers intent is to enable the Frankfurt’s Federal
Financial Supervisory authority to make free and informed choices, despite punishments.
This is a selfless intent.

3. Respect for autonomy = Yes

By never ignoring autonomy, the intent of the decision-maker is to respect Frankfurt’s

Federal Financial Supervisory authority the ability to make free and informed decisions. This
is inherently respectful of their autonomy. This maxim passes all three Categorical
Imperative tests; therefore, it is ethical.

The maxim “to never ignore autonomy” can be considered an acceptable ethical law. If
everyone must never ignore autonomy, the board of directors therefore must, regardless of
any consequences, based on all the information with the Kantian analysis the ethical decision
would be to fully inform the media or the Frankfurt’s Federal Financial Supervisory authority
about Wirecards fraud.

Ethical Rights Analysis

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The first stage of an ethical rights analysis is determining which rights are at play at the point
of the ethical dilemma. The following rights are relevant:

Distributive Justice Analysis

Distributive Justice analysis begins with going behind the ‘Veil of Ignorance’ and identifying
the potential worst off parties affected by the ethical dilemma. The potential worst off parties
at the time of the ethical dilemma could be:

 The Frankfurt’s Federal Financial Supervisory authority because they were

protecting the reputation of Wire cards during 2018
 Bafin, as their negative right to autonomy is being violated.
 The shareholders, as their negative right to autonomy is being violated, and
they were scammed.
 German Government, as their negative right to autonomy is being violated.
 The Wire cards clients, as they are being exposed to perpetual financial crime.
 To fully disclose money laundering information to Frankfurt’s Federal
Financial Supervisory authority or the German government would have the
outcome that all autonomy would be respected.

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 To not fully disclose money laundering information to Frankfurt’s Federal

Financial Supervisory authority would have the outcome that all autonomy
would be ignored.

The only outcome that improves the worst off’s position is to fully disclose
money laundering information to Frankfurt’s Federal Financial Supervisory
authority.

Final recommendation

The case surrounds the primary duty owed to the Frankfurt’s Federal Financial Supervisory
authority and it’s right to autonomy, necessary to regulate the financial industry. Based on all
the information and using the four ethical models which are utilitarianism, Kantianism,
Ethical rights, and distributive justice they should inform the social media in regard to all the
scams wire cards were doing in order not to jeopardize most of the community that was
scammed or even the stake holders that suffer huge loss or were scammed or lied about the
profit they were supposed to have.

Although, Frankfurt’s Federal Financial Supervisory authority should have investigate more
when there were many claims during the 2018 fraud or claimed made by Sir Chris Hohm or
the anonymous allegation from Matthew were they claimed that they have been laundering
money to the US illegal online gambling.

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Reference

MCCRUM, D. and PALMER, S., 2019, Feb 08. Inside Wirecard's accounting scandal: Wirecard has
become one of the most valuable companies in Germany. But a preliminary report by a top law
firm has unveiled a pattern of suspected book-padding across the payment group's Asian
operations. Financial Times, 9. ISSN 03071766.

Missing billions push Wirecard to edge of ruin; Accounting scandal engulfs one-time German
fintech star' (2020) Daily Mail [London, England], 23 Jun, 66,
available: https://link.gale.com/apps/doc/A627380034/STND?
u=utas1&sid=STND&xid=05fca62c[accessed 02 May 2021].

Anonymous2020, Jun 23. Wirecard's former CEO arrested over accounting scandal. Xinhua News
Agency - CEIS.