Wirecard scandal: EY must disclose all documents, rules Federal Court of Justice

The auditing firm EY (formerly: Ernst & Young) must provide comprehensive information to the insolvency administrator of Wirecard AG and Wirecard Technologies GmbH and grant access to its case files. This was decided by the Federal Court of Justice (BGH) in a ruling on Thursday (File No.: III ZR 438/23). The III. Civil Senate, which is responsible for, among other things, service and contract law, largely granted the claims of the insolvency administrator. The administrator demanded the handover of documents from EY's work as auditor and from a forensic special investigation in the Wirecard scandal. Ultimately, the administrator is seeking 1.5 billion euros in damages due to systematic failure.

Annual financial statements audited

The defendant EY acted as auditor for Wirecard AG from 2009 to 2019 and issued unqualified audit opinions for the annual and consolidated financial statements for the years 2014 to 2018. In the 2019 financial year, however, EY refused this certification, which immediately led to the spectacular collapse and insolvency filing of the payment service provider in June 2020.

The plaintiff demanded information about which documents were in EY's case files for the audits of the financial years 2014 to 2019, the handover of these documents, access to the complete files, and an injunction against their destruction. In addition, he demanded information and handover of documents from the forensic special investigation into company acquisitions in India ("Project Ring"), which began in 2016 and was discontinued in 2018.

Background: As early as March 16 and 29, 2017, EY had informed Wirecard AG in writing of insufficiently proven revenues from 2015 and 2016 and had even threatened to restrict the audit opinion – only to issue it on April 5, 2017, without any conditions.

The BGH bases the insolvency administrator's claims on the civil law provisions on agency in Section 675 of the German Civil Code (BGB) in conjunction with the duty of information and accounting of the agent (Section 666 BGB). By opening the insolvency proceedings, these rights of Wirecard passed to the insolvency administrator. The Senate thus considered the lawsuit to be largely justified. EY must therefore also answer certain questions regarding the audit of the consolidated financial statements for 2016.

No exceptions for internal papers

The BGH explicitly corrects the lower court: an Higher Regional Court had partially restricted the insolvency administrator's claims for information and access. It had decided that internal working papers, records of personal impressions of the consultant, and collections of confidential background information should be excluded from the duty.

The Senate overturned these limitations. While such documents may be excluded from handover in individual cases, it explained. However, EY had not fulfilled its duty to provide information in the lower courts and had not sufficiently justified why these specific documents had to be withheld. Thus, EY must now grant the insolvency administrator full access to these sensitive areas as well.

However, the lawsuit is unfounded insofar as it concerns information and access to the case files for the financial years 2014 and 2015. Here, the BGH declared the plaintiff's claims to be time-barred. The Karlsruhe judges also dismissed the lawsuit for an injunction against the destruction of the case files, as they considered the necessary actual danger for this to be non-existent. Overall, the ruling strengthens the position of insolvency administrators in their dealings with auditors and emphasizes their comprehensive duty to provide information. The professional supervisory authority for auditors already imposed a fine of 500,000 euros on EY in 2023 for breaches of duty in this case.

(vbr)