Money Men: A Hot Startup, a Billion-Dollar Fraud, a Fight for the Truth 
by Dan McCrum.
Bantam, 326 pp., £20, June 2022, 978 1 78763 504 3
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People​  talk about capitalism as if it were just one thing, but the truth is that we live in a global system of capitalisms plural, with a chunk of ideology in common but considerable differences in local emphasis. Britain has fantasies about itself as an ideologically clear-minded capitalist state, but our political economy is riddled with padding and feather-bedding and cronyism and inefficiencies – perhaps the most spectacular example being the £15.7 billion-plus lost in fraud and error during the Covid response.* If you were to draw up a matrix showing how big a scandal is on one axis, and how under-noticed it has been on the other, that would surely be in the top right-hand corner, an outrageous failure that in a well-functioning society would be guaranteed to bring down the government and trigger reform of the Treasury and procurement systems. Instead, the person at the head of the machinery which supervised, or failed to supervise, the fraudpocalypse is currently in a run-off to be the next prime minister.

Capitalism always has a local tenor, for better and for worse. Singapore consistently tops lists of free-market societies on a range of metrics, but also has one of the largest provisions of state housing in the world. The US is a capitalist society with a denuded to non-existent safety net for the poor, but multiple quasi-socialist exemptions and subsidies for corporations and the rich. France is being led towards the unconscionable horror of neoliberal capitalism by President Macron, his critics say – though he has just nationalised EDF, the world’s third biggest power company. Denmark is a model of tolerant, inclusive economic equality – but it does have a law against the existence of ‘ghettos’ which explicitly gives a lower level of rights to people from ‘non-Western’ backgrounds. Capitalism shares principal ingredients, but it comes in as many different flavours as ice cream.

The German version of capitalism is often seen as the world’s most grown-up. It is a capitalist society free from the excesses of Anglo-American speculation and financial engineering. It is famous for, inter alia, the level of worker representation at board level in its companies; the robustness and variety of its Mittelstand, the medium-size employers that are the backbone of the country’s manufacturing industry; the strength of that manufacturing sector and its unrivalled (for a rich country) success in export markets; its probity and responsible attitude to economic management, with individuals, households, companies and governments all equally determined to spend less than they earn. Nobody thinks Germany is the most exciting political-economic landscape in the world, and it is widely envied for exactly that reason. All of which makes it even more surprising that in the last ten years, two companies in the DAX, the stock-market index of Germany’s thirty (now forty) biggest corporations, have experienced colossal implosions, caused by fraud. For one of them, it was a near-death experience; for the other, it proved to be terminal.

The first scandal featured one of the world’s best-known companies, Volkswagen. From a distance, Volkswagen’s history looks like a simple success story, particularly in its integration of the three elements of a modern economy that are often imperfectly reconciled: the government, the corporation and the individual worker. At Volkswagen, the supervisory board that controls the company is made up of representatives of the shareholder owners (of whom by far the most important are descendants of Ferdinand Porsche, whose family is split into two rival dynasties, the Porsches and the Piëchs), the government of Lower Saxony and the workers. This level of worker representation is a legacy of the Nazi appropriation of union assets at the time of the company’s formation in 1937: in compensation, the workforce was given an enhanced role in running the company when it restarted after the Second World War. As Jack Ewing says in Faster, Higher, Farther (2017), his eye-opening book about the company, ‘the Nazis had unwittingly laid the groundwork for one of the grandest experiments ever in worker-management co-operation.’

This governing structure saw Volkswagen grow rapidly during the years of the German economic miracle. It had a huge hit with its first sedan, later modified to become the VW Beetle, an unlikely example of a Nazi concept, the Kraft durch Freude Wagen (‘strength through joy car’), which turned into a countercultural darling of the 1960s. It had another with its Type 2 combi van and another with the Golf, currently on its eighth iteration and still the car Top Gear once called ‘the most sensible private choice’. By 2008 Volkswagen had become the most valuable company in the world, with a market capitalisation of $370 billion. Today it has 673,000 employees, thanks in part to the fact that it has absorbed numerous other car marques: Audi, Škoda, Bentley, Lamborghini and Seat are among its hundreds of subsidiary companies. Before Covid hit, VW was selling eleven million cars a year and had just overtaken its deadly rival Toyota as the most popular car brand in the world.

The head to head with Toyota was at the core of what was to be VW’s disaster. As the 21st century went on, it became increasingly clear that everybody in the fossil fuel business had to start thinking about ways of getting into clean, or at a minimum cleaner, energy. Toyota did that by making big bets on hybrid cars, mixing battery charging and petrol engines to reduce fuel consumption and CO2 emissions. Here, it developed a significant lead: witness the early 2000s ubiquity of the Prius. The Prius was and is ugly, but that was part of the point. Prius ownership became a way of lowering your petrol bill and carbon impact while also signalling that you were the kind of person who cared more about the planet than about driving a fancy set of wheels.

VW, by contrast, were unashamed petrolheads, proud of their engineering supremacy in the arena of the internal combustion engine. They did not want to switch to battery or hybrid power. Hybrid engines are notoriously complex and buggy, and VW preferred to build on the technology they knew best. The company made a huge bet on diesel fuel and lobbied hard to persuade governments of diesel’s advantages. The main one is that diesel is a more energy-efficient source of fuel than petrol, and as a result has lower levels of CO2 emissions. Since CO2 emissions were the principal focus of governments’ early interest in climate change, this pivot to diesel spoke to their need to be seen to do something about emissions. Germany is the most powerful country in Europe, and car manufacturing is the most powerful lobby in Germany, so as if by magic, Europe began a switch to diesel engines in cars, with government incentives persuading many consumers to move across (including this mug). By 2002, 40 per cent of car purchases in Europe were diesels. Fast forward sixteen years, and it was the unwinding of these pro-diesel incentives that triggered the gilets jaunes protests in France.

The physics were never quite as simple as the advocates of ‘clean diesel’ would have us believe. Diesel had lower CO2 emissions, true, but to get a diesel engine to work efficiently, you needed to run it hot, which caused a surge in nitrogen oxide emissions. These, in terms of both climate and human health, are a disaster. For a start, nitrogen oxides are much more potent greenhouse gases than CO2. And they have a direct impact on human health. Spikes in NOx emissions in urban areas are accompanied by spikes in heart attacks. Ewing summarises their effects: ‘asthma, chronic bronchitis, cancer, risk of heart attacks, and such environmental effects as smog formation, acid rain and accelerated climate change’. So, in short: nitrogen oxides – very bad. The physics simply didn’t permit manufacturers to have both low CO2 emissions and low NOx emissions while also keeping the car within a viable price range. Regulators test emissions. When the new diesel engines were hooked up to monitoring systems in test centres, they would fail.

VW solved this conundrum by cheating. Instead of incurring the extra costs and inconveniences of reducing NOx emissions – which was doable, but so expensive it would break the business model for the cars – the company resorted to what the industry calls ‘defeat devices’. It is surprisingly easy to tell when a car is being subjected to a laboratory-based emissions test, because engines on a test track run with a regularity never seen in real-world use. This is ‘trivial’, as engineers say, for software to detect. A defeat device then kicks in: a gadget, sometimes physical and sometimes software-based, which overrides the normal operation of the engine and switches it to a cleaner, lower emissions mode for the duration of the test.

We trust car companies with our lives every time we get into one of their vehicles. For a car firm so flagrantly to break the testing rules, in spirit and letter, is shocking not just for the illegality itself but for the attitude it implies – a contemptuous indifference to the regulators and to the customers whose interests they are attempting to serve. It was crazily reckless, not just with respect to the environment, but to VW’s ability to function as a business, because a car company that people can’t trust is a car company whose machines people won’t buy. To put the company at risk by cheating on a test designed to protect the environment is a breach of trust the equal of anything to come out of the credit crunch and financial crisis. How on earth did this industry paragon go so badly wrong? The answer lies partly in its very success and power. VW is a European company, obviously, and European regulators were not a worry. For one thing, they relied on the lab tests that the defeat devices were designed to defeat; for another, their enforcement powers were next to non-existent. Why? See above: Germany is Europe’s most powerful country, car manufacture is Germany’s most powerful industry. The worst that could happen, in the unlikely event that Volkswagen was caught, was a slap on the wrist and a small fine.

VW was to discover that things were different in America. The US regulators had far greater powers, far greater willingness to use them, and crucially, thanks to a team of brilliant nerds at the University of West Virginia, they had access to a device that would attach to a car and measure emissions on the road, in real-world conditions. Officials at the Californian regulator CARB (Californian Air Resources Board) had long been sceptical about the low NOx numbers produced by Volkswagens; now they had a means to test them. The results weren’t just bad, they were horrific: some VW cars emitted forty times their claimed level of nitrogen oxides.

So far, so bad. But VW compounded its problems by stalling the regulator for a year, using every available means to challenge the accuracy of the data. On 18 September 2015, the Environmental Protection Agency published a Notice of Violation, and made it official: VW hadn’t just been failing environmental tests, it had been systematically lying about them. Note that all the time these cars had been on sale in the US, VW’s advertising had focused on the environmental credentials of the polluting vehicles. As Ewing argues, ‘Volkswagen doubled down by aggressively promoting its cars as environmentally virtuous. That strategy elevated the emissions cheating from a mere violation of regulations to a gigantic consumer fraud.’ It is a choice that can only be explained as an institutional contempt for the rules – a contempt for the idea that anyone knew better than VW itself.

You would expect this to go down badly with regulators everywhere, and so it proved. Eleven million cars had been fitted with defeat devices, most of them in Europe. Fines and compensation took the company to the brink: five years ago, when Ewing published his book, ‘it was not hard to imagine a worst-case scenario in which the total cost would add up to $50 billion or more. That sum might be enough to force Volkswagen into bankruptcy, endangering the jobs of Volkswagen’s 600,000 workers worldwide, the vast majority of whom had done nothing wrong.’ In the event, the bill by March 2020 was $34.7 billion, with the UK bill of £193 million arriving in 2022. As with the financial crisis, nobody senior went to jail. Oliver Schmidt, an engineering executive, made the mistake of going on holiday to the US, where he was arrested, charged, tried, pled guilty and was sent to prison for seven years. (Schmidt’s sentence was supposed to run until Christmas this year, but he was transferred to prison in Germany and released in January 2021.) Germany does not extradite to the US, so the five other senior executives charged by the US authorities were safe from the Feds. A number of them were tried in Germany, where they were all acquitted. It turned out that the demanding, notoriously micro-managing chief executive of VW, Thomas Winterkorn, had known nothing about the scandal, and hadn’t read a warning memo about it sent to him in May 2014 – which was lucky, because if he had, his subsequent actions would have amounted to fraud, and he would probably have gone to prison. A good day to flake on the paperwork, Herr Winterkorn! But maybe skip the trip to Disneyland, OK?

The​ other story of fraud and scandal at a DAX company stars a corporation of a very different kind. VW was, is and always will be in the car business. Wirecard was a payment company, an intermediary between customers buying stuff with credit cards and companies supplying the goods, but its story of rocketing success and abrupt implosion began elsewhere: in pornography. Paul Bauer was a Munich-based skatewear entrepreneur – he had the Central European rights to Vans, the US sneaker brand – who in 1997 got chatting to a man he met on a plane and ended up, as you do, flying to Los Angeles to negotiate with Larry Flynt for the German language rights to Hustler magazine. Bauer agreed the deal, started to import the magazines, and quickly realised that the future of the porn business was in digital, not print. The tricky part was working out how to get people to pay for it, and the answer came in Electronic Billing Systems, a new company Bauer started to charge people for dialling in to the porn sites. This was the antediluvian past of dial-up modems and premium-rate phone lines; those premium-rate numbers were geysers of cash, and the electronic payments side of the business could barely keep up with the cascade of money.

In 2001, by way of upgrading his payment systems, Bauer acquired an insolvent Munich company called Wirecard, a payment processor, and switched its focus from mainstream commerce to porn and thence to other businesses which operated in legal and reputational grey areas. Principal among these was online gambling. This was legal in some jurisdictions and illegal in others, and as a result transactions were prone to being blocked by the main credit card companies, Visa and Mastercard. But there were workarounds: some market participants offered an online wallet, which could be charged up with funds from elsewhere and then used to gamble online, without the credit card networks knowing about it. Another, cruder, technique was to – oops! – mislabel the transaction, so that instead of being identified with the 7795 code that denoted online gambling, a potential red flag, another code would accidentally-on-purpose be appended and the transaction would sail past the credit card company’s checks. Money poured in. To increase its access to the credit card networks, Wirecard bought a small bank, giving it the ability to issue its own cards – a big competitive advantage. Its business model had transitioned from wanking to banking.

In autumn 2006, without advance notice or debate, Congress tacked the Unlawful Internet Gambling Enforcement Act onto the SAFE Port Bill, which concerned port security. Online gambling abruptly became illegal in the US. This created chaos, but also huge opportunities, one of them in the area of poker. Games of skill were specifically exempt from the Act – but was poker a game of luck or skill? Many payment providers wouldn’t touch it, out of fear of the US authorities. (A theme in financial scandals is that the only regulators people truly fear are in the US, because they are the only regulators who get people sent to prison.) That meant there was plenty of money to be made by people who were willing to take the risk – chief among them, Wirecard. Just as the money from porn was quickly dwarfed by the revenue from gaming, the revenue from gaming was soon dwarfed by the revenue from poker. In 2007, Wirecard’s revenues increased by 63 per cent, to €131 million.

Bauer sold all his shares in the company by the end of 2007. According to Dan McCrum, the author of Money Men, ‘the final straw was a set of growth projections Wirecard had prepared for its investors: a 45-degree line, an unstoppable upward expansion. “All this cannot be possible,”’ Bauer said, and quit. The company had a new CEO, an Austrian former management consultant called Markus Braun. It was on Braun’s watch that Wirecard’s revenues and share price grew so steeply it ended up as a DAX-30 company. In the early stages of Wirecard’s growth, much of its revenue came from what was known as ‘high-risk processing’ in gambling, event tickets, miracle cure pills/supplements, budget airlines and porn. The risks were mainly of two types: of companies going broke, which was the risk for theatres, events and airlines; or, in the case of porn, gaming and supplements, of complaints and ‘chargebacks’, when customers demand their money back for a suspect transaction or bogus goods. Credit card companies hate chargebacks, and fine or freeze the accounts of merchants who are responsible for a surplus of them. It can therefore be useful, if you are engaged in one of these businesses, to have a ready supply of alternative merchant IDs.

Bear in mind that the location of an online business is something of a legal fiction, to do with where the company is registered rather than anything less virtual. In Wirecard’s case, a huge number of shell companies with British – and therefore gambling-legal – IDs were registered in Consett, a depressed former mining town in County Durham. Working with Wirecard was Simon Dowson, a 26-year-old local with, by his own account, four GCSEs. He recruited hundreds of people in and around the town to act as directors for hundreds of shell companies, signing forms and forwarding paperwork, but otherwise having no connection to the relevant businesses. (According to Companies House, Dowson has been the director of 1018 companies, and is still the director of 75.) The identity of the company’s owners was further protected by routing the paperwork through shell companies in the British Virgin Islands. All this is legal: the UK’s process for creating companies is internationally famous for its laxity. Still, as McCrum says, ‘payments to the various online casinos, pornographers and quack pill suppliers processed in this way went into accounts at Wirecard Bank in Germany in the name of the Consett companies, controlled by the unseen owners. It was a lot of effort to go to if you had nothing to hide.’

Outsiders never get to locate the exact point a legitimate business crosses the line and starts cheating. That’s a pity, because it would be interesting to know what’s running through the mind of a Bernie Madoff or an Elizabeth Holmes on the first occasion they see the moral fork in the road, face the reality of their actions, and make the wrong choice. Or maybe what happens is an ethical blur, a rush and press of business, in which what feels like a temporary, fixable expediency, a white lie, over time and in retrospect calcifies into a mistake that can’t be undone, a life-defining crime. We never get to know that, because these people are self-selectingly the kind of people who won’t tell us the truth. In the case of Wirecard, my hunch would be that its shady origins in porn and gaming put a kink in its corporate DNA. Some of its actions, in some jurisdictions, were never legal. The line between breaking those local laws and full illegality may not have been a difficult one to cross. It might seem a small thing, to fake a 7795 code merchant ID in order to conceal the source of a payment; but once you’ve done that – and it is pretty clear Wirecard did a lot of that – other forms of malfeasance become psychologically much easier.

McCrum,​ a journalist for the Financial Times, is both the author of Money Men, and also, though he wouldn’t put it this way, the hero of its story. He was more responsible than anyone else for the exposure and eventual collapse of the hugely fraudulent payment company. He became suspicious about Wirecard in 2014, and spent half a decade looking into the firm, at increasing personal cost. What he saw at the start was that the public narrative of Wirecard was of ever-growing profits. But its accounts were opaque.

Because it was a strange hybrid of technology company and bank it had weird financial statements. Some of the money flows recorded there related to the huge volume of payments coursing through its systems from credit card issuers to merchants, while the rest described Wirecard’s actual business: the commission it kept from each transaction and all the various costs and investments and profits and other details of activity at a normal company. To simplify everything, Wirecard’s CFO, Burkhard Ley, provided analysts with adjusted versions of the cash flow statement. It was like he took a knife and carefully cut Wirecard the machine away from the giant spinning wheel it powered.

Once the spinning wheel was cut away, Wirecard showed profit – lots and lots of profit. That was interesting, for two reasons. First, it’s hard to make money in the European payments business. The gold-rush days of dial-up porn and acai berry supplements, both of them once staples of Wirecard’s business, are long gone. Payments is a crowded and competitive area in which regulations are strict and margins are small. So how were they making all their money? Second, if there was all this cash swilling around, where was it? As a Wirecard sceptic explained to McCrum,

‘Faking profits, you end up with a problem of fake cash. At the end of the year the auditor will expect to see a healthy bank balance – it’s the first thing they check. So what you have to do is spend that fake cash on fake assets,’ he said. Imagine the auditor opens the treasure chest and finds it empty. We spent the gold on that building at the top of the hill, you say, handing them a telescope. So long as the accountant doesn’t walk up there and discover the house is just a wooden façade, everything is just fine.

Wirecard’s answer to the question ‘Where’s the money?’ was a version of ‘You don’t know her, she goes to another school.’ The profits and the money came from ‘third-party businesses’ which operated in areas where the European-based Wirecard could not. The man in charge of them was the company’s young chief technology officer, the Austrian Jan Marsalek. There were three of these third-party businesses, all based in Asia: PayEasy (Manila), Senjo (Singapore) and Al Alam (Dubai). McCrum and colleagues went in search of evidence of these thriving enterprises, and found instead a series of half-empty, half-asleep, visibly unthriving offices. His doubts about the business grew, and he began publishing sceptical pieces about it in the FT. The company responded with an ever louder series of accusations about ‘market manipulation’.

The big break in the case came when a whistleblower in Wirecard’s Singapore offices sent seventy gigabytes of data proving that the company was falsifying its accounts by ‘round-tripping’ – moving money from one location to another, just in time to satisfy the inspecting auditors. (I say it was a whistleblower: actually it was the whistleblower’s mother, sick of her son’s employer getting away with its lies. The whistleblower’s reaction, on hearing that the files had been sent to the FT, was the timeless cry: ‘Oh my God, Mum, what have you done now?’)

Wirecard’s response was to counter-attack. The company had been through mini-crises over its credibility before, and had learned a playbook. It was the same set of tactics that the KGB recommended to agents under interrogation: admit nothing, deny everything, make counter-accusations. In Wirecard’s case, the counter-accusations would always target short-sellers. A short-seller is a person or institution who thinks a share price is overvalued, and who therefore bets on it to fall. The commonest technique is simply to borrow a share, and sell it, with a promise to return it by a certain date. The action of selling the share helps to depress the price. Short-sellers are wildly unpopular with the companies they target, and are frequently accused of representing capitalism at its seamy worst. That critique is sometimes fair, because some short-sellers veer close to market manipulation and fraud; but they are also an example of capitalism working the bloody-fanged way it’s supposed to, instead of the government-padded and cronyish version currently prevalent. Many fraudulent companies would still be in business if it weren’t for short-selling, because shorting offers sceptics a way of putting their money where their mouth is. Under capitalism, you don’t need to stop at calling someone a fraud – you can make money from proving it.

Short-sellers are especially unpopular in Germany, which does not admire untrammelled ‘Anglo-Saxon’ (as Europeans obliviously call it) capitalism. For this reason, when Wirecard blamed short-sellers and market manipulators for criticism of its business, their complaints found ready listeners at home. The FT exposure of cooked books in Singapore should have set alarms ringing everywhere, not least inside Wirecard itself, because an honest company would immediately have promised to look into the revelations. Instead, Wirecard responded by calling the report ‘false, inaccurate, misleading and defamatory’ – which, to an informed observer, was confirmatory. ‘They’re criminals,’ McCrum’s boss at the FT said. ‘They just don’t know how to behave like a normal company.’

But that’s not the way the story was seen in Germany. Commerzbank put out a report saying that the FT scoop was ‘fake news’, that McCrum was a ‘serial offender’ and that ‘we are actually more worried about obvious active participation of the FT in market manipulation than about the allegations to the company.’ McCrum rang the author of the report. ‘If it walks like a duck, it usually is a duck,’ she said, and hung up. The FT published more evidence, with the astounding, hard-to-believe outcome that BaFin, the German financial regulator, announced an investigation into market manipulation. In other words, they didn’t just ignore the whistleblower, they went looking for evidence that the whistleblower was a criminal. Handelsblatt, the German equivalent of the FT, had a copy of the key evidence about the fraud in Singapore, but chose to contextualise it with a long interview in which Braun explained away the allegations. When police in Singapore raided Wirecard’s offices, BaFin responded by announcing a two-month ban on shorting Wirecard stock, using a power it had employed only once before, in the depth of the credit crunch. The Frankfurter Allgemeine reported that McCrum was under criminal investigation. Handelsblatt followed up with a story that ‘a new short attack is planned and that a lot of money is being used to influence media reporting.’ BaFin filed a criminal complaint against McCrum and a colleague. Wirecard filed a lawsuit against McCrum. The company made extensive use of private detectives to follow him and there were repeated attempts to hack his email. Money Men makes it clear that this was a horrible period, with a heavy dose of Kafka: the FT had proof that Wirecard was fraudulent, but nobody wanted to believe it, least of all the relevant regulator. It was BaFin’s intervention that turned McCrum’s story from a mere financial scandal into something much more alarming, a cross between the Enron scandal and Rosemary’s Baby.

If it walks like a duck, it usually is a duck. If it looks like a colossal fraud, it probably is a colossal fraud. The FT published what should have been conclusive proof of Wirecard’s fake accounting on 15 October 2019. Wirecard responded by announcing a special audit by KPMG (which happened to be Braun’s former employer), but kept acting as if nothing was amiss. The markets seemed to believe it, because the market capitalisation of the firm stayed at €16 billion. The audit took almost six months, slowed at every stage by the company’s stalling and deflection, and Wirecard announced that it had ‘not produced any substantial findings in these areas of investigation that would result in a need for correction of the financial statements’. This wasn’t true. When the KPMG report arrived, it became clear that there was a problem. ‘KPMG had been appointed to settle a simple question: did Wirecard’s customers actually exist? Six months and many air miles later, it was unable to say for sure.’ Wirecard kept denying anything was wrong and the market kept believing it, until another audit, from Wirecard’s regular accountant, Ernst and Young, landed on 18 June 2020. Wirecard claimed to have €1.9 billion on deposit in the Philippines, and had the paperwork to prove it. ‘Please be informed that the attached documents are spurious,’ the Bank of the Philippine Islands said. Braun was unruffled: ‘It’s all a big misunderstanding which will soon be resolved.’ On 22 June Wirecard admitted that the money wasn’t just missing, it had probably never existed. On 25 June the company went bankrupt, owing its creditors €3.5 billion.

Six days earlier, Jan Marsalek had paid €8000 in cash to two pilots at a private airport outside Vienna, then took a Cessna to Minsk and disappeared. He currently features on Europol’s list of Most Wanted Fugitives. (The Europol list is less fun than the FBI’s Most Wanted, because it doesn’t have an official Top Ten, though the first fugitive on the US list has the occupation ‘golf equipment importer’, so maybe it’s a draw?) Marsalek is thought to be now in Moscow. The head and deputy head of BaFin, the failed regulator, both resigned. Christopher Bauer, head of PayEasy in Manila and a close associate of Marsalek, is supposed to have died in the Philippines of an infected boil in July 2020. ‘The family have rejected any suggestions that Bauer’s death was faked.’ Braun is awaiting trial on charges of fraud. Pav Gill, the whistleblower in Singapore whose revelations (or whose mum’s revelations) brought down the company, is sceptical of Braun’s protestations of innocence. ‘The CEO can’t be that much of a dense dupe, right? If you try to present yourself as some sort of Elizabeth Holmes visionary, you need to have some sense of what is going on in your company. You can’t now blame it on the guy who ran away. For all we know, that was the plan all along: Marsalek is missing and everyone else is a victim.’

It is clear from the story of Wirecard that the company was greatly assisted in its criminal activity by stereotypes about Germany. ‘There were many Teutonic stereotypes available, but incompetent crook wasn’t one of them,’ McCrum observes. ‘It’s a German company run by Austrians,’ the editor of the FT was told, as if that was a full and complete answer to the paper’s reporting. Stereotypes are almost always resented by the people on the receiving end. But not in these cases. In the story of both Volkswagen and Wirecard, criminal activity was facilitated by the willing internalisation of national stereotypes about competence and propriety. In most countries, the characteristic flaw of contemporary capitalism is the cynicism involved. In many places – the US, France and Italy, to name just a few – a particular nexus of cynicism is the complicity between financial and political elites. That complicity also exists in the UK, but there is also a local variety of cynicism which manifests in indifference to the provenance of the money sluicing through the financial system. Why was it in London that the Russian criminal elite was able to launder its money so easily? Because it was in London that the whole financial system was geared around facilitating that kind of laundering. It was in London that financial institutions simply didn’t care where your money came from or how it had been made.

The defining flaw of German capitalism, however, is not cynicism but complacency. That complacency underlies the remarkable fact of two huge frauds in DAX companies within five years. Volkswagen didn’t need to pay any attention to what regulators thought, because it knew better than the people who made the rules. We are the car people; we want to make diesel engines; our diesel engines will not pass tests; therefore the tests are wrong and must be circumvented. Regulations were simply an inconvenience to be worked around. Clear evidence of fraud was produced in the case of Wirecard, and the regulator’s response was to bring criminal charges against the people who exposed the wrongdoing. Why? Because the critical voices were coming from outside the magic circle of German capitalism, where processes are followed and rules are obeyed. The moral of the story: our cynical capitalism is bad, but complacent capitalism can give us a good run for its stolen money.

Listen to John Lanchester discuss this piece with Thomas Jones on the LRB Podcast.

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