2 men convicted of falsifying accounts linked to collapsed payments company Wirecard

Singaporean R. Shanmugaratnam was convicted on Sept 22 of 13 counts of falsification of accounts linked to nearly €1.1 billion (S$1.7 billion) purportedly in escrow for German payments company Wirecard, which has since collapsed, and its related firms.

From 2016 to 2018, Shanmugaratnam, 59, who was then a director of auditing services firm Citadelle Corporate Services, issued 13 balance confirmation letters falsely confirming to Wirecard AG, its related companies WCUKI and Cardsystems, as well as their auditors, that Citadelle held the amount in escrow for the Wirecard entities across three financial years.

On Sept 22, Briton James Henry O’Sullivan, 50, was also convicted of five counts of falsification of accounts after he abetted Shanmugaratnam to issue five of the letters in March 2017. 

The pair’s case is said to be linked to Austrian fugitive, former businessman and suspected spy operative for Russia Jan Marsalek, who was chief operating officer of Wirecard AG from 2010 to 2020.

An Interpol Red Notice has been issued against him.

Once such a notice is issued, the police in other countries can be on the lookout for foreign offenders. The Red Notice can then be used to support extradition proceedings after an arrest is made.

Oliver Bellenhaus, a German who used to be managing director of Cardsystems Middle East FZ – a Dubai subsidiary of Wirecard Technologies – was also named in court documents tendered by Singapore’s prosecution.

Escrow is an essential service in capital markets that supports transactions such as mergers and acquisitions.

Deputy public prosecutors (DPPs) Gordon Oh, Alexandria Shamini Joseph and Louis Ngia stated in their submissions: “(Shanmugaratnam) intended to deceive Wirecard AG, its subsidiaries and its auditors with the letters and thereby obtain advantages for himself, (Marsalek, Bellenhaus and O’Sullivan), and cause detriment to the auditors with the false confirmations.

“It is undisputed that (Shanmugaratnam) prepared the letters knowing that the contents were false and at the behest of persons external to Citadelle. The key issue in dispute was whether (he) falsified the letters with intent to defraud.”

District Judge Kow Keng Siong convicted Shanmugaratnam and O’Sullivan after a trial.

The DPPs said Shanmugaratnam had been the director and sole shareholder of Citadelle since September 2014.

O’Sullivan got to know him when the Briton engaged Citadelle’s services to set up companies in Singapore.

Citadelle then offered corporate secretarial services to 30 of O’Sullivan’s companies, including Brightyear, Senjo Group and Senjo Payment.

O’Sullivan was also the owner of multiple accounts on e-mail platforms and messaging app Telegram.

Shanmugaratnam believed that he was communicating with the younger man through these e-mail accounts, said the prosecution.

Court documents stated that O’Sullivan was Marsalek’s long-time business partner and friend.

O’Sullivan introduced Marsalek to Shanmugaratnam on an occasion before July 2015, said the prosecutors, adding: “According to (Shanmugaratnam), he was asked by (Marsalek) to act as an escrow agent between Wirecard entities and (O’Sullivan’s) companies.”

Among other things, Shanmugaratnam received a request on Feb 23, 2016, from accounting firm Ernst & Young (EY) for Citadelle to confirm the balance of all accounts held by Wirecard AG and/or its subsidiaries with Citadelle as of Dec 31, 2015.

In March 2016, he received a document from Marsalek.

The prosecutors said: “The document contained draft wordings to be put into balance confirmation letters. Shortly after, Shanmugaratnam prepared (three) letters on Citadelle’s letterhead using the wording provided in (the) document.

“Shanmugaratnam then sent the three letters to EY via e-mail on March 29, 2016. On the same day, EY Germany replied to confirm receipt of the e-mail.”

The letters had mentioned three escrow accounts, and each of them purportedly had a balance of between €30 million and more than €66 million.

Court documents stated that in fact, Citadelle was not holding these sums of money for Wirecard and/or its subsidiaries as of Dec 31, 2015.

On May 23, 2016, Shanmugaratnam received an e-mail from Bellenhaus, asking him to provide confirmation that Citadelle held an additional €41.5 million in an escrow account as of March 31, 2016.

The e-mail contained the wording to be used for a letter of confirmation to be addressed to WCUKI.

In May that year, Shanmugaratnam prepared letters using words provided by Bellenhaus. After that, he sent them to Bellenhaus via e-mail.

The letters had mentioned two escrow accounts, and each of them purportedly had a balance of between €30.3 million and €41.5 million as of March 31, 2016.

Shanmugaratnam went on to commit similar offences involving the remaining letters, and five of them were linked to O’Sullivan.

The DPPs said: “(His) deliberate act of issuing false balance confirmations of money held on Wirecard’s behalf to Wirecard’s auditors inherently demonstrates his intent to defraud.”

Shanmugaratnam is represented by lawyers Megan Chia and Clara Ng.

Among other things, he had said in his defence that he had no knowledge of any criminal scheme between Marsalek, Bellenhaus or any other people to defraud Wirecard AG and its subsidiaries through the use of the confirmation letters. 

As for O’Sullivan, the prosecution said evidence clearly showed the Briton instructing Shanmugaratnam to sign false balance confirmation letters in 2017.

The DPPs added that O’Sullivan was acting as the middleman between Shanmugaratnam on the one hand, and Marsalek as well as Bellenhaus on the other, to have Shanmugaratnam issue the false letters to the auditors.

Represented by lawyers Tito Shane Isaac, Sindhu Nair and Lim Chu Yech, O’Sullivan claimed that an unauthorised third party had compromised his devices and sent the messages relating to the falsified letters.

He claimed that his e-mail and Telegram accounts were hacked, the court heard.

Wirecard Singapore had been providing payment processing services to about 1,900 companies here before the Monetary Authority of Singapore (MAS) ordered it to stop in September 2020.

MAS also directed the firm to return all customers’ funds within two weeks.

The shutdown of its payment services affected thousands of consumers, who were unable to make online or credit card payments to merchants on Wirecard SG platforms.

Telecommunications firm M1 then had its monthly recurring payment option disrupted. Payment services for other companies, including eateries like Starbucks, were also affected.

Merchants had to make payment arrangements with new service providers.

Wirecard filed for insolvency in Germany in June 2020. The company’s former chief executive Markus Braun and several other top executives were then arrested.

Shanmugaratnam and O’Sullivan are expected to be sentenced in November.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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