It was Wirecard’s biggest deal — and its most controversial.
In October 2015, the German technology company agreed to pay up to €340m for a collection of small, barely profitable Indian payment groups.
Two of the companies, Hermes I Tickets and GI Technology, had been involved in processing payments for just a couple of years. Wirecard chief executive Markus Braun hailed the deal, saying at the time that it would strengthen the company’s position “in one of the world’s most rapidly growing electronic payment markets”.
The targets were sold to Wirecard by an entity based on the island of Mauritius called Emerging Markets Investment Fund 1a, which was only incorporated in February of that year.
EMIF 1a had bought the Indian companies just six weeks earlier for a fraction of the price. The ultimate beneficial owners of the Mauritius entity, which reaped substantial profits from selling the payment groups to Wirecard, have remained a mystery.
Wirecard collapsed in June last year in one of Germany’s largest accounting frauds. For years, questions have lingered over whether one or more Wirecard executives were behind EMIF 1a and might have thereby had access to hundreds of millions of euros.
Emails and internal documents reviewed by the Financial Times, combined with a witness statement given to Munich prosecutors investigating the downfall of the once lauded company, provide further insight into a transaction that is the subject of several lawsuits.
Months before takeover talks started between Wirecard and EMIF 1a, Jan Marsalek, the German group’s former chief operating officer and now a fugitive, had embarked on a project to improve the websites of the Indian payment companies.
According to emails reviewed by the FT, Marsalek was introduced to the co-founders of the payment groups by Henry O’Sullivan, a British businessman who advised Wirecard in Asia and entered at least one partnership with the company in the region.
The Briton was among those believed to have controlled EMIF 1a, a former business associate of O’Sullivan and Marsalek has told Munich prosecutors, according to people familiar with the investigation.
Internal Wirecard emails seen by the FT show he was briefed about matters related to EMIF 1a after the acquisition of the Indian payment groups, and was a close confidant of Marsalek.
A hunting enthusiast and prolific dealmaker, 46-year-old O’Sullivan has business interests from oil trading to payments processing.
It was in late 2014 that O’Sullivan put Marsalek in touch with Palani Ramasamy, who with his brother Ramu, had co-founded Hermes and GI Technology.
“Palani and his brother Ramu are good chaps who I would always be interested in doing business with in any way,” O’Sullivan wrote in an introductory email. Marsalek subsequently met Palani Ramasamy in December 2014 in Vienna’s luxurious Hotel Sacher.
In March 2015, Marsalek began redesigning the website of Hermes, one of the Indian payment groups. Wirecard’s former chief operating officer commissioned a Munich-based designer, provided pictures and text and personally oversaw the work. Hermes was equipped with a state of the art website, and both it and GI Technology were given modern logos.
“We were under quite intense time pressure,” the web designer, who asked not to be named, told the FT. His company frequently worked for Wirecard, and said he had assumed Hermes and GI Technology were already part of the German group.
“It was a bit unusual that all of the communication even about minute details was solely with an executive board member,” he said.
Emails show that Wirecard footed the bill for the revamp, about €25,000.
Weeks after the new Hermes site went online, Wirecard began the takeover talks with EMIF 1a. Dubbed “Project Peacock” within Wirecard, Marsalek was keen to get the deal done quickly.
“He put a lot of pressure on us, as he wanted to get the project done by the end of September,” said one former Wirecard employee who played a key role in the transaction.
The person, who spoke to the FT on the condition of anonymity, said he occasionally had the impression that “my own executive [Marsalek]” was an obstacle to rigorous due diligence. “It was a bit strange: We were working on the biggest M&A transaction in our history and yet nobody from the board even asked for a fairness opinion.”
Such independent third-party assessments of a company’s valuation are standard when making acquisitions.
EMIF 1a, which acquired the Indian payments companies for about €37m, banked with the Mauritius branch of Standard Chartered and in 2016 engaged KPMG as its auditor. However, the Big Four firm told the FT that it ditched the mandate after six months as it was “not able to secure access to key information and individuals needed to conduct the audit”.
It appears Wirecard may have vastly overpaid EMIF 1a for the Indian companies. In the days leading up to Wirecard’s implosion, an internal restructuring team put the value of GI Technology at zero, according to a presentation seen by the FT.
As part of a lawsuit filed in London’s High Court by minority investors in Hermes alleging a conspiracy to defraud them, O’Sullivan, who was not a defendant, was described by the plaintiffs as one of the “principal representatives of the investors in EMIF”. The Ramasamy brothers denied the allegations, and the claim was dismissed by the court.
Doubts over the EMIF 1a deal first emerged just months after the transaction was announced. In early 2016, a Wirecard employee based in India told local EY auditors that “senior executives” of the German payments group directly or indirectly held stakes in EMIF 1a.
A subsequent forensic investigation into “Project Peacock” by EY was aborted by Wirecard in 2018. Early last year, EY’s anti-fraud team suggested that Marsalek might be one of the owners — an allegation that he vehemently denied at the time. Mauritian regulators suspended the fund’s licence after Wirecard’s collapse.
Florian Toncar, an MP for Germany’s Free Democrats, said that the evidence of Marsalek’s behind-the-scenes work on websites of companies that Wirecard later acquired was “hardly in line with an executive’s fiduciary duties”. The emails suggested that “Marsalek prettied up websites so Wirecard could pay higher prices to EMIF 1a”, he added.
Shortly after Wirecard’s insolvency, Munich prosecutors accused Braun of masterminding the creation of EMIF 1a. Wirecard’s former chief executive, who has been in police custody since July, denies any wrongdoing. People familiar with the investigation told the FT that police have not found any evidence or witnesses supporting any involvement of Braun with EMIF 1a.
A lawyer for Braun told the FT the former chief executive had no knowledge of Marsalek’s work on the websites of Hermes and GI Technology. Nor did Braun have any personal or professional relationship with O’Sullivan, she added, declining to comment further.
Keeping a low profile
In contrast to Braun, Wirecard’s chief evangelist and public figurehead, O’Sullivan kept a low profile.
Documents reviewed by the FT show that O’Sullivan had a habit of avoiding written references to his real name.
In early 2020, when KPMG tried to interview him about the EMIF 1a transaction during a forensic audit commissioned by Wirecard’s supervisory board, he wrote an email to the payments group seeking “assurances that any written or electronically communicated notes circulated to [Wirecard] do not mention my name at all”.
According to emails seen by the FT, an adviser to Wirecard’s supervisory board suggested O’Sullivan be referred to as “Ms Corinna Müller”, adding that this was approved by the company. The emails show that O’Sullivan was subsequently referred to using the fictitious name within Wirecard.
Emails sent to Marsalek in 2016 show that a key decision maker at EMIF 1a used the address “[email protected]”.
O’Sullivan’s first two names are “James Henry” and a similar email address was in use at Senjo Group. Senjo is a Singapore-based business partner of Wirecard where the businessman was also a decision maker, according to people familiar with the matter. There appears to be no evidence that anyone named James Henrie ever had any position at Wirecard, Senjo or EMIF 1a.
Companies associated with O’Sullivan received large loans from Wirecard. Loan documents by Wirecard Bank describe O’Sullivan as “personally known to Wirecard executives and of impeccable integrity”, according to the appendix of KPMG’s forensic audit into Wirecard.
O’Sullivan is believed to be in Singapore, according to people familiar with the matter. Singapore police, which last summer said they had opened an investigation into Senjo, declined to comment. Senjo Group did not respond to a request for comment.
Despite multiple efforts, the FT could not reach O’Sullivan for comment. Palani and Ramu Ramasamy did not provide responses to requests for comment by the FT.
Marsalek absconded in June last year and is on Interpol’s most-wanted list. A lawyer for Marsalek declined to comment. Munich prosecutors declined to comment.
Additional reporting by Stefania Palma in Singapore and Dan McCrum in London.