Credit to KPMG for shining a light on fraud at Wirecard

Nailed It

KPMG: A scathing report in The Financial Times that detailed extensive fraud at German payment giant Wirecard wasn’t without a compliance-related silver lining. The report highlighted the role auditor KPMG had in helping to shed light on the rotten inner workings at Wirecard. KPMG, which was tapped for a special audit of the company after allegations of wrongdoing first surfaced late last year, never signed off on Wirecard’s version of events because the company could never provide proper documentation for the location of $2 billion in missing funds. Kudos to KPMG for not signing off on something they couldn’t confidently confirm, despite Wirecard’s insistence that everything was on the level. —Dave Lefort 

IBM + L.A.: During back and forth over the merits of a privacy lawsuit focused on location data tracking by The Weather Channel app, IBM and the city of Los Angeles were able to come together to address the city’s need for support in fighting COVID-19. In announcing a settlement of that lawsuit last week, Los Angeles City Attorney Mike Feuer revealed IBM would donate a substantial amount of electronics equipment to assist the county’s contact tracing efforts and the city’s data storage needs. The support from IBM was not a condition of the settlement, which mainly focused on revisions to location tracking disclosure screens, so it’s nice to see that the two sides were able to partner to focus on the bigger picture despite their legal dispute. —Kyle Brasseur

Storebrand Asset Management: Norway’s largest private asset manager became the latest among its peers to take a socially conscious stand as it cut ties with Exxon Mobil and Chevron among 27 exclusions made in accordance with its new climate change policy. Storebrand, in a press release Monday, said the decision was made based on the companies’ lobbying against the Paris Agreement, which sets out a global framework to combat climate change. “Storebrand will have a net zero in greenhouse gas emissions from its investment portfolios by 2050 at the latest,” the asset manager announced. Last month we gave a nod to Nordea Asset Management for dropping Brazilian meat giant JBS from all its funds due to the company’s handling of deforestation and corruption charges, and the world’s largest asset manager, BlackRock, made a splash last year when it said it would hold companies and boards accountable where they are not making enough progress on sustainability-related disclosure. —Kyle Brasseur

Failed It

Wirecard: In the most damning indictment yet of the behavior of the German payments group, The Financial Times reported this week on the company’s alleged plan to acquire Deutsche Bank, a move planned at least in part to cover up a $2 billion fraud. “By blending Wirecard’s business into Deutsche’s vast balance sheet, it might be possible to somehow hide the missing cash and explain it away later in post-merger impairment charges,” wrote reporter Olaf Storbeck in the FT of Wirecard’s thinking behind the takeover. —Dave Lefort

Wells Fargo: The troubled banking giant just can’t stay out of the news. This week, it agreed to settle claims of hiring discrimination against more than 30,000 Black job applicants by agreeing to pay $7.8 million in back wages and interest and will provide 580 applicants with jobs as tellers, personal bankers, and other administrative positions. As part of the deal with the U.S. Labor Department’s Office of Federal Contract Compliance Programs, the bank did not admit liability in the investigation (we hate this, by the way … just admit when you’re wrong!). The government credited the company for being proactive in entering into the “conciliation agreement.” The hiring practices in question took place between 6-10 years ago, according to the company. “Since this time period, we have made significant changes, including centralizing recruiting, establishing a recruiting team focused on diverse talent, increasing partnerships with diverse organizations, and improving record keeping,” a Wells Fargo spokesman said. —Dave Lefort 

Honda Motor Corp.: The Japanese automaker’s U.S. subsidiary entered into an $85 million settlement with 45 states (and D.C.) this week to settle allegations the company concealed airbag safety issues in Honda and Acura vehicles sold in the United States. That’s on top of Honda’s $605 million settlement of a class action lawsuit in 2018. Honda has been slow to address the faulty airbags manufactured by longtime supplier Takata Corporation, only taking action after the lawsuits started flying. But as part of its settlement with the states, Honda is taking thoughtful measures to prevent similar missteps, incorporating “improvements in critical areas such as risk management, quality control, supplier oversight, training and certifications, along with mandatory whistleblower protections.” Let’s see how well Honda applies the hard lessons it has learned. —Aaron Nicodemus

U.S. Oil Fund: The country’s largest crude oil exchange-traded fund has been on the receiving end of not one but two Wells Notices from regulators in the past 10 days regarding disclosures it made during the oil price crash brought on by the coronavirus pandemic back in April. On Aug. 17, U.S. Oil, its CEO John Love, and the United States Commodity Fund received Wells Notices from the Securities and Exchange Commission, and the Commodity Futures Trading Commission followed up with Wells Notices of its own for the aforementioned trio two days later. The notices signal intent by the regulators to bring an enforcement action—they are not definitive, and U.S. Oil will get a chance to make its case before any potential fines are announced. But add the two looming threats to multiple shareholder lawsuits U.S. Oil is facing, and it is a tough time to be in the oil futures business. —Kyle Brasseur