Dan McCrum, Stefania Palma, Olaf Storbeck and John Reed of the Financial Times are the 2020 winners of the Impact Award for Distinguished Financial Journalism for their reports that exposed a massive fraud at the heart of one of Europe’s top technology companies.
The award is given by the New York Financial Writers’ Association. The Impact Award honors a story or body of work by business journalists whose reporting spurred impact, irrespective of when the story or stories were published.
Wirecard was once Germany’s fintech star – a payment processing company that replaced Commerzbank in Germany’s blue-chip DAX 30 stock index and seemed poised for international dominance of its business. At its peak, Wirecard had a market value of $28 billion and attracted an investment from Japan’s SoftBank, one of the world’s largest technology investors.
In June, the company collapsed into insolvency, just days after revealing a $2.1 billion accounting hole at the core of its business. The disclosure meant that much of its business was nothing more than a fiction, and that the company hadn’t been nearly as profitable as it had claimed to investors. Its shares are now nearly worthless, its former CEO has been arrested on suspicion of false accounting, and German financial regulators are wondering how they could have missed such a massive fraud.
None of these revelations should have surprised readers of the FT, who for years have been given inside access into Wirecard’s business by McCrum and his colleagues. They began raising questions about Wirecard’s accounting practices as early as 2015. In 2019, the FT doubled-down on its reporting by revealing details of an internal investigation by one of Asia’s most eminent legal firms which indicated that Wirecard had been inflating its revenues for years. The revelation prompted police to raid Wirecard’s Singapore office. Additional FT reporting prompted Wirecard to appoint a special auditor to examine its books and culminated in June’s revelation that much of Wirecard’s business didn’t exist.
That might have been the end of the Impact Award Committee’s deliberations, had it not been for the fact that Wirecard falsely accused the FT’s reporters of colluding with short sellers in an effort to bring down its share price – claims which were found to be groundless by an outside law firm appointed by the FT to investigate the allegations. Despite the immense pressure brought on the FT, the paper continued to publish its Wirecard reports.
The FT’s courageous and persistent coverage exemplifies an important aspect of this award: Most journalism awards are limited to honoring news coverage in the previous year.
The Impact Award recognizes that some of the finest journalism often doesn’t generate significant impact until years later. When Wall Street Journal veteran Tom Herman proposed the idea for this award several years ago, he suggested calling it the “Cassandra Prize” after the mythical Greek princess whose name has become synonymous with forecasters whose accurate warnings of future disasters are ignored. Investors who chose to ignore the FT’s Wirecard reporting did so at their peril.