(Bloomberg) -- Wirecard AG, the German payments company struggling to move on from reports of alleged questionable accounting methods, faced new claims in a lawsuit that it “acted recklessly” when it bought an Indian business five years ago without doing proper due-diligence.
The allegations were made in a lawsuit filed by two former minority shareholders in travel company Hermes I-Tickets Private Ltd. Prashant Manek and Sanjay Chandi say that the company “turned a blind eye” to efforts by a Mauritius fund to buy their stake at a fraction of what Wirecard paid for Hermes I-Tickets just a few weeks later.
The former investors claim they were duped into selling their shares in September 2015 to the fund at a price equivalent to around 480 euros per share ($520). A few weeks later, the fund agreed to sell the same shares to Wirecard for roughly 4,150 euros per share, a lawyer for the men said at a London court hearing Friday.
“In proceeding with the purchase of Hermes without making such enquiry or raising the alarm, Wirecard turned a blind eye or acted recklessly in a way that was dishonest and thereby became a party to the fraud,” lawyer Stephen Midwinter said in court documents prepared for the hearing.
The German payments processor has been working to rebuild its reputation after facing allegations about questionable accounting methods last year, shattering its share price which has since recovered. The company rejected the media reports and has given auditors at KPMG unrestricted access to its books in an attempt to reassure rattled investors.
In an earnings statement Friday, Wirecard posted full-year revenue that beat the highest analyst estimates.
Wirecard denies the allegations and has filed a application to get the case thrown out.
“Wirecard was not a party to the sale of the shares of the minority shareholders in Hermes,” the company said in a statement after the hearing. The “acquisition of Hermes by Wirecard was preceded by an extensive due diligence in cooperation with renowned external legal, financial and tax advisors, and at no time did Wirecard act recklessly or dishonestly.”
Chanek and Shandi didn’t immediately respond to requests for comment about Friday’s hearing.
The investors asked the court Friday for permission to use documents Wirecard submitted, including witness statements from Wirecard’s Chief Operating Officer Jan Marsalek and Head of M&A Matthias Helms, in a related lawsuit against the former owners of Hermes and individuals connected with the Mauritius fund.
The investors say that the former Hermes I-Tickets directors conspired to make misrepresentations to them as to the value of the company and concealed information about the sale to Wirecard.
The lawsuit against Wirecard was filed because Manek and Chandi came to the conclusion that the company must have been aware that “there was an obvious and real risk that the transaction was tainted by fraud,” Midwinter said.
An honest person would have made further enquiries to ensure the acquisition was above board, but Wirecard made no such effort, he said.
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