The story Matthew Earl tells is of a black Mercedes-Benz, which parked outside his home and started following him. He claims it was intended to send a deliberate message: that he and his family – including two young children – were under surveillance. After a couple of days, he says, two men emerged from the car to deliver a legal letter from their client, the German payments company Wirecard. The men, from the private investigations company Kroll, allegedly used a “pointed and intimidating” tone.
While the manner of the letter’s delivery may be disputed, it kicked off years of threats of legal action and accusations of wrongdoing against Earl. But, according to a legal claim brought by Earl, it also marked a new chapter in a “campaign of unlawful harassment” carried out by Wirecard’s law firm, Jones Day, Kroll, and other firms.
The claim, which has just been lodged in London’s high court, details allegations of covert surveillance by Kroll, and hacked communications and proposals for hi-tech attacks to intercept mobile phone data by other unknown operators.
Through its lawyers Kroll said that it had “acted entirely in accordance with all applicable laws and regulations”, that Earl’s claim was “misconceived” and that the company denied the claim in full. Jones Day did not respond to requests for comment.
Whether or not the legal claim against Jones Day or Kroll succeeds, the case, and emails disclosed in it, provide a rare glimpse into the murky world of corporate espionage and reputation management – and the lengths to which some companies will go to try to silence critics.
Short-selling
Earl is a founder and fund manager at Shadowfall, a hedge fund that focuses on short-selling, or betting that the price of shares will fall. His surveillance had been ordered by Wirecard AG, a German payments company and member of the Dax index of blue-chip companies, that Earl had alleged (anonymously) was a fraud. Four years later it collapsed. Wirecard’s chief executive, Markus Braun, was arrested in June 2020, and is on trial in Germany charged with fraud, embezzlement, accounting and market manipulation. Braun has denied the allegations, and has said he himself was one of the victims of a fraud.
Short-selling can be seen as controversial, and short-sellers often make their reasons for shorting companies public in order to drive down the share price and make a profit. A former analyst at the City stockbroker Charles Stanley, Earl has a long history of picking fights with companies that he claims are overvalued.
An opinion article published in late 2019 in City AM, a London financial newspaper, laid out the pros and cons of short-selling. There are “some notable examples where short-sellers have identified structural flaws in companies, and prompted market corrections in their price,” it said. “In some instances, frauds or poor accounting practices have been discovered by the shorting activity of thoughtful investors.”
The article called for greater regulation of short-sellers, but was notable for another reason: its author, Ben Hamilton, is one of two employees of Kroll named in Earl’s claim. Hamilton’s profile on Kroll’s website describes his work as a former investigative journalist for the BBC and Channel 4, as well as tracking down stolen cryptocurrency, finding the hacker of a FTSE 100 chief executive’s emails, and breaking up a counterfeit goods ring.
Hamilton’s profile also highlights an unnamed “investigation that successfully identified anonymous bloggers who had conspired with short-sellers to manipulate the market for a corporation’s shares”, but neither his profile nor the article mention Wirecard. However, Earl’s allegations suggest that particular case had taken up a significant amount of Hamilton and Kroll’s time.
Kroll surveillance
Earl had published the first of his anonymous reports on Wirecard AG on 24 February 2016 from Zatarra Research, a website he co-founded anonymously. The effect of the report was dramatic: Wirecard’s shares fell by 21% on the day of publication.
Wirecard scrambled to respond, denying the allegations and trying to unmask Earl, eventually hiring Kroll and other private investigators for an extensive programme of tracking and surveillance of several short-sellers, according to the claim.
Kroll, which was acquired by Duff & Phelps in 2018, has offices around the world, including in the Shard skyscraper in London, and was engaged by Wirecard in March 2016. Its services did not come cheap, according to costs cited in the claim: Kroll allegedly charged an initial retainer of €75,000 (£66,000) to cover a period of “around six weeks”. A Kroll invoice from January 2017 showed how costs mounted for what it codenamed “Project Hermanus”. It allegedly billed €254,661 for almost 750 hours of work by 16 individuals, including “computer forensics”, “surveillance services” and “source inquiries”.
Other emails appear to show the efforts that Kroll went to in its tracking of Earl. In August 2016 another Kroll employee allegedly sent Wirecard executives covert photographs of Earl and a collaborator at London’s Victoria station, while the company took photos of Earl’s house.
Wirecard also hired at least five law firms and a public relations company to work on the matter, according to an email cited by the claim.
‘Whistleblower’
A March 2016 report that was allegedly prepared for Wirecard by an unnamed investigations firm suggested even more extreme means for the company to find its critics, including the potentially illegal use of an international mobile subscriber identity (IMSI) catcher – a device that intercepts mobile phone data as it is sent to the network. The report said it “would be extremely valuable to get information from the cellphones”.
Earl claims Wirecard also directed operatives to hack his private communications. On 8 December 2016 many of these details were published online in what was claimed to be a report by a whistleblower inside Zatarra – despite Zatarra consisting of only Earl and a collaborator.
That so-called whistleblower report, entitled “Zatarra RIP”, allegedly contained verbatim extracts from Skype conversations between Earl and others, including journalists at Reuters and Bloomberg, as well as photographs of emails. An earlier email to Wirecard purporting to be from the anonymous Zatarra whistleblower claimed to have seen communications “on Skype, Twitter, Signal and by SMS”.
In a statement, Kroll’s lawyer said: “Throughout this engagement Kroll acted entirely in accordance with all applicable laws and regulations. It was not – and of course would never be – involved in any way in any hacking, intimidation or other illegal acts.
“Since concluding its engagement with Wirecard, Kroll has discovered that Wirecard engaged other private investigation companies both prior to, and during its engagement. Naturally, as Kroll was not aware of their engagement by Wirecard, it is unable to comment on the propriety, or otherwise, of their conduct.”
Legal strategy
There is no suggestion that Kroll or Jones Day were involved in the alleged hacking. However, the claim alleges that hacked information formed a central part of the legal strategy against Earl drawn up by Jones Day, and that the US law firm knew or should have known that it was obtained by Wirecard. Jones Day needed a “plausible and apparently lawful basis for the identification of the claimant”, the claim alleges.
It cites an email to Wirecard and Hamilton allegedly sent on 8 December 2016, in which the Jones Day partner Sion Richards wrote that the Zatarra RIP report “facilitate[d] Wirecard’s ability to threaten and subsequently bring proceedings” – but only if “Wirecard was not involved in obtaining such material”. According to the claim, the email noted that the London-based lawyer had asked Kroll to serve legal letters “personally” to Earl. Richards did not respond to requests for comment.
For at least two days from 8 December 2016, Kroll employees parked in the black Mercedes E-Class outside Earl’s home, which was on a private road, the claim alleges. The same vehicle allegedly followed him, until finally at 7pm on 9 December Hamilton and another Kroll employee doorstepped Earl at his home.
After the letter was delivered, the campaign was played out in legal letters, as part of what Earl alleges was an “aggressive legal and reputation management strategy” carried out by Jones Day on Wirecard’s behalf.
Earl alleges that Jones Day and Kroll in their communications repeatedly misrepresented the truth of how much they knew. He claims that Jones Day knew or suspected that Wirecard was involved in acquiring the “Zatarra RIP” information, and that it lied about its knowledge of the months of surveillance of Earl undertaken by Kroll.
Earl argues that the actions of Wirecard, Jones Day and Kroll amounted to “a conspiracy, with the intention to injure the claimant, by unlawful means”. He will argue that he is entitled to aggravated damages from the law firm and the investigators.
