Sonn’s sudden Steinhoff departure leaves more questions than answers
This week’s abrupt resignation of Heather Sonn as chair of Steinhoff, with the company still reeling from a R100bn-plus accounting fraud scandal dating back three years, came as a surprise.
Though some observers say Sonn is probably a victim of a complex web of dodgy transactions that brought Steinhoff to the brink of collapse, the saga raises uncomfortable questions about steps taken by the former chair to find out everything she could about the firm being bought by the company she partly owns.
Sonn, who was a de facto face for Steinhoff for almost three years, called it a day on Monday after a company in which she was a shareholder got involved in a deal with another that now appears to have been funded by Steinhoff.
Regulators rightly require companies to tell shareholders about deals with executives and directors — such as Sonn, who had been non-executive director since 2013 before taking up the role as chair in late 2017 — to avoid undermining their independence.
In a two-page statement to shareholders, Sonn acknowledged that had she known about the relationship she would have had an obligation to declare that an entity she holds a stake in, Gamiro Ventures, was getting into a transaction with Geros Financial Services, which appears to be associated with and funded by Steinhoff.
To fully grasp the issue, it is worth laying out how Sonn got ensnared in the web of dodgy bookkeeping practices at the heart of Steinhoff’s astonishing fall from an investor favourite worth more than R200bn.
In 2017, months before Steinhoff revealed SA’s biggest corporate fraud, Steinhoff’s Geros gave Sonn’s Gamiro an option to buy a stake in its debt collection agency, Blake and Associates, which counts Steinhoff’s subsidiary JD Group as a client.
Sonn simultaneously served on the board of Gamiro and Steinhoff when her company eventually bought a controlling interest in Blake and Associates in 2018.
One is inclined to believe Sonn — who flagged the transaction to PwC investors in
December 2017 after Markus Jooste resigned as CEO — that she did not know that, in fact, Geros was linked to Steinhoff.
For one, a group of executives identified in the PwC investigation report into Steinhoff’s flawed accounting practices went to extremes — at times using legal documents and professional opinions — to hide complex financial connections between Steinhoff and a number of entities that include Geros in the fraudulent scheme to record intercompany deals as external income.
It took PwC’s more than 100 financial experts 15 months to unravel the puzzling network of entities used to inflate profits and hide losses.
It is worth noting that a titan of deal making in SA, Christo Wiese, was convinced to part with a company that he had spent his whole adult life building in exchange for Steinhoff shares that ended up being worthless. Wiese, who was chair when the scandal broke, has also faced accusations that somehow he must have known.
That line of argument falls apart when one considers what he had to lose, and eventually did.
So it would be unreasonable to expect Sonn and her littleknown investment company in Cape Town to have established that Geros is part of Steinhoff.
Her team is, in all likelihood, substantially smaller than the army of PwC auditors that was on hand to comb through Steinhoff’s books.
Still, the job of her due diligence team seemed fairly simple: if Gamiro was trying to strike a deal with Geros — which appeared to be independent from Steinhoff at the time — to ultimately gain control of Blake and Associates, it should have taken reasonable steps to find out everything it could about Blake and Associates.
It does not look as if Sonn’s team performed even the most basic checks.
If it did, it would have taken minutes to work out that one of Blake and Associates’ clients is JD Group, a furniture company that has been part of Steinhoff since at least 2011.
Sonn declined to comment beyond Monday’s statement.
IT DOES NOT LOOK AS IF SONN’S TEAM PERFORMED EVEN THE MOST BASIC CHECKS ON BLAKE AND ASSOCIATES