FSCA turned up the heat on Jooste on the eve of his death
A new criminal charge of contravening the Financial Markets Act by publishing false statements was going to be investigated by the National Prosecuting Authority, the market regulator announced. By
The day before former Steinhoff CEO Markus Jooste is believed to have died by suicide, the Financial Sector Conduct Authority (FSCA) said a new criminal case would be added to a much bigger fraud investigation under way against him.
In a media briefing on Wednesday, 20 March, the head of market abuse at the FSCA, Alex Pascoe, said the case to be added to the investigation by the National Prosecuting Authority (NPA) involved contravention of the Financial Markets Act (FMA).
“We are obviously going to inform the JSE of our findings, as well as the South African Reserve Bank and other regulators such as Irba [Independent Regulatory Board for Auditors] and Saica [South African Institute of Chartered Accountants],” he said.
Asked how likely it was that the FSCA would ever see Jooste’s R475-million administrative penalty paid, Pascoe said the fine would become a debt to the FSCA if unpaid, and the FSCA was entitled to take steps such as civil execution to recover it.
Regarding Steinhoff’s former European finance chief, Dirk Schreiber, Pascoe said the leniency agreement Schreiber had received was subject to very strict conditions to which he had to adhere.
Given that Jooste had previously appealed and succeeded in reducing an FSCA insidertrading fine from R161.6-million to R20-million, the FSCA had been sure that he would appeal against the R475-million fine as well.
Pascoe said Jooste had, in fact, already indicated that he intended to take the matter to the Constitutional Court. The FSCA had expected him to pursue “a long road of litigation stalling strategies”.
Regarding the extent of the FSCA investigation of the figures that had been misrepresented, Pascoe said examining every line item on the income statement and balance sheet would have taken “many, many years”.
“We really focused on certain elements of the [restated financials] such as cash and cash equivalents, and goodwill. Our investigation covered about R38-billion-worth of restatements where we gathered enough evidence to support our report of the contravention of the FMA,” he said.
The FSCA investigation showed how the false reported income had an impact on the cost of sales, which resulted in higher profitability and affected cash and cash equivalents, restatements and goodwill.
The FSCA had intended to open a criminal case for contravention of sections 81A and B of the Financial Markets Act, related to the publication of false and misleading statements in the financial results.
“We believe this will be added to the bigger fraud investigation that the NPA is currently investigating,” Pascoe said on Wednesday.
“The penalty for a Financial Markets Act criminal [conviction] would be R50-million or 10 years’ imprisonment or both.”
Addressing the amount of the R475-million administrative fine imposed on Jooste, FSCA Commissioner Unathi Kamlana said one of the challenges faced by the tribunal was that fines had to be proportional, reasonable and fair.
“We think that this amount takes into account what is prescribed in the law,” he said, adding that the administrative penalty would not be the only punishment for fraud.
“There is also the criminal matter that is being handled by law enforcement agencies. It’s important to look at [the consequences] in total and not just what the FSCA does,” he said.
Our investigation covered about R38-billion-worth of restatements where we gathered enough evidence to support our report of
the contravention