The Steinhoff blame game: beyond belief
In December 2017, Markus Jooste wrote: “Hi there. Firstly I would like to apologise for the all the bad publicity I caused the Steinhoff company the last couple of months. Now I have caused the company further damage by not being able to finalise the year-end audited numbers and I made some big mistakes … Please continue to live the Steinhoff dream and I must make it very clear none of Danie, Ben, Stehan and Mariza had anything to do with any of my mistakes.”
After killing “the Steinhoff dream” he fled from the mess he had created.
This week’s testimony by former CFO
Ben la Grange, who, according to Jooste, “had nothing to do with any of the mistakes”, began to shed some light on the events that led to the erosion of an estimated R190bn worth of value and an obliteration of hard-earned investment rands on behalf of pensioners.
As I watched parts of La Grange’s testimony, it became clear to me that one of two things happened here.
Either Jooste was so smart, so conniving, and such an expert at deception that he committed all his “mistakes” without detection from anyone else, or everyone else did see or at least had suspicions but simply turned a blind eye, enjoyed the Steinhoff dream and didn’t ask any questions.
Take, for example, the argument put forward by La Grange that he “did not do anything wrong”; in fact, he blames Jooste for “limited sharing of information” with him.
La Grange claims that in the five years of working closely with his “non-friend”
Jooste, he saw nothing, zero, lutho, niks — all while he was in charge of financial affairs.
La Grange then explained how a scheme to increase profits and create fictitious receivables was run exclusively and secretly by Jooste. According to the former CFO, “there were inflated profits” which came from an external buying group.
In summary, this “buyer” would take volumes of different products and negotiate with suppliers to give additional rebates to Steinhoff. These rebates would be a credit to the income statement, therefore increasing profits. “But the buying group seems to be nonexistent and funded with loans from Steinhoff,” says La Grange. But, of course, he knew nothing about all of this.
However, the same La Grange then turns around and blames the auditors, and argues that if the company had one group of auditors, all this stuff could’ve been detected and this whole mess would’ve been avoided. “Thixo wa se George Goch!”
How does that work, chap?
You, as CFO of one of the largest companies on the JSE — which had businesses all over the world, made huge acquisitions of some of the biggest companies in some of the biggest economies — knew nothing of the shenanigans and corruption that your CEO, who you worked with every day, was busy with in the business you ran with him, yet you blame group external auditors for missing such a huge fraud, that you so eloquently explain to us now? Kanjani?
“At no point … does the group on a holding-company level re-audit the numbers. Having a single set of auditors would have decreased the risk of what happened at Steinhoff,” said La Grange. OK, let’s go with that then, sir.
So since you were the CFO and knew about this situation, how come you never fixed it?
And if you truly believe what you are saying, why do you blame the group auditors, when you know full well that group auditors don’t re-audit the work already audited by subsidiary auditors?
There are reports that in these European markets Steinhoff purposely appointed smaller audit firms that may not have had the experience to detect these fraudulent transactions you claim to know nothing about.
How is it possible that the CFO of the company played no role in appointing these auditors and didn’t even once suspect that this could be a problem?
La Grange claims he was shocked when, on Sunday December 3, he was called into an audit committee meeting where the group auditors told him and the rest of the committee why they would not sign off the financials. Apparently, the next day, December 4, the meeting was meant to continue and hear from the CEO, Jooste, but he never pitched and instead penned the infamous “Hi there. I acted alone” letter.
There is a reason the Companies Act places the fiduciary duty of a company’s affairs at the doorstep of its directors. Yet unscrupulous and negligent directors want us to believe that it’s the auditors who are to blame for not detecting fraud — when they are the ones either perpetrating or turning a blind eye to the perpetrators, only for them to say “Sorry” or “I knew nothing” and retire in Hermanus.
How is it possible that the CFO of the company played no role?