VEB takes Deloitte to court over Steinhoff
• Body issues summons for breach of obligations in relation to losses suffered by shareholders
Dutch Investors’ Association VEB has issued summons against Deloitte for breach of obligations when it audited Steinhoff Holdings.
“In issuing the unqualified audit report as part of the group’s annual accounts for financial 2016, Deloitte was in breach of its obligations,” Armand Kersten, head of European relations at VEB, said on Tuesday.
VEB said it had summoned Deloitte to appear before the district court of Rotterdam in relation to the losses suffered by the Steinhoff shareholders.
“By incorrectly providing an unqualified report for Steinhoff’s financial statements for 2016, Deloitte seriously failed its duties as laid down by law for auditors,” Kersten said.
He said that due to the misleading financial statements Steinhoff investors had incurred billions of euros of losses.
On December 6 2017, the supervisory board at Steinhoff revealed concerns about widespread accounting irregularities and said it was unsure about the actual value of more than €8bn of assets disclosed in its financial statements. The disclosure led to a collapse in the Steinhoff share price to R1.29 at Tuesday’s close from about R60 in early December.
On December 13 Steinhoff announced that the 2016 financial statements were to be restated and Deloitte withdrew its unqualified audit report.
“It is highly doubtful that Deloitte had sufficient insight to be able to assess the valuation of Steinhoff’s property, acquired companies and related goodwill, among other items,” Kersten said. It was also unclear how Deloitte could have approved Steinhoff’s cash position as disclosed in its financial statements.
Kersten said Deloitte had failed to apply the appropriate level of professional scepticism in relation to the procedures performed and submitted by other auditors that did work for Steinhoff. “In view of the wide range of irregularities occurring
over many years, questions may also be raised about the quality of the audit’s transfer from Deloitte & Touche SA to Deloitte Accountants BV in the spring of 2016,” said Kersten, referring to the transfer of Steinhoff’s registration from SA to Holland.
VEB’s move is the first legal action instituted against Steinhoff’s auditors.
Business Day was unable to get comment from Deloitte CEO Lwazi Bam on Tuesday evening.
In February, VEB, which is a Hague-based not-for-profit association, launched a class action against Steinhoff after signalling its intent as early as December 7. It is acting on behalf of shareholders who bought or held shares between August 7 2015 and December 6 2017.
Tomas Arons, a professor of law at Utrecht University in Holland, said there was a significant advantage to taking action against Steinhoff under Dutch law.
“When a company has issued misleading statements in their accounts or in their prospectus there is a reverse burden of proof on the company to prove it was not misleading.”
In April, former Steinhoff chairman Christo Wiese announced he was taking legal action against the group in a bid to recover R59bn.
This was followed by reports that former FirstRand chief GT Ferreira and the vendors of Tekkie Town had lodged demands with Steinhoff.
Coronation Fund Managers, which was one of the largest institutional investors in Steinhoff, said in May that it would be taking legal action against Steinhoff.
Meanwhile, on Tuesday, Steinhoff reported that more of its creditors had agreed to a debt standstill arrangement that expires on June 30.
Creditors have agreed not to enforce their rights until the end of the month to allow Steinhoff time to clinch a debt restructuring agreement with its lenders.