Markus guns for PWC report
Ironically, in a bid to get hold of the PWC report, Steinhoff’s former CEO accuses the retailer of bending the truth
ý Steinhoff’s former CEO, Markus Jooste, has upped the ante in the battle to get his hands on the PWC forensic report into the company, which the fraud-ridden retailer insists must remain secret.
It’s ironic that Jooste is the person testing Steinhoff’s defences, seeking to prise out the report in the interests of “transparency”, given that he is at the centre of Pwc’s finding that over more than a decade, he helped mastermind R106bn in false or fictitious deals.
In recent weeks Jooste has submitted a blizzard of applications for the report, including in a case in which Tekkie Town’s founders are suing Steinhoff, and in another where Firstrand founder GT Ferreira is doing the same.
Steinhoff has stoutly resisted, claiming the report was commissioned by its lawyers Werksmans, and is covered by “legal privilege”.
This, Jooste’s lawyers say in the court papers, is effectively a lie.
In an affidavit dated August 21, Jooste’s lawyer, Salome Uys Potgieter, says Steinhoff’s claim that Werksmans commissioned the report is “not so”.
“It does not appear that the PWC report was brought into existence for the purpose of pending or contemplated litigation. On the contrary, it appears Pwc’s investigations and report were undertaken for the principal purpose of establishing, and enabling Steinhoff to report on, its actual financial position,” she says.
It’s an important distinction. If it was really Steinhoff that commissioned the report to get to the bottom of the fraud and not Werksmans, the company will struggle to claim there is the “legal privilege” that allows it to remain secret.
Potgieter says former chair Heather Sonn told parliament in August 2018 that PWC was “appointed by, and [is] reporting to, the supervisory board”, and the purpose of the report is to “determine what happened”.
Also, early on, Steinhoff told the world it was “committed” to “sharing the progress and results of those investigations”.
In fact, it was only in December 2018 — a year after the fraud was uncovered and Jooste quit — that the tone shifted and Steinhoff began to talk about “legal privilege” and say it would only publish an “overview” of the findings.
This is why, Potgieter says, you can’t take the company at its word.
“Steinhoff has made contradictory allegations in order to introduce and persist with the contention of privilege in respect of the PWC report ... by seeking to interpose its attorneys in the appointment,” she says.
She says hiding the report presents a dilemma for Steinhoff: “It seeks to rely on Pwc’s findings [for its claim against Jooste], but without producing any evidence thereof — that is, other than its own secondhand summary thereof.”
This is why she is trying to use the rules of the court to compel the release of the report, arguing these rules allow someone to “inspect any document” to which “reference is made”.
It’s not just Jooste who wants the report. At the recent AGM, ordinary shareholders demanded it be released so they can finally see the sort of detail sketched out in the 3,000-page document. (The
FM, alongside investigative journalists at amabhungane, has also lodged an access to information request for the full report.)
Investors have a keen financial interest: since the company confirmed “accounting irregularities” on December 5 2017, Steinhoff’s shares have tumbled 98%, from R45.65 to 76c — a R193bn fall in market value.
It doesn’t help Steinhoff’s case that a number of other parties seem to have the full report, including the SA Institute of Chartered Accountants, the Financial Sector Conduct Authority and crime-fighting unit the Hawks.
Jooste also cites an interview former Steinhoff director Johan van Zyl gave to television channel CNBC on March 14 2019. In that interview, Van Zyl said: “I have read it, which is quite interesting” — even though he’d resigned from Steinhoff nearly a year before. (Steinhoff’s lawyers later said Van Zyl’s statement “was incorrect”.)
Steinhoff, as it’s done the entire time, is shrugging off Jooste’s court action. “Nothing has changed from our side,” says company spokesperson Tyrrel Murray. “He’s using this tactic in every case where he’s been joined.”
There’s another element to this. If, as Steinhoff says, it wanted the report to settle litigation, a “settlement offer” it floated in July to draw a line under the 90 lawsuits it is facing could conceivably open the way for the report to be released. Under this settlement, Steinhoff is offering R16.5bn in cash and Pepkor shares to settle the R136bn in legal claims it faces.
At the time, however, Steinhoff CEO Louis du Preez told the FM that even if the settlement were accepted, the company wouldn’t want to release the PWC report, because there are still “criminal processes ongoing” using that report.
Shareholder activist Theo Botha says it isn’t good enough that shareholders are being asked to settle their legal claims “blind”, without having seen the PWC report. “How can they make an informed decision?” he asks.
This comes as the authorities drag their heels over arresting anyone — even though the Hawks have had three investigators working on the case for months.
Hawks spokesperson Hangwani Mulaudzi told ENCA this week the PWC report is, in places, not immediately helpful for criminal investigations. “But we have been consulting with the auditing team.” Mulaudzi said investigators have been working “on this matter for a long time”, and a request for “mutual legal assistance” has now been sent to the Netherlands for any information that will help.
He would not, however, provide any date by which he expects arrests to be carried out.
Steinhoff has made contradictory allegations in order to introduce and persist with the contention of privilege in respect of the PWC report
Salome Uys Potgieter