Christmas gift for Jooste

By nearly doubling the amount to be paid, Steinhoff directors succeed in corralling potential litigants into settlement deal

Christmas came early for Steinhoff’s former nonexecutive directors. Four years and a week after the release of the “irregular accounting” statement that shook the SA investment community and dominated business headlines for much of the following 48 months, the slight chance of any of them being held to account in a court of law faded almost completely.

The December 15 news that Steinhoff had brought the last of the creditors/shareholders into its settlement deal must have sparked huge celebrations among the former directors.

While corralling all the potential litigants means the Steinhoff board is now much closer to being able to focus on running the business, much more importantly for the former directors it means there is little to no chance that an aggrieved shareholder will pursue a civil action against them.

This is courtesy of the settlement’s “no-liability” clause, which prevents signatories taking action against

Steven Booysen, David Brink, Danie van der Merwe, Heather Sonn, Christo Wiese, Len Konar and Johan van Zyl. In addition, the settlement agreement protects the group’s auditor, Deloitte.

All this protection comes at a price, revealed in Steinhoff’s 2021 results on December 15 to be R16.6bn. The initial R9.4bn litigation settlement proposal had to be hiked by R7.2bn to entice the stragglers to join in. And there’s the promised R1.2bn top-up from Deloitte, made on the basis that it does not admit any liability for losses incurred.

Former Steinhoff CEO Markus Jooste was also in line for a festive gift.

Two days before the December 15 settlement news, the Financial Services Tribunal announced a decision that took much of the sting out of the earlier damning insider trading charges against Jooste. The tribunal, chaired by judge Louis Harms, essentially upended the finding and accompanying R161.6m administrative fine that had been announced by the Financial Sector Conduct Authority (FSCA) back in October 2020.

The FSCA’s findings had been well received by members of the public who were despairing of Jooste ever suffering consequences for his role in the value destruction at the global retail group. However, Harms’s ruling, announced on December 13 2021, eliminated most of the robustness of the FSCA’s finding.

In a decision that highlights the near-impossibility of prosecuting an insider trading case, Harms stated that the information shared by Jooste was neither specific nor precise and therefore did not qualify as insider information. He set aside the findings on both of the cases that had been appealed and ordered the FSCA to come up with a more appropriate — read lower — administrative fine.

So Jooste must realise he is pretty much home and dry as far as SA law is concerned.

With the settlement agreement sewn up there’s little chance of any civil actions from well-heeled shareholders against the executive directors, who are not sheltered by the agreement’s “no-liability” clause. In terms of SA law any shareholder determined to go after Jooste or his CFO, Ben la Grange, would have to persuade the company to pursue a derivative action. Without the sort of information contained in the PwC report, which is not accessible to the shareholders though they paid for it, it would be a high-risk move for an individual or a group of shareholders.

Nothing indicates that Steinhoff has an appetite for aggressive action against Jooste. In June 2019 it filed papers in the Cape Town high court in what now seems a half-hearted bid to claw back R870m remuneration from Jooste and R272m from La Grange.

Once the litigation deal has been finalised the Steinhoff board will probably make much of the need to now focus on business rather than justice.

As for the prospect of criminal action being pursued effectively in the near to medium term, there has never been much hope of that. What little chance there might have been is likely to disappear under the flood of Zondorelated prosecutions unless the justice department realises the importance of white-collar crime being prosecuted and sets up a unit to do just that.

It seems the best chance of Jooste being called to account lies with the German public prosecutor, but a drawn-out extradition battle may see him able to live out the rest of his life in the comfort of the Western Cape.

Hopefully the Zondo villains have less success avoiding justice.

At this point there is nothing to indicate that Steinhoff has the appetite for aggressive action against Jooste