FOUR REASONS JOOSTE’S NO-SHOW TRIAL MATTERS
An arrest warrant has now been issued to ensure Steinhoff’s former CEO faces fraud charges in Germany
After rumours that he may just pitch, Markus Jooste reverted to type by dodging the first day of his criminal trial this week at the regional court in Oldenburg, 25km from Steinhoff’s former European headquarters in northern Germany. It wouldn’t have surprised those who saw Jooste use every Stalingrad-style tactic to avoid having to answer questions in parliament in September 2018. And yet, Jooste’s German lawyer Bernd Gross argued that “we [did] everything we [could] to allow him to attend this trial”, Bloomberg reported.
The judges weren’t impressed and prosecutors have now asked that an arrest warrant be issued for Jooste. Given how ruthlessly efficient South Africa is when it comes to extradition proceedings, nobody should hold their breath.
Still, there are four reasons the German trial remains critical in the wider Steinhoff saga:
1. In defending Jooste’s no-show, Gross let slip in court that “the South African investigations are close to [being] finalised and are expected to yield an indictment”. This, Gross said, meant his client risked being arrested, had he left the country.
If a South African prosecution is close it would be welcome, given the strategic about-turns in the investigation, now in its seventh year.
Insiders say the scope has been narrowed, with one of the smoking guns being a fake R376m invoice allegedly submitted by Jooste. That speaks to the trade-offs: much of the con might not be prosecuted, but a narrower focus would be easier to prove and leave less scope for endless legal reviews. Which is just as well, given the second point.
2. The German case illustrates viscerally that as time ticks on, chances of a successful prosecution diminishes proportionately.
This was evident in the case of Jooste’s co-accused in Germany, 72-year old Alan Evans, a former banker and Jooste’s consigliere for decades. Evans, an Englishman whom Steinhoff insiders described as “one of Markus’s guys”, joined Citibank at the age of 23 in Jersey, where he learnt the ropes of secretive trusts.
By 1997, he was working for Jooste, first incorporating his Jersey-based company Danesfort Investments then structuring the dubious 2001 deal at Steinhoff involving the Knysna forests, which made Jooste a fortune at shareholders’ expense.
In Germany this week, Evans was due to face four charges of assisting Jooste in the fraud. But the charges he faced were reduced because it had taken too long to bring the case.
Evans, slippery as ever, said his memory wasn’t great, particularly about events more than a decade old. Others will argue the same and that’s for charges that haven’t already prescribed.
3. The bad news for Jooste is that despite Evans’s protestations in court about his “integrity”, by midmorning on Tuesday he had accepted the charges and agreed to a settlement of €30,000 (about R598,000). It’s a trifling sanction for his role in South Africa’s largest fraud but it does add to a growing list of those who, insiders say, may be prepared to testify against Jooste.
On May 3, two others accused of helping Jooste Steinhoff’s former European MD Siegmar Schmidt and its European CFO Dirk Schreiber will go on trial in the same court. At least one of them, sources say, is willing to help local investigators. This attests to the adage that friends are few when lawyers are plenty.
4. The Steinhoff heist is immensely complicated and the architects probably banked on it being too complex to unravel. But the German prosecutors did a commendable job in doing just that. In one of the charges, prosecutors claimed Jooste demanded a €700m profit in the 2011 financial year, and to reverse-engineer it he enlisted Schmidt, Evans and Schreiber.
So, in November 2011, Steinhoff created an empty shelf company called Winecott, which was then sold to a company called Talgarth Capital (run by Evans from the tax haven of the British Virgin Islands) for a mouthwatering €840m. Steinhoff’s income statement that year included an extra €840m in “other operating income” from the sale of Winecott.
“Due to this sham transaction, there is an alleged annual surplus of €828.6m Without this, and other sham transactions, the annual deficit would have been €507,345,” prosecutors claimed, in a translated version of the charges.
Of course, this money never actually arrived and Talgarth provided various “letters of comfort” to Steinhoff to hide this reality. Ultimately, however, you can only kick the can so far down the road before somebody notices that the cash you were promised never arrived in the account.
And yet, Steinhoff’s practice of trading shell companies to Jooste’s accomplices in exchange for ludicrous sums of money, then booking this as “profit”, was repeated, according to the charges, in each of the next three years.
Little appetite to travel
These alarming details, fleshed out in court, illustrate that given enough time (and squadrons of forensic auditors), every complicated larceny can be unravelled.
It must have been alarming for Jooste to witness this from afar, though it wasn’t the first time he dodged a trip to Germany.
In December 2015, he was due there for the long-awaited listing of Steinhoff on the Frankfurt Stock Exchange. But on the eve of the listing, Oldenburg prosecutors raided Steinhoff’s European headquarters in Westerstede, which was soon followed by Jooste developing sudden “neck pain” and opting to stay at home.
When the Handelsblatt newspaper asked him if his sudden illness was linked to the raid, he dismissed it. “That has absolutely nothing to do with it. The neck problem becomes acute from time to time and my doctor advised me to stay in bed,” he said.
Anyway, he sniffed, the German raid was a “local matter, and will be dealt with there”. Rather like he is evidently hoping the German criminal prosecution will be.