Steinhoff ‘was loss-making without fraud’
Commentator Simon Brown says it is very likely that the scam amounted to more than the claimed profits
UNDER-FIRE retailer Steinhoff is expected to come under renewed pressure today as the company guns for executives and directors who pocketed millions of rand in an accounting scandal that cost the company more than $7.4 billion (R106.34bn) in 2017.
The group, whose shares fell by 5.64 percent to R1.84 on the JSE on Friday, said it was planning to recover more than R130 million in bonuses paid to former chief executive Markus Jooste over irregular dealings that continue to unravel the group.
On Friday, PricewaterhouseCoopers (PwC) released a damning report that pointed to Jooste and other directors who, it said, recorded income from fictitious and/or irregular transactions between the 2009 financial year and 2017.
PwC said the fraud saw the group’s profits inflated by €6.5bn (R105.77bn).
“The group intends to seek recovery of the bonuses paid to certain individuals.
"The Amsterdam Court has recently granted Dutch leave against Mr Markus Jooste, the group’s former chief executive, at the group’s request,” the report said.
Between 2011 and 2016, Jooste took home R128m in annual, “strategic” and deferred bonuses. He was not awarded bonuses in 2009 and 2010.
His executive team took bonuses north of R400m in the period flagged by PwC.
The report is, however, mum on former chairperson and non-executive director Christo Wiese’s involvement in the scandal. Jooste’s total remuneration between 2009 and 2016 was R333m, while Steinhoff’s then chief operating officer, Danie van der Merwe, took home R156m during the same period.
Former chief financial officer Ben la Grange earned R112m, including bonuses, in the years under review.
Business Report has calculated that the company reported combined profits of R74.7bn during the period.
In its 2016 annual report, the company claimed its assets were worth €32.1bn.
Simon Brown, founder of JustOneLap, said it was very likely that the Steinhoff fraud was more than the claimed profits.
“In other words, the company actually was loss-making without the fraud,” Brown said.
PwC said Jooste and “certain other individuals” did not avail themselves to be interviewed as part of its investigations and that “discussions are ongoing regarding the basis on which any such interviews may take place”.
Asief Mohamed, the chief investment officer of Aeon Asset Management, said Jooste and his executives committed offences of a criminal nature.
“One would not have expected Jooste to co-operate with the PwC investigation as he will most likely have incriminated himself.
"The other directors of Steinhoff should also be held accountable and resign from all fiduciary positions,” Mohamed said.
Jooste was subpoenaed by Parliament last year to testify about Steinhoff’s near collapse.
He largely laid the blame on the company’s decision to form a strategic partnership with Austrian businessman Andreas Seifert.
At its peak, Steinhoff was part of the JSE Top 40 index and the JSE Top 25 Industrial index, but its market capitalisation by Friday had dwindled to a measly R7.9bn from the more than R200bn the firm was valued at in 2017.
The PwC report identified the Campion/Fulcrum Group, the Talgarth Group and the TG Group as three principal groups of corporate entities that were counter-parties to Steinhoff in respect of the transactions that it investigated that led to the inflated profits and asset values.