WRAP: Hawks investigating fraud at Steinhoff

Hawks investigating fraud at Steinhoff

Hawks head of specialised commercial crimes Major-General Alfred Khana told Parliament that there are three Steinhoff matters being investigated.

Two of the matters were raised in Stellenbosch and one in Sandton, but Khana would not give the details of who raised the cases. “I foresee a whole flood of interested parties come to us,” he told Parliament’s joint-committees.

The Hawks is also engaging with other role players and regulators such as the Companies and Intellectual Property Commission, the Financial Services Board, the Independent Regulatory Board for Auditors and the Reserve Bank.

The criminal investigator is in a process of redrafting its investigation plan to incorporate the roles of the other organs. Khana said that timelines of investigations may be an issue.

He explained that the Hawks will be looking into fraud at Steinhoff. “Everything that has been done relates to misrepresentation, which led to billions [of rands in losses] suffered by various bodies or individual parties.”

Khana also said that Parliament may be under the false impression that Steinhoff reported a case to the Hawks. “To make it utterly clear Steinhoff did not report a case to Hawks.”

He explained that the chairperson of Steinhoff’s audit and risk committee Steve Booysen dropped a report without naming those implicated in wrongdoing. The report was dropped on the eve of Steinhoff’s first appearance before Parliament on January 31.

The Hawks is in a process of getting a detailed response from Booysen. “It is important for us to have information to have a decent investigation into the matter.”

Khana said that Steinhoff referred the Hawks to PwC’s final report, which is yet to be completed. He raised concerns that there was no certainty as to when the Hawks would get the PwC report.

“There is no suspect here today,” Khana said of the hearings. “There is no inkling of a suspect, there is nothing pointing to anyone.

“I want to make it clear to the committee we are at the mercy of reports we are supposed to get,” he said.

Robert Driman, attorney of Steinhoff, said that the retail group wrote to Khana after it learned that he found the report submitted by Booysen to be malicious. Driman said he would be willing to engage with Khana on the matter.

The committees on finance, public accounts, trade and industry and public service and administration resolved to subpoena former CEO Markus Jooste who failed to appear before it. They have also given former CFO Ben la Grange 10 days to indicate whether he will appear before the committee in August. Failing to do so, the committee will also launch a process to subpoena La Grange. 

The committees will regroup for the Steinhoff matter in August. 

Parliament’s joint committees have agreed to follow a process to subpoena former Steinhoff CEO Markus Jooste, after he declined an invitation to appear before them.

The committees on finance, public accounts, trade and industry and public service and administration on Wednesday discussed how they would pursue Jooste.

Chair of the Standing Committee on Finance Yunus Carrim confirmed to journalists during recess that after the hearing, the process to launch the subpoena will begin. Advocate Jenkins will be mandated to engage with the speaker's office and the legal services unit.

Steinhoff investigation could take three years – IRBA

The Independent Regulatory Board for Auditors (IRBA) told Parliament’s joint committees hearing into Steinhoff's collapse on Wednesday that it could take up to three years to conclude a public interest investigation as complex as the one it is conducting into the global retailer.

IRBA’s representative Imran Vanker stated that an investigation outside of the public interest takes 18 months. But one which is a matter of public interest could take longer.

IRBA gave an update on its investigation and highlighted that it has not been sitting with its arms folded.

IRBA launched its investigation in December 2017 after issuing a letter to Steinhoff’s audit firm Deloitte.

Deloitte had provided a “detailed response” on January 20, 2018 relating to three years of audits for the years between 2014 and 2016.

IRBA made a decision to extend the investigation by two more years dating to 2012. The investigation is looking to identify what are the risks to Steinhoff and if the appropriate procedures were followed to manage the risks, Parliament heard.

IRBA is in a process of reviewing the information it has received. IRBA has approximately 150 open investigations and only five investigators, but the Steinhoff investigation has been prioritised, the regulator confirmed.

FSB grilled on timelines for Steinhoff investigation

Parliament's joint committees were underwhelmed by the Financial Services Board's progress report on its Steinhoff investigation.

Alex Pascoe, investigation team leader in the Directorate of Market Abuse of the FSB, explained that four investigations are currently taking place.

Two relate specifically to insider trading. One looks into a foreign account which traded prior to a publication in August 2017, said Pascoe. That trading account relates to a foreign incorporated entity.

The second investigation focuses on numerous trading accounts which sold Steinhoff shares between September 2017 and December 2017. The FSB is determining if the accounts are linked to Steinhoff, its executives or other parties related to Steinhoff.

The third investigation is looking into misstatements of accounts for the 2015/16 financial results and the 2017 interim results. The FSB is waiting for Steinhoff to restate the 2015/16 financial statements and the 2017 interim misstatements. The FSB is also looking into who is responsible for the misstatements and is collecting information from foreign regulators in this regard.

Executives of Steinhoff have been interrogated. Summonses have been issued to Steinhoff executives, including Jooste, Pascoe said.

The final investigation involves insider trading and false statements. This relates to a report published on December 7, after Steinhoff issued a SENS on its accounting irregularities and the resignation of Jooste. The report was published by a foreign research company, which may have taken short positions on Steinhoff shares, Pascoe explained.

Pascoe said that the investigations should lead to an outcome where they will be presented to members of the directorate of market abuse. They will decide to close the matter or refer it for enforcement action, either an administrative sanction or criminal process.

In response to the FSB’s presentation, ANC MP and member of the standing committee on finance Thandi Tobias-Poloko said it was not different to what they presented at the first hearing on January 30. It appeared that there was hardly any progress. 

Chair of the committee Yunus Carrim also pressed for confirmation on the details of the completion of the investigation.

Pascoe said that the first investigation into insider trading could take three to four months, while the second would be completed by the end of the year.

Carrim asked Pascoe what is the norm for similar international bodies to complete investigations, but Pascoe could not answer.

JSE waiting on PwC report before acting on accounting concerns

The JSE is waiting on the PwC report before acting on accounting concerns of Steinhoff, Parliament's joint committees heard.

JSE CEO Nicky Newton-King presented how the JSE is handling the Steinhoff matter. The JSE has suspended Steinhoff's bonds and preferential shares following the retail group's failure to publish its financial reports.

"We are waiting on the PwC's findings to determine if things (financial statements) need to be restated," she said. The timing to take action is in the hands of what may transpire from the PwC report, she added. 

The JSE is still working with the Frankfurt Stock Exchange, where Steinhoff has its primary listing. "There has been sufficient disclosure from Steinhoff International."

Newton-King explained that the JSE is looking into regulatory improvements. The Steinhoff matter has also brought into questions about the regulatory scheme and refinements in governance which should be made, she explained. 

Among the issues raised include the diversity of boards, board appointments and the authority of shareholders in appointing board members and the role of the boards.  

All of Steinhoff's top management interviewed by PwC except Jooste

Former Steinhoff CEO Markus Jooste  has not been interviewed by audit firm PwC. The firm is conducting an internal investigation into Steinhoff.

PwC Africa's forensic services leader and partner Louis Strydom explained that all of Steinhoff's top management were interviewed, except Jooste who provided conditions which were not acceptable. 

He also explained that PwC had interviewed individuals in Germany, who have been the best sources of what happened at the retail group. Some of these individuals have been engaged with three to four times. 

MPs want bonuses for Steinhoff execs to be put on hold

MPs raised concerns about the proposed bonuses to be paid to Steinhoff executives, while the retail group is caught within a scandal.

Chair of the portfolio committee on trade and industry and ANC MP Joanmariae Fubbs asked that the bonus payouts be placed on hold.

Steinhoff's attorney, Robert Driman said that the notice of the AGM, to be held on April 20, includes information on remuneration proposed for executives.

The decision to approve the proposals depends on the shareholders, Driman said. 

Fin24 previously reported that a payout of R2.92m is proposed for three senior board members.  

Steinhoff execs excused from Parliament hearing 

Steinhoff's law firm Werksmans Attorneys and forensic firm PwC made presentations before Parliament on behalf of the retail holding company on Tuesday.

Executives could not attend as they are attending a conference of the global group in the UK where the future structure and strategy of the company is being determined, attorney Robert Driman said.

"Steinhoff wishes it to be known that it is unusual to send forensic auditors and its attorney. It would prefer to speak for itself. Steinhoff wants to confirm it is committed to give information to the joint committee."

Driman said that Steinhoff would like to place on record that since the announcement of accounting irregularities considerable progress has been made. "Steinhoff is committed to reporting to Parliament's committees and providing information as it can."

Steinhoff will appear before the committees again in June, once the AGM has been held. Steinhoff will then be in a position to release their financial results, Driman said.

PwC Africa's forensic services leader and partner Louis Strydom spoke on the progress of the investigation. He explained that 14 different work streams have been developed to complete the investigation as fast as possible. Each work stream will release individual reports. 

Strydom explained that there were copious amounts of information, including emails, which the firm has to go through. He also expressed that as new information comes to light it changes the timeline of the investigations. 

Strydom said that PwC was not told by executives or non-executive directors how to conduct the investigation, what to look into and what to ignore. "That to me is positive. We cannot do our work properly if we have any limitations to the scope of the investgation."

Parliament to hear work-in-progress on Steinhoff matter

Parliament committees will hear updates on investigations into Steinhoff on Wednesday.

The Financial Services Board (FSB), JSE, the Hawks, the Independent Regulatory Board for Auditors and the Companies and Intellectual Properties Commission and PwC will make presentations before the  committees on finance, public accounts, trade and industry and public service and administration.

The committees however will not hear from former CEO Markus Jooste. His lawyers De Klerk and Van Gend Incorporated wrote to the portfolio committees declining the invitation to appear before Parliament.

Jooste’s reasons were that he has resigned as CEO and was not in a position to provide meaningful assistance to the committees.

Other reasons given include that the FSB is also investigating the matter and has summoned Jooste who will be interrogated on issues related to Steinhoff.

Jooste’s lawyers also raised concerns that his appearance before the committees could undermine his right to a fair trial, Jooste is under criminal investigation by the Hawks.

The committees will decide whether they will subpoena Jooste.

Chair of the standing committee of finance Yunus Carrim said that he thinks the committees would ultimately decide to pursue Jooste.

"This argument that Mr Jooste cannot turn up because he is no longer with Steinhoff is unacceptable to the committees. In fact it is precisely Mr Jooste that has most to account for in the collapse of the Steinhoff shares and its implications for a wide range of people in our country and elsewhere in the world,” he said.

The Steinhoff hearing will kick off at 10:00.