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Steinhoff on hunt for executives behind accounting scandal

May 11 2018 10:03
John Bowker, Bloomberg

Steinhoff International’s [JSE:SNH] finances are in a mess. Now it’s going after those who presided over the fiasco.

The beleaguered retailer said on Thursday that roles played by former executives in an accounting scandal are being investigated and the company is taking legal advice on how to seek justice. In addition, the owner of Conforama in France and Mattress Firm in the US is looking to reclaim bonuses paid even as the wrongdoing was being carried out.

While Steinhoff didn’t identify anyone by name, former CEO Markus Jooste is sure to be at the top of the list. The 57-year-old racehorse tycoon quit on December 5, the day after failing to attend a meeting to discuss why auditors at Deloitte had refused to sign off on the 2017 accounts.

He hasn’t been seen or heard from publicly since, and Steinhoff chairperson Heather Sonn has said he’s been referred to an anti-corruption police unit.

Jooste was paid €2.93m (R43m) across three separate bonuses for the 15 months through September 2016, according to that year’s annual report. That boosted his pay for the period to €5.6m and compares with bonuses of €1.3m awarded to then-chief financial officer Ben la Grange, who has quit the position but remains employed by the company.

Ex-chief operating officer Danie van der Merwe - the current CEO - took home €1.47m in extras.

However, while securing the return of bonuses would represent a much-needed public-relations win for Steinhoff, the cash would hardly help solve its problems.

The shares have crashed more than 95% and the company faces a make-or-break meeting with lenders next week over how to restructure more than €10.4bn (close to R60bn) of debt.

Impending impairments to make up for inflated profit and asset values are set to balloon well beyond the €6bn initially estimated. The company is also the subject of at least five lawsuits.

One of those has been filed by billionaire Christo Wiese, the former chairperson and biggest shareholder. He’s seeking R59bn to compensate for losses caused by the share-price crash, while repeatedly and adamantly stating he knew nothing of any accounting wrongdoing.

While Steinhoff hasn’t disputed his position, it did say on Thursday that his “intimate involvement in and with the group over many years” made his case highly unusual.

Another lawsuit has been filed by GT Ferreira, one of the founders of FirstRand [JSE: FSR] and a former member of Steinhoff’s executive-management board.

Europe connection

Aside from CEO Jooste, the identity of other executives that Steinhoff wants to target is more of a mystery. At least some are likely to have been based in Europe, as that’s where the accounting wrongdoing took place.

In Germany, where Steinhoff moved its primary stock listing from Johannesburg in 2015, Sueddeutsche Zeitung reported that Jooste conspired with fellow European executives to move revenue figures around subsidiaries to boost their balance sheets, citing internal emails.

Back in August, Manager-Magazin said Jooste is being investigated by German prosecutors in a 2015 case linked to possible accounting fraud, though Steinhoff said that the time that aspects of the article were “wrong or misleading.”

The truth will eventually come out.

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steinhoff international  |  retail  |  companies
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