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We're not friends - Steinhoff ex-CFO blames Jooste, auditors for accounting scandal

Aug 29 2018 18:16
Janice Kew and John Bowker, Bloomberg

Steinhoff International Holdings' ex-Chief Financial Officer Ben La Grange blamed departed leader Markus Jooste and auditors including Deloitte for the retailer’s accounting scandal, saying he became aware of any wrongdoing only days before the crisis erupted.

In his first public comments since being suspended by the company last week, La Grange said Steinhoff’s financials were corrupted by third-party transactions connected to Jooste and inflated profit contributions from various parts of the business. “I don’t think I did anything wrong,” he told members of parliament in Cape Town on Wednesday.


READ in our LIVE UPDATE:

  • Ben la Grange was shocked by Deloitte report on fraud at Steinhoff
  • Former Steinhoff CFO says losses to pension funds are permanent
  • La Grange reveals reason for suspension
  • MPs not buying Heather Sonn's PR exercise... and more


La Grange was speaking alongside current Steinhoff executives Heather Sonn and Louis du Preez, who were updating parliament on the ongoing process of rescuing the retailer. The owner of Conforama in France and Mattress Firm in the US reported accounting irregularities on December 5, wiping billions of dollars off its market value. Jooste quit as chief executive officer the same day, and has been referred by Steinhoff to a local police unit.

'Not friends'

The former CEO - who has yet to give his side of the story - limited what he shared with La Grange and the duo weren’t close, according to the ex-CFO. "We were not friends or socialised outside a business environment," he said. The first La Grange knew of the accounting wrongdoing was on December 3, after Deloitte told Steinhoff it couldn’t sign off on financials for the year through September, he said.

Asked why he stepped down if he wasn’t culpable, La Grange said he wanted a fresh board to negotiate with investors and lenders for the sake of appearance. "People were so angry at Steinhoff - if they were to see my face they would want to hit it," he said.

Deloitte had rubber-stamped accounts for previous years that now have to be restated, and the firm and Steinhoff’s mistake was outsourcing work on various parts of the business to smaller auditors, La Grange said. "A single group of auditors could have prevented what happened here at Steinhoff," he said.

Three buckets

PwC is investigating Steinhoff’s financials and identifying what went wrong and who is responsible, with a focus on what La Grange referred to as "three buckets": off-balance-sheet deals, overpaying for assets and inflated profits. The probe will be "substantially complete" by the end of the year, while a three-year deal agreed to with creditors and a series of asset disposals have secured the immediate future of the company, according to a presentation published on Wednesday.

That said, a portion of the losses to pension funds as a result of the retailer’s collapse are likely to be permanent, La Grange said, adding that the stock will probably never recover. The shares gained 30% in Frankfurt as of 3:45pm local time, though they remain 95% below pre-crisis levels.

La Grange stepped down as CFO in January but remained on the payroll as a consultant until his contract was suspended last week. Steinhoff hasn’t given him a formal reason for the sanction, and in any case he was due to stop working for the retailer at the end of next month, he said, adding that he’s still receiving a salary.

The ex-CFO’s testimony matches that of ex-Chairperson Christo Wiese and audit-committee head Steve Booysen, who both told lawmakers earlier this year they first heard of wrongdoing late in 2017. La Grange agreed that the duo weren’t aware of the financial irregularities.

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