EDINBURGH — It beggars belief that former Steinhoff CEO Markus Jooste had no knowledge of financial irregularities within the books of the global retail giant. But that’s what he has claimed in his first public appearance since his resignation late last year. Jooste presided over Steinhoff during a massive acquisition spree, fuelled by dodgy accounting to creditors and investors. Jooste says the term ‘financial irregularities’ suggests fraud, which he is not guilty of. The message he leaves is that the financial jiggery pokery, that he undoubtedly must have played a role in, was just the right side of the line between legal and illegal. Jooste has blamed Steinhoff auditors, Deloitte, for the fiasco that has pushed Steinhoff to the brink of collapse. – Jackie Cameron
(Bloomberg) – Steinhoff International Holdings NV ex-Chief Executive Officer Markus Jooste said he wasn’t aware of any financial irregularities and quit as head of the global retailer after disagreeing with the board on how to deal with a dispute with auditors Deloitte LLP.
In his first public appearance since the accounting crisis that wiped billions of euros of the company’s market value in December, Jooste challenged the widespread view that he is responsible for any wrongdoing. Instead, he blamed Deloitte for wanting an additional probe into allegations of financial mismanagement in Europe just days before the retailer was due to report 2017 financials.
“My advice was to appoint new auditors and get accounts out by end January,” Jooste told lawmakers in Cape Town on Wednesday. He knew the alternative of failing to report full-year results – which eventually happened – would have a “disastrous impact,” he said. The board disagreed, and opted to appoint PwC to probe the accounts.
Steinhoff said Dec. 5 that it had uncovered accounting irregularities and that Jooste had quit. The shares have since crashed more than 95 percent and the company restructured about 10 billion euros of debt earlier this year to stave off collapse. The owner of Conforama in France and Mattress Firm in the US has reported Jooste to South African police.
“To me, accounting irregularities means fraud,” Jooste said. “I was not aware of any accounting irregularities.”
The European financial investigations that concerned Deloitte originated in a dispute between Steinhoff and former partner Andreas Seifert, Jooste said. Steinhoff agreed to sell its half of the German furniture chain POCO to Seifert earlier this week, putting an end to that dispute.
Steinhoff blame game goes on as ex-CEO targets German partner
The legal battle with Seifert, mainly over the valuation and ownership of German furniture chain POCO, led to investigations by European regulators and tax authorities that attracted the attention of Steinhoff’s auditors at Deloitte LLP, Jooste told lawmakers in Cape Town on Wednesday. He quit in December after the retailer’s board disagreed with his plan to replace the auditors, he said.
In his first public appearance since the accounting crisis that wiped billions of euros off the company’s market value, Jooste, 57, said he wasn’t aware of the financial irregularities reported by the company the day he quit. Instead, he blamed Deloitte for wanting an additional probe into allegations of financial mismanagement in Europe just days before the retailer was due to report 2017 financials.
“My advice was to appoint new auditors and get accounts out by end-January,” Jooste told the lawmakers. He knew the alternative of failing to report full-year results – which eventually happened – would have a “disastrous impact,” he said. The board disagreed, and opted to appoint PwC to probe the accounts.
Steinhoff said Dec. 5 that it had uncovered accounting irregularities and that Jooste had left. The shares have since crashed more than 95 percent, causing the company to restructure about 10 billion euros ($11.6 billion) of debt and sell a string of assets to stave off collapse. The owner of Conforama in France and Mattress Firm in the US has reported Jooste to a South African police unit known as the Hawks, although they say they don’t have enough information to start an investigation.
“To me, accounting irregularities means fraud,” Jooste said. “I was not aware of any accounting irregularities.”
Jooste’s appearance in parliament follows a similar hearing with former Chief Financial Officer Ben La Grange last week. By contrast, the ex-CFO didn’t mention Seifert, opting to blame Jooste for not sharing information and for influencing third-party transactions that are now being investigated by PwC. Before that, former Chairman Christo Wiese said news of the financial wrongdoing came as a “bolt from the blue” and also accused Jooste of being involved.
Flanked by four lawyers and wearing a dark suit and spotty gray tie, Jooste said the billionaire Wiese was involved in several meetings with Deloitte leading up the refusal to sign off on 2017 financials. Wiese’s net worth has plunged to $1.3 billion from $5 billion before the scandal. Jooste said he personally has lost 3 billion rand ($193 million).
Steinhoff agreed to sell half of POCO to Seifert earlier this week, putting an end to the dispute.
Steinhoff ex-CEO’s day of reckoning delayed by police row
While the owner of Conforama in France and Mattress Firm in the US said in January it had referred Jooste to the anti-graft unit known as the Hawks, a high-ranking official at the department last week said the report was – and remains – devoid of crucial details. The authority is still waiting for Steinhoff’s audit committee head, Steve Booysen, to supply the missing information, specialized commercial crimes head Alfred Khana told lawmakers.
Scandals like #Steinhoff also contributed to drop in economic confidence and our #Recession. As the boss #MarkusJooste needs to be held accountable – without favour. State fraud and Private Sector fraud are the equally criminal. No matter who the crook is.
— Simon Grindrod (@SimonPGrindrod) September 5, 2018
“There is not a shred of evidence under oath that will allow me to go to anybody to question them,” he said at a parliamentary hearing to discuss Steinhoff’s near collapse.
Visibly exasperated, Steinhoff Chairwoman Heather Sonn responded that the company has done everything the Hawks have asked of it and that Booysen isn’t aware the police want more information. Furthermore, she’s opened a second case with the law enforcement agency that accused individuals other than Jooste of wrongdoing, without identifying them.
Frustrated investors
The impasse is likely to frustrate investors who lost money in the fall out from the Steinhoff crisis, including pension funds. The company has shed 95 percent of its market value – some 13 billion euros ($15 billion) – since reporting accounting irregularities in December, and has sold a string of assets to shore up its balance sheet. Jooste quit on the day the crisis erupted, and hasn’t been heard from publicly since.
Jooste talking about how he had to travel the world 200 days a year for #Steinhoff.
“It saddens me that many losses were incurred by pension fund. I worked for this business for more than 20 years.”I feel like he wants us to sympathise.
— Ranjeni Munusamy (@RanjeniM) September 5, 2018
That’s set to change on Wednesday, when he finally appears before lawmakers after repeated refusals, though only on condition he’s asked exclusively about flaws in the financial industry. He isn’t able to give evidence on Steinhoff directly as he’s no longer an employee and may eventually face prosecution in relation to the scandal, the ex-CEO’s lawyer, Callie Albertyn, said in a letter to the parliamentary finance committee.
Auditors at PwC are investigating Steinhoff’s accounts with a view to reporting accurate financials for the year through September 2017 by the end of this year. The probe is focused on inflated profit and asset values, as well as off-balance-sheet deals with third parties.
‘Abysmal performance’
At last week’s hearing, some lawmakers told Khana that once a case was opened it’s the police’s job to investigate and build a case. The committee members also asked if the Hawks have a large enough budget or auditors to investigate a possible fraud inquiry. They concluded by saying Steinhoff and the Hawks must talk and come back to parliament in fourteen days with their differences resolved.
“Our prime concern is the abysmal performance of the Hawks,” Committee Chairman Yunus Carrim said in a statement after the hearings. “Of course, we realize the complex and global nature of the investigation, but it’s clear that the Hawks are doing very little beyond having meetings with no results.”
The stock rose 2.9 percent on Tuesday as the company agreed to sell its half of the German furniture chain POCO to former business partner Andreas Seifert, putting an end to their bitter dispute.
