Spiralling out of control, Steinhoff hunts for dodgy execs while shares plunge

JOHANNESBURG — A giant death star is starting to hover over embattled retailer Steinhoff, which is increasingly facing the risk of total obliteration as the extent of its financial scandal slowly and painstakingly comes to light. On Thursday, the company announced that its overstatement of profit and treatment of off-balance-sheet entities will result in further material impairments beyond 6 billion euros ($7.2bn). This disastrous news sent the share price plunging further into the small-cap territory. In early trade on Friday, the share price on the JSE was already down over 7%, bouncing around the R1.61 level. Added to Steinhoff’s woes is the news that Tekkie Town filed papers in the Western Cape High Court on Thursday afternoon to have its R3.2bn 2016 acquisition by Steinhoff reversed. Time is running out and the only option facing Steinhoff might be liquidation and, ultimately, court appearances for its dodgy execs like Markus Jooste and Co. – Gareth van Zyl

By John Bowker

(Bloomberg) – Steinhoff International Holdings NV’s finances are in a mess. Now it’s going after those who presided over the fiasco.

The beleaguered South African retailer said 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 U.S. is looking to reclaim bonuses paid even as the wrongdoing was being carried out.

From left to right, Philip Dieperink, acting chief financial officer of Steinhoff International Holdings NV, Danie van der Merwe, acting chief executive officer, Heather Sonn, chairman of Steinhoff International Holdings NV, and Steve Booysen, head of the audit committee, sit during the company’s annual general meeting in Amsterdam, Netherlands, on Friday, April 20, 2018. Photographer: Jasper Juinen/Bloomberg

While Steinhoff didn’t identify anyone by name, former Chief Executive Officer Markus Jooste is sure to be at the top of the list. The 57-year-old racehorse tycoon quit on Dec. 5, the day after failing to attend a meeting to discuss why auditors at Deloitte LLP had refused to sign off on the 2017 accounts. He hasn’t been seen or heard from publicly since, and Steinhoff Chairwoman Heather Sonn has said he’s been referred to an anti-corruption police unit.

Jooste was paid 2.93 million euros ($3.5 million) 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 5.6 million euros and compares with bonuses of 1.3 million euros 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 1.47 million euros 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 percent and the company faces a make-or-break meeting with lenders next week over how to restructure more than 10.4 billion euros of debt. Impending impairments to make up for inflated profit and asset values are set to balloon well beyond the 6 billion euros 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 chairman and biggest shareholder. He’s seeking R59 billion ($4.8 billion) 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 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 Ltd., Africa’s biggest bank by market value.

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.