Christo Wiese: Insider view on Steinhoff CEO Jooste’s corporate crime of the century

DUBLIN – In this fantastic interview, billionaire Christo Wiese opens up to Alec Hogg on his experiences with Markus Jooste and the collapse of Steinhoff. Wiese, who is suing Steinhoff for R59bn that he claims he lost due to misrepresentations, gives a unique insight into the months preceding the Steinhoff collapse. As a board member and major shareholder, Wiese had a front-row seat to the unfolding drama that brought down Jooste and devastated Steinhoff. His story makes for compelling listening. – Felicity Duncan.This is the Rational Perspective, I'm Alec Hogg. Today, Christo Wiese on the Steinhoff crash. .___STEADY_PAYWALL___.Billionaire retailing entrepreneur Christo Wiese lost more than anyone else in the Steinhoff collapse. As the biggest single shareholder, there's the matter of almost R60bn that disappeared from his asset base overnight. As precious, for those who operate in his rarefied atmosphere, is the damage to his reputation. On top of that, a pile of Wiese's loans, secured by Steinhoff shares, cost Wall Street's biggest banks billions more, and overnight they transformed him from high society's A to, well, no list. He resigned as chairman of Steinhoff's board shortly after the fraud surfaced in early December – now he wants his money back. .Well, the obvious first question is that you are suing Steinhoff for R59bn..Yes..From what I've read, it's all to do with misrepresentation. .That's correct, yes..You are an advocate, you did study the law. So, this is something that is pretty close to your heart, when you see this from a legal perspective..Absolutely, but you will appreciate in an instance like this, I was obviously obliged to take the very best advice that I could get. It wasn't a decision taken lightly, as you can imagine so, I'm certainly not relying on my own knowledge of the law. I am very well-advised..The forensic auditors came out with some interesting statements and essentially, from what you read, from the AGM, that over many years there's been fictitious invoices and inflated asset values. .Yes, those comments have been made, you are quite right, it is in the public domain..But surely that's criminal? .Well, you know, I don't want to prejudge that, Alec, but the forensic auditors will hopefully, before the end of the end of the year, release their report and that will indicate very clearly what exactly had been happening, where it happened, who the perpetrators were, and dealing with the consequences..What the forensic auditors said leaves very little to the imagination..One would, as an outsider, you'd wonder why criminal charges have not been laid, or that the law enforcement authorities haven't been brought in yet?.Yes, as you know, Alec, I'm not involved with Steinhoff since December so, it's really not possible for me to give an answer to that question..To say, Wiese's one-time prodigy enjoyed absolute trust is an understatement. After injecting his massive Pepkor Group into Jooste's operation, Wiese doubled up again by putting up his huge stake in the enlarged entity as security to buy still more shares in Steinhoff. That to help fuel an aggressive international acquisition campaign. .When the Mattress Firm deal was done, after the Poundland deal, effectively you doubled up your investment by borrowing?.Absolutely..Yes, and putting your shares up?.Yes, absolutely..What gave you that confidence?.Well, on everything that the business was ostensibly producing at that stage. And the strategic plan, with the acquisition of Mattress Firm. You know, Mattress Firm owns 25% of the mattress market in the United States. As a retailer, that appeared like a huge opportunity and it's a business that they, in Steinhoff, had been looking at over a very long period of time. It made, at the time, on the figures presented, the strategies presented – it made perfect sense..But it was also, the biggest short position on the New York Stock Exchange at the time, and the price that was paid was a substantial premium on what the shares were trading at. Did you go into that depth?.Yes, absolutely, at the ruling price. But if you look over the previous year, where the share was that, as you know, it often happens. I mean, I pointed out to people the other day that if you take a business, a very good business, like Woolworths, in the last 18 months or so, just check what happened to their share price. These things happen in businesses. I mean, I've gone through periods where Pepkor traded at a 29 PE and then it traded at a 6 PE. So, that on itself, was not a reason for alarm..And you know, Alec, at the end of the day, you're asking me, 'Didn't this raise a red flag or that raise a red flag?' Just read all the analysts' reports on Steinhoff, until the day it crashed. People were studying it and analysing it. Look at the people who still, I think in August or so, Jooste issued a bond and he told me – now, I never checked those figures – but a 10-year bond and he had applications for €3.2bn. That was in September, or thereabouts, two months before the whole debacle..So, what was there to put one on one's guard? There were those articles and the raid by the prosecutor. We had appointed a very, very highly respected legal accounting firm in Germany that employs hundreds of professionals. They went into everything and reported back that everything was in order, in the accounts and all the things that were alleged wrongdoings. All cleared, and everything in order, but the whole market was aware of that. They knew of the raid..How did they miss it? How did that firm miss it? .Well, that's presumably, Alec, presumably that will come out in the forensic investigators' report now. How did people miss it? I mean, how did a firm like Deloitte. I mean that's also public knowledge now so, I can say it to you. The question to Deloitte would be, 'But you signed off on those things in 2016?' So, that mystery can only be clarified when the forensic investigators produce their report..Yes, and Dr Andreas Seifert, did you ever have a chance to meet with him, because he seems to have been very central to all of this?.No, I never met him, because you know, that whole dispute started long before I got involved with Steinhoff. So, we just had regular reports and their reports back to the board were that Seifert is not faring well in the litigation process, and secondly, that you know there will be attempts to settle the matter. Thirdly, that we could verify, was that there was a provision in the accounts for what was considered to be the worst outcome of such a settlement. Now, as you've probably seen, they did now settle it in the last couple of days. They settled with Seifert on the one issue, and I think that was the major issue. I never had an opportunity to meet him. After the debacle, there was an approach by him to ask that maybe the two of us should meet, but I left Steinhoff shortly thereafter so, I never met him..We now know that Dr Andreas Seifert was the man who exposed the Jooste fraud. The two of the, Seifert and Jooste, were once tight, very tight, but after they fell out, Seifert made it his mission to get back what he claims to have been cheated of. He succeeded last week. Wiese is hoping to do exactly the same – in his case, to recover R59bn worth of assets that were injected into Steinhoff, based on the company's, what he calls, misrepresentation. More specifically, Wiese said, he was told lies and given false information about Steinhoff's true financial position by it's CEO, Markus Jooste, a man who he trusted implicitly. .Maybe just to go back a little bit, to your relationship with Markus Jooste. He often spoke about how he met you, when he was an articled clerk. When he came in, to do audits, did you know him then? Did you build a relationship then?.Yes, well no, we didn't have any sort of relationship. He was a young, articled clerk with a firm of accountants, who were then looking after some of my affairs. So, I met him, he was a youngster, he is 20 years younger than I am. He looked like a nice, bright, young guy but I saw him for a year or two, in that capacity. He then left for the then-Transvaal, and for about 15-years I had no contact with him but I was aware of what he was doing in Steinhoff, building the Group..So, when did you get closer, or when did you get to know each other better? .Well, when I did the Lanzerac deal, I sold Lanzerac to a consortium, of which he was part in 2011, and he then approached me to swap my PSG stake into Steinhoff, which made me a fairly large shareholder in Steinhoff, in 2011. So, I suppose that's when you can say that the relationship started..As a significant shareholder presumably, you got an opportunity to have a look at the books at that point, and there was clearly nothing untoward? .Well, no, what happened, two years after the deal, as a significant shareholder, I was invited onto the board. The board, at that stage, consisted of some of the top names in SA, top business people, people most of whom I knew. So, I was on the board for about two years watching how the company operates, looking at their systems, how professional they were, and what their plans were. At that stage I had already decided, and it was widely reported, that I wanted to consolidate my business interests, and I considered that Steinhoff was the perfect vehicle to do so. And that's when we started, in 2014/15. I started talking to Jooste about Steinhoff acquiring the Pepkor business from me and the other shareholders, and that I would then invest the proceeds of that acquisition into Steinhoff. Yes, that happened towards the end of 2015..During all of this time, it now transpires that there was already quite a lot of shenanigans going on in the accounts in Europe, in Steinhoff Europe..Was it, at any stage, strange to you that Steinhoff Europe was being audited by a very small German firm?.No, you know, that had been going on for years because, as I understood it, those were the original auditors of Bruno Steinhoff's business. So, they are people who were familiar with the Group, from its inception. Much like we had in Pepkor, you know, Pepkor started off with a firm of auditors in Upington, when it was really a very, very small business, and it stayed with the same firm for over 50 years. The firm, of course, it changed its name. So, there was a similar situation there, but it didn't really concern me because it had gone on for a very long time, and of course, these component auditors were also being looked at by the statutory auditors, who initially were Deloitte in SA, but, from the listing in Frankfurt, it became Deloitte Netherlands. So, there was no reason to have any concern about that, none whatsoever..You must have spent hours mulling these things over in your head, but during all these years was there anything that, with hindsight now, that Markus Jooste did or said that would have, with hindsight, given you a little pause for concern that he might have been busy with this stuff that we now know he was busy with?.But you know, Alec, that's the amazing thing. You know my friend, Whitey Basson, amongst others, saying well, he doesn't like that people running that style or that sort of culture, in a way. But he was referring to things like going to World Cups, and stuff like that, because that's not things that we did. So, yes, there was criticism of style, but in the few years that I worked with Jooste, never once, the slightest indication of anything shady, trying to cut a corner. What I saw was a very hard-working guy, with a very strong team. They knew the regulations, the exchange control set-ups, etc., very impressive, very professional..And you know, I've said this to people a thousand times, Steinhoff was the only company, that I'm aware of, where the three members of the audit committee of the Supervisory Board, all three had doctorates in accounting..My question always was, why should I – I'm a failed lawyer – why should I, or any of the other esteemed, non-executive board members, why should we have any concern about a structure that had been working for so many years? If I look back, somebody asked me the question earlier this morning, 'What lessons did I learn?' I said, that's part of the frustration. I don't really know, even looking back, what should I have done differently?.Because, what I do realise now, is I grew-up in my businesses, over the period of 50 years. I knew those businesses, you could sense when things were not going well. I have this little, old story that when I leave my office at 19h00, and the car park is empty, then I know the business will not be doing well. You have a feeling for what happens, and what happened with me in Steinhoff obviously, I did not know the businesses that they were in well enough to sense that things are perhaps not going as well, as it would appear from the numbers. I don't know whether that makes sense to you. In retrospect, I think, yes, that is something. But then, on the other hand, Alec, you know my history. I've gone into many businesses. When I went in, obviously on a much-much smaller scale, without having that same depth of knowledge of those businesses that I had in my own businesses, with which I grew up..All about trust..Well, at the end of the day, you know, I mean this is probably a cliché, but it certainly was part, and remains part, of my DNA and philosophy is the old adage that it is dangerous or risky to trust, but it's far riskier in a business to distrust. How do you build businesses that employ hundreds of thousands of people, unless you have that absolute trust? The way I had it in Whitey Basson, Pieter Erasmus, and all the other businesses that I'm involved in – absolute and total trust. Sure, we all make judgement errors but it's got nothing to do with integrity..Why did Whitey and Pieter, certainly from the people I've spoken to, why did they have an aversion towards Markus Jooste? Did they maybe see things there you couldn't?.I don't know. They certainly never told me that they are aware of things that could be shady, but they, like me, didn't know those businesses. They didn't like, what I refer to as, the style. But you know, even in my own group, Alec, some of my colleagues – the one didn't like the other one's style. They ran their businesses differently. So, you know from my side, it was simply one of those personality clashes, that people that just did not sit around the same fire, as it were..Whitey expressed his views very openly, to his credit, but never a suggestion of a lack of integrity, never. He just didn't like those businesses, because Shoprite and Pepkor, if I may say so in all humility, are fantastic businesses. Cash generative, defensive businesses. So, yes, Whitey, we have a furniture business in Shoprite but we acquired it, in a sense, by accident. So, I ascribed Whitey's resistance, inter alia, to the fact that he didn't like those businesses, which he's perfectly entitled to that view..Wiese refers there to Whitey Basson. Now, he's an entrepreneur who built Africa's biggest retailing group, Shoprite. Basson got into the furniture business through Shoprite's acquisition of the failed retailer, OK Bazaars, which owned a large furniture operation. He got to know more about furniture, and clearly, would have had an insight into the way that Steinhoff operated. But even though Basson, and others like Remgro chairman, Johann Rupert, expressed publicly and often their concerns about Steinhoff and Jooste, its biggest shareholder paid no heed, something Wiese obviously regrets. .To this day, since the 6th December, I've not heard a word from him. Other friends have come to me and shown me messages that he sent them saying, how terrible he feels about my situation, etc. But I never heard a word, that's a fact and I have said it to people, because they ask me, have you seen him or have you heard from him? From the 6th December – not a word..And his lawyers?.No, I haven't heard from his lawyers..The thing here that confuses us so much is that he caused a lot of trouble. He then sent out a WhatsApp message or an SMS. .Sort of a mea culpa, yes..Yes, and then he disappeared?.Totally disappeared, but his lawyers have never been in touch with me. I've had absolutely no contact, not a word from him, not with anybody connected to him, not a single word. People, friends have told me they've seen him in Stellenbosch in restaurants, and in Hermanus, and so forth but I've not seen nor heard from him..Some insiders say, the disgraced Steinhoff CEO, Markus Jooste, still tells anyone around Stellenbosch prepared to listen, he's done nothing wrong. He's baffled at what all this fuss is about. That's a classic sociopathic tendency, sociopaths are people with personality disorders, which gives them the inability to accept blame or to accept the reality of the damage that their actions have wrought..You know, Jooste gave no indication whatsoever that he was concerned about anything blowing up. I mean, far from it. The sort of things that were on our table that we were discussing – with the merchant banks we were looking at forming a huge property company, putting the various properties into a listing with one of the major international banks. I mean, all these plans, and I looked at all these papers. Still towards the end of November, we were discussing, which would pump an enormous amount of liquidity into Steinhoff, based on the figures as they were then, some €4bn. I mean, everything was going according to the long-term strategy. So, there was no concern. And STAR as you know, on listing, because that's mainly the old Pep businesses, it was a huge success. Oversubscribed. So, there was no sign of any problem..Just from your own perspective, you have a reputation that's been built up over half a century, and you've also, because of your doubling-up bet and the non-recourse loan, you've also cost some big banks a lot of money, and they've got long memories. .From a personal perspective, one only really has your reputation..Yes, it's a terrible thing because I dealt with many of these people for decades, Alec, and obviously, it's a terrible thing to experience. All I can tell you, that you can imagine what my situation, personally was, when overnight R50bn or over R50bn because I've got to relate it to the share price, over R50bn of my assets go up in smoke. If I have to tell you, and it's there for the record, the support that I have had from the banks that I had dealt with was just amazing so, I would like to believe that my relationship with them has not been damaged. That they understand it. But it doesn't make me not feel terrible about what happened. The only argument I can put on the table is I lost more than anybody else..But if it wasn't a non-recourse loan then that extra €1bn that the banks have had to, or plus, then you would have had to pick up that loss. What gave you the insight to do that?.Yes, there was no insight. My advisors all… there's no way that I would have assumed, having regards to my balance sheet structure, that kind of liability, without protection. Now, Alec, I've had offers from all the banks on collars, zero-cost collars, and different methods of financing, which would mitigate the risk. So, having a margin loan ringfenced, is just one of the ways in which you do it, because somebody else who had invested during that time, did a zero-cost collar, and of course, for him it worked out much better than for me because I lost my shares..Obviously, when you go a little bit deeper into your other interests, Brait has got New Look, New Look has got massive exposures to the banks. You need a good relationship with the banks. Has this affected that relationship? .Not at all. In my own, personal situation, it had no effect. As far as Brait is concerned, as you know, Brait had been going through the tough time, a lot of High Street retailers in the UK, since Brexit. But we have not had any pushback. Obviously, banks do sell their debt when they consider that they're at risk. Here is another interesting thing. Major banks that dealt with Steinhoff, that was also in the margin loan, not a single bank sold down their exposure to Steinhoff in the two to three months in the lead-up to December, not one..At this stage, Viceroy, were they on the scene yet?.I can't remember when their first report appeared, but really, what Viceroy stated in their report, Alec, was just, in many respects, a distorted version of the Oldenburg prosecutor's report, which we had forensically investigated after December 2015..Markus Jooste is a smart guy, jeepers, that he managed to fool so many people. Have you ever seen this before? .No, not in my life. I was telling somebody this morning that I didn't know that, but I kind of must have been aware, but my colleagues in the office pointed out to me, our CAs, that in the year that he wrote his board exam, he was the number-one guy in South Africa, way ahead of everybody else. He's an extremely intelligent guy. He is, in my view… Look, I worked very hard in my time, Alec, but the way that guy worked, it was just unbelievable. It was nothing for him to fly to Europe on Sunday and be back on Wednesday, fly to Australia on Friday, and be back on Monday, and fly to the U.S.A. on Thursday – the guy just had an amazing energy output..Why do you think he did it? .Well, that has to be the $64,000 question. And that baffles everybody… Why? For what? To achieve what? He wasn't that big a shareholder, well, you know, by normal standards. He owned something, I think, like 60-million shares, which at their height, when the share price was trading at R90-odd – that is a lot of money..Why do it? To increase the value of that shareholding, or what is the motive? But remember, Alec, we're talking all this and we must always remember that, until the final report is on the table, we don't know what happened – it's that simple. My action is based on that it's now in the public domain said that the accounts were misleading, and assets were overinflated, and profits were inflated. But that's what's in the public domain. Obviously, I know some things from what the auditors told me when I was finally approached by them in December, but that is fiduciary knowledge, which I'm not at liberty to disclose..But clearly that would have influenced your decision to sue Steinhoff?.Well, no, I couldn't do that because it's what we call, 'knowledge in the box.' But there's enough out. There are other people suing Steinhoff, Alec. There are other claims on the table already, which prompted, inter alia, prompted us to take action..But do you expect to get the money or if there are so many claims that are there?.Look, Alec, to get the money – how is that going to be possible? But to restructure the Group – that is entirely possible. Everybody coming to the table, all the stakeholders, creditors, banks, bondholders, shareholders, and claimants like myself – there are many others like me, hey, who had done direct deals with the company. Swapping assets into Steinhoff in return for shares. Now, it is clearly, in the best interest of all the stakeholders to go and sit around the table and say, guys, this is the size of the cake, here is the size of the claims, how do we restructure this company so that it can move ahead? It has some excellent businesses, and I repeat, most of those come out of Pepkor. But there are other good businesses. There's a property portfolio, etc. Let's resuscitate the thing, get it restructured, and move on. Clearly, that's got to be the logical thing to do..But if the banks have lent so much money on fictitious accounts surely, they're going to want their money back, rather than to keep anything going?.Yes, well, but you know, Alec, just think for a moment. We all want our money back but it depends on where your claim is, how it's structured, whether you're a preferred creditor, etc., That must all emerge in such a roundtable discussion..In almost five-months, since the Steinhoff bomb dropped, Wiese has been subjected to every measure of criticism, from angry and emotional stakeholders, some of which claim he was in on Jooste's crooked game. But that makes absolutely no sense, given how much money he has lost. More likely, Wiese was just one of many rich, smart, and powerful people, who were fooled by a clever accountant from Pretoria. But even the smartest criminals tend to get snared in the end. In Jooste's case, it was by his one-time bosom buddy, Andrea Seifert. A man who refused to lie down or go away quietly. .This has been the Rational Perspective. I'm Alec Hogg, until the next time, cheerio.

Christo Wiese: Insider view on Steinhoff CEO Jooste’s corporate crime of the century

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