Steinhoff shareholders take steps to make Deloitte pay for collapse – legal action latest

EDINBURGH — It’s still not clear whether Steinhoff is likely to survive the scandal over accounting irregularities that propped up a global acquisition strategy. Late last year, the Steinhoff share price collapsed as news emerged of its CEO at the time, Markus Jooste, having knowledge of jiggery-pokery in the books. Since then, it has become apparent that the company hid debts and massaged figures in order to fool investors, creditors and others. Now, former Steinhoff fans have become enemies as they seek to recoup some of their losses by squeezing Steinhoff and related parties for funds. Deloitte, the auditors who apparently sat back and did nothing or were so incompetent they could not see what was going on, have been brought into the legal battle. – Jackie Cameron

By Thulasizwe Sithole

Shareholders in Steinhoff on Wednesday sued Deloitte for damages in a Dutch court, accusing the auditor of failures in the accounting scandal that brought the South Africa-based global retailer to the brink of collapse, the Financial Times reports.

Former Steinhoff CEO Markus Jooste.

“VEB, the Dutch investor rights group, said it brought the lawsuit in the Rotterdam district court as Deloitte had “seriously failed in its statutory task as auditor” by giving an unqualified audit to Steinhoff before the owner of the UK’s Poundland and Mattress Firm in the US revealed a black hole of more than €5bn in its accounts.” 

The revelation of the irregularities in December last year wiped more than €14bn from the market value of Johannesburg- and Frankfurt-listed Steinhoff, plunging many of its subsidiaries into a credit crisis and leading to an investigation, which is still continuing, into the scale of the losses, continues the FT.

“Steinhoff’s collapse brought a spectacular end to a run of debt-fuelled acquisitions by the company, which had the backing of Christo Wiese, one of South Africa’s richest men and its former chairman. Markus Jooste, the group’s long-time chief executive, resigned in the wake of the scandal.”

Deloitte, recalls the FT, withdrew its unqualified audit within days of the irregularities coming to light. “It is very questionable whether Deloitte had sufficient insight to be able to judge, among other things, the valuation of Steinhoff’s property, acquired companies and goodwill. It is also unclear how the accountant was able to approve Steinhoff’s cash position, as shown in the annual accounts,” VEB is quoted as saying. 

An investigation by PwC focused on Steinhoff’s eastern European property portfolio and has also extended to the group cash pile, reports the FT. “Deloitte in the Netherlands has received a writ of summons from the VEB and are currently reviewing that document,” a spokesperson for Deloitte is reported as saying. 

VEB is already leading a shareholder class-action lawsuit against Steinhoff in the Netherlands over the scandal, while Wiese, who stepped down as chairman after the scandal, is also suing the group, seeking $4.7bn from cancelling purchases of its shares in 2015 and 2016. 

“Steinhoff is still battling to push through a restructuring of more than €10bn in debt in order to survive. On Tuesday the company said it had received enough support from creditors not to enforce their rights while it continues negotiations. The standstill expires on June 30. The group ‘remains in constructive discussions’ with its lenders, Steinhoff said.”