EDINBURGH — The rich town of Stellenbosch, surrounded by vineyards, is where many business associates have met, often through their studies at university. These close-knit groups are sometimes referred to as the Stellenbosch mafia. But previously firm friendships are faltering as investigators into Steinhoff, the global retail chain built by South Africans on the back of dodgy accounting, probe deeper into transactions. Former CEO Markus Jooste might soon be telling tales on his former pals in the South African Parliament. Meanwhile, other Steinhoff senior managers are likely to be called to account for their actions as it becomes increasingly clear that the financial irregularities were not the work of one person. – Jackie Cameron
By Loni Prinsloo
(Bloomberg) – Steinhoff International Holdings NV ex-Chief Executive Officer Markus Jooste has agreed to appear before South African lawmakers next week – on condition the hearing focuses on flaws in the financial industry that may have caused the retailer’s shares to collapse.
Jooste has repeatedly refused to give evidence to parliamentary committee members, with his lawyer saying he’s no longer a Steinhoff employee and therefore can’t speak on behalf of the company. He quit the owner of Mattress Firm in the US and Conforama in France in December after the retailer reported a hole in its accounts, wiping out billions of dollars of market value.
“It’s bizarre that Markus Jooste will be now be summoned to assist in identifying flaws and challenges in the regulation of the financial system,” David Maynier, the opposition spokesman on finance, said in emailed comments. “We are going to have to get to the bottom of how this happened.”
While the scope of his hearing will be limited, Jooste’s Sept. 5 appearance before the finance committee in Cape Town is likely to attract considerable interest because he hasn’t spoken publicly since the eruption of the accounting scandal. Steinhoff has referred its former CEO to the police, who are investigating three cases of fraud relating to the company.
Jooste’s deal with parliament was released in a court ruling Tuesday. Ben La Grange, Steinhoff’s former chief financial officer, will answer questions on today. He was suspended by the company last week alongside former Company Secretary Stehan Grobler has part of a long-running probe into the financials.
Steinhoff Ex-CFO Blames Accounts Crisis Squarely on Former Boss
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 South African lawmakers in Cape Town on Wednesday.
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 Dec. 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.
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 Dec. 3, after Deloitte told Steinhoff it couldn’t sign off on financials for the year through September, 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.
PwC is investigating Steinhoff’s financials and identifying what went wrong and who is responsible. 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 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 19 percent in Frankfurt as of 2:37 p.m. local time, though they remain 95 percent below precrisis 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.
Steinhoff ex-CEO’s Ally Joins Roll Call of Corporate Pariahs
By Renee Bonorchis and Janice Kew
(Bloomberg) – After three decades behind the scenes, Stehan Grobler is now in the spotlight.