PwC report shows these execs were responsible for fraud, says Steinhoff CEO
PwC found that a 'senior management executive' – since named as Jooste – was allegedly behind a small group of other executives, who, working with other individuals outside the Steinhoff Group, used fictitious and/or irregular transactions to inflate the group’s assets by an estimated €6.5 billion - about R105 billion - between 2009 and 2017.
CAPE TOWN - Steinhoff bosses, regulatory bodies, the Hawks and the NPA on Tuesday met Parliament’s joint meeting of the standing committees on finance, public accounts and the committees on trade and industry and public service and administration.
The meeting came after Steinhoff on Friday released an 11-page summary of audit firm PwC’s 3 000-page report on its probe into the alleged fraud and corruption that led to the collapse of the company’s share price in December 2017. The company’s CEO Markus Jooste resigned hours before Steinhoff disclosed the hole in its accounts.
PwC found that a “senior management executive” – since named as Jooste – was allegedly behind a small group of other executives, who, working with other individuals outside the Steinhoff Group, used “fictitious and/or irregular transactions to inflate the group’s assets by an estimated €6.5 billion - about R105 billion - between 2009 and 2017.
- Steinhoff did not want to name the individuals implicated in the PwC report citing lawyers’ advice over privacy concerns. The issue was that the company could not volunteer this information. Once instructed to do so by Standing Committee on Finance chairperson Yunus Carrim, however, the company’s new CEO Louis Du Preez went on to name former Steinhoff chief executive Markus Jooste, former chief financial officer Ben la Grange and former executives Dirk Schreiber and Stehan Grobler.
- Du Preez also named four non-Steinhoff executives linked to the companies Campion/Fulcrum, Talgarth and TG Group: Siegmar Schmidt, Alan Evans, Jean-Noel Pasquier and Davide Romano.
After the meeting, Du Preez confirmed to journalists that Steinhoff on Tuesday received a summons from the Financial Sector Conduct Authority (FSCA) to provide it with the full PwC report. He said he would be taking legal advice, but said Steinhoff wanted to co-operate.
Earlier on Tuesday, Du Preez told the joint committee meeting he was sole possessor of a printed version of the PwC report and that it was not possible for any of the electronic versions to be printed. Carrim has urged regulators and investigators to ask for copies of the full report.
The Financial Sector Conduct Authority’s (FSCA) Brandon Topham told the meeting Steinhoff was the FSCA “number one priority” but couldn’t give a precise date when it would finalise its investigation, while hoping this would be by the end of the year. He was awaiting the full PwC report. Topham said the FSCA was focusing on eight accounts linked to possible insider trading on Steinhoff shares. He urged anyone who received information on which to trade shares to come forward. The FSCA was also investigating market manipulation and the issuing of false and misleading information in relation to Steinhoff’s financial statements.
Rudi Voller of the Companies and Intellectual Properties Commission (CIPC) told the meeting there was no legal basis in terms of the Companies Act for Steinhoff to withhold the names of implicated former executives, and that they should be asked to do so. Voller said the CIPC was closely watching the investigations under way with a view to launch director delinquency applications under the Companies Act.
Hawks head Lieutenant General Godfrey Lebeya told the meeting the three criminal complaints lodged in December 2017 were merged into a single docket. The Hawks are investigating fraud, theft, corruption and breaches of the Companies Act. MPs were not impressed with the lack of progress in the Hawks investigation, with the Democratic Alliance’s Alf Lees saying they took almost a year to investigate a single transaction, with no conclusion yet. Lebeya said the probe was to be expanded and would include the PwC report’s findings.
JSE CEO Nicky Newton-King said Steinhoff was already fined R1million and Pepkor (formerly Steinhoff Africa Retail STAR) R5million, of which R1m was suspended for two years. Newton-King said they’re working on proposals to strengthen the JSE’s regulatory approach to new and existing listings.
Steinhoff board chairperson Heather Sonn told the meeting the group is still in “a precarious position” and did not want to do anything that would jeopardise legal proceedings and prosecutions. All board members had subjected themselves to the PwC probe and it was now critical to complete the group’s financial statements for 2017/18, with adjustments informed by the PwC report. A total of 22 current and former directors – but not Markus Jooste, who did not cooperate with PwC – had been interviewed.
The Independent Regulatory Board for Auditors (IRBA) reported that its investigation into the auditors of Steinhoff would rely on the publication of Steinhoff’s restated financials. The board also noted with concern the allegations contained in the PwC forensic investigation report regarding the nature and extent of the corporate fraud allegedly perpetrated by a small of group of executives and related parties, potential accounting irregularities and potential non-compliance with laws and regulations.
The IRBA investigates whether auditors complied with international auditing standards, e.g. audit work on related parties, and the IRBA Code of Ethics, for example, the exercise of professional scepticism by the auditor. IRBA CEO Bernhard Agulhas says their probe is into Deloitte South Africa, who signed off on the group’s consolidated financial statements up until 2015.