Fictitious and irregular deals key to Steinhoff heist

An overview of the long-awaited report by auditing firm PricewaterhouseCoopers (PwC), which has been investigating the shenanigans at retailer Steinhoff, has revealed that a range of “fictitious and/or irregular” transactions inflated the profits and assets of the group by over EU6.5-billion, or over R100-billion, between 2009 and 2017.

The summary was released in an 11-page statement on the company’s website on Friday. It does not specifically name former chief executive Markus Jooste as party to the suspicious dealings, but instead speaks of a “senior management executive” that was apparently key to their implementation.

READ MORE: Steinhoff class action is payback

It said that “a small group of Steinhoff group former executives and other non Steinhoff executives, led by a senior management executive, structured and implemented various transactions over a number of years”. This had the effect of substantially inflating Steinhoff’s profit and asset values over an extended period

The report is the culmination of 14 months work by PwC, which was tasked with investigating the group’s books, after Jooste quit in December 2017 amid allegations of accounting irregularities.

The revelation precipitated a spectacular crash in the company’s share price, which reportedly declined by about 90%, and wiped out billions of rands of value for investors — including entities like the government employees pension fund.


The PwC investigation found “a pattern of communication” showing that the senior management executive “instructed a small number of other Steinhoff executives to execute their instructions, often with the assistance of a small number of persons not employed by the Steinhoff Group”.

READ MORE: Jooste — I did not know about accounting irregularities

The report also revealed that the fictitious or irregular transactions were entered into with third parties that were made to appear independent of the Steinhoff Group, and its executives. Instead, according to PwC, they now appear to be closely related to, or controlled by the same small group of Steinhoff executives, and select outsiders.

READ MORE: JSE cleans up after scandals

Three principal corporate groups or entities were identified as being counterparties to the suspect transactions — namely the Campion or Fulcrum Group, the Talgarth Group and the TG Group.

The income generated from the suspicious transactions with these entities, as well as a number of others, amounted to over €6.5-billion or over R100-billion at current exchange rates, between 2009 and 2017.

In many cases said the report overview, the fictitious or irregular income was created at an intermediary Steinhoff Group holding company level. The money was then allocated to underperforming Steinhoff operating entities as so-called “contributions” that took many different forms and either increased income or reduced expenses in those operating entities.

The full report — which is over three thousand pages long, with a further four thousand annexure documents — will not be made public as it is “subject to legal privilege and other restrictions”.

Alongside a series of remedial actions to address the report’s findings, Steinhoff’s board has resolved to pursue “claims against certain individuals that appear responsible for the unlawful conduct identified”.

“Those claims will be multifaceted and will be pursued in the various jurisdictions where the unlawful conduct has taken place,” the company said.

This will include — in instances where third parties make a successful claim against Steinhoff — the group pursuing these individuals for “an amount equal to the amount which the Steinhoff Group is ordered to pay the third party claimants”

The company is also seeking to recover the bonuses paid to certain individuals.

The full financial impact of the findings in the PwC report is yet to be determined, the company said, but it will be reflected “to the extent possible” in restated figures for the 2015 and 2016 financial years, as well as the yet to be published financials for 2017 and 2018.

Other remedial actions will include the filling of the newly created position of chief compliance and risk officer.

Subscribe to the M&G for R2 a month

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

And for this weekend only, you can become a subscriber by paying just R2 a month for your first three months.

Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

Related stories

Financial conduct body slaps Jooste with R162-million fine

The former Steinhoff chief executive and three others have been fined by the FSCA for insider trading in the days leading up to the company’s 2017 share price crash

Khaya Sithole: Steinhoff – a gang of desperate adventurers?

As long as the only legitimate litigant is Steinhoff itself, the company’s directors will remain at large

Covid-19 a ‘catalyst for closing the pay gap’

Executive directors earn 66 times the national minimum wage and are overwhelmingly white, a report by assurance, advisory and tax services company PwC has found

Use PIC and pension fund to rescue SA

Pensions aren’t threatened, Eskom will be saved and it’ll boost growth and a low-carbon economy

Steinhoff relies on legal ‘fig leaf’

Journalists’ court case challenges corporates that hide behind legal ‘professional’ privilege’

EDITORIAL: Writing was on the board for DA

It ought not to have made any sense. And yet, it somehow did. The DA had spent much of the year before at war with itself
Advertising

Subscribers only

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

Q&A Sessions: ‘I think I was born way before my...

The chief executive of the Estate Agency Affairs Board and the deputy chair of the SABC board, shares her take on retrenchments at the public broadcaster and reveals why she hates horror movies

More top stories

DRC: Tshisekedi and Kabila fall out

The country’s governing coalition is under strain, which could lead to even more acrimony ahead

Editorial: Crocodile tears from the coalface

Pumping limited resources into a project that is predominantly meant to extend dirty coal energy in South Africa is not what local communities and the climate needs.

Klipgat residents left high and dry

Flushing toilets were installed in backyards in the North West, but they can’t be used because the sewage has nowhere to go

Nehawu leaders are ‘betraying us’

The accusation by a branch of the union comes after it withdrew from a parliamentary process
Advertising

press releases

Loading latest Press Releases…