/ 21 April 2023

Where will Markus Jooste appear in court?

Graphic Markusjooste Instagram 1080px
Wanted: Former Steinhoff chief executive Markus Jooste missed his date with a German court and now the country wants to extradite him. But South Africa wants him here to face more charges. Graphic: John McCann

A German court is considering an application for an arrest warrant for Markus Jooste that could lead to a request for his extradition from South Africa, but it may be met with a polite refusal from this side.

It is understood that, for now, surrendering the former Steinhoff chief executive to Germany is an unpalatable prospect for local authorities who hope to charge him with fraud for his role in a corporate scandal spanning several jurisdictions. 

Jooste failed to present himself to the regional court in Oldenburg in the Bundesland of Lower Saxony on Tuesday, according to his German lawyer Bernd Gross, because his passport was held by his local attorney as part of an agreement with South African police.

“We have asked the South African authorities to allow my client to travel, we do everything we can to allow him to attend this trial,” Bloomberg quoted Gross as telling the court.

“The South African investigations are close to being finalised and are expected to yield an indictment.”

Sources close to the South African investigation agree that Jooste could soon be charged. 

Although the official word from the Directorate for Priority Crime Investigation (the Hawks) remains that their investigation with the Specialised Commercial Crimes Unit is “ongoing”, five years after his resignation as accounting irregularities at the furniture retailer once known as Africa’s Ikea came to light, progress is said to have been made with the help of professional auditing firms.

There is also no argument with Gross’s assessment that Jooste could face more serious charges, punishable with longer prison sentences, than the two counts of accounting fraud prosecutors want him to answer in Germany.

Those stem from sham transactions totalling €839  million that reflected as sales profits in the 2011 results of Steinhoff sister company Tau Enterprises and bolstered the group’s consolidated balance sheets.

The next two years saw further bogus transactions involving the sale of shares in Tau and Omega Enterprises, a shelf company in the Steinhoff stable, to other entities in the group while presenting it as external income, according to the German indictment. 

Prosecutors initially formulated six charges but abandoned four to which a statute of limitations applied because the alleged crimes were committed more than a decade ago.

Jooste was indicted along with George Alan Evans, a Geneva-based former banker who handled Steinhoff’s offshore portfolio and was accused of aiding and abetting balance sheet manipulation. 

Evans has denied wrongdoing and his lawyers and prosecutors reportedly agreed on Tuesday that the charges would not be pursued if he paid a penalty of €30  000. 

Although several countries have taken a keen interest in the Steinhoff saga — and requested legal assistance from South Africa — Germany is the first state to institute charges against Jooste and his associates.

According to an 11-page summary of a PwC forensic audit commissioned by Steinhoff itself, “fictitious and/or irregular” transactions inflated the profits and assets of the group by over €6.5  billion from 2009 to 2017.

Last year, the JSE imposed a directorship ban and two R1  million fines on former Steinhoff chief financial officer Ben la Grange, one for his breach of listings requirements in respect of the so-called “Steinhoff at Work Transaction”.

Steinhoff at Work was a subsidiary of Steinhoff Investment Holdings Limited. Steinhoff joined a structure referred to as the “buying group” through its involvement with the TG Group, which purportedly negotiated and collected volume rebates for the retail holding company as well as other third parties. 

In mid-November 2016, Jooste handed La Grange a handwritten document indicating the pro rata contributions that Steinhoff at Work would be entitled to receive from TG Group was in the amount of €23.5  million. 

There was no actual transaction that supported the calculations, but an invoice was generated for the TG Group and processed in Steinhoff at Work’s accounting records. 

The fictitious transaction meant that Steinhoff at Work’s income was falsely inflated by R376.6  million. This in turn skewed the income of the Steinhoff group. 

Its profits and assets were inflated by more than €6.5  billion from 2009 to 2017.

When irregularities came to light in late 2017, Steinhoff’s share price plunged by more than 95% in December 2017, erasing tens of billions of rands in shareholder value.

“One has to compare the charges instituted by German prosecutors to the fraud charges he would face here. And one has to consider the amount of money involved and the number of people who were affected in South Africa when you do so,” an insider familiar with the process told the Mail & Guardian.

“Part of what has to be decided in a case like this is which country has the bigger public interest in bringing him to trial, and we think it is South Africa. So it is unlikely that we will be open to letting him go.”

But South African authorities have denied any attempt to confine Jooste to the country, saying at this stage he was officially only a person of interest in their investigation.

“He is free to travel, we have not imposed any restraint,” a government official said. 

Jooste’s local attorney, Callie Albertyn from De Klerk and Van Gend Attorneys, did not reply to a request for comment on the claim that he held his client’s passport.

It is understood that Jooste remains in residence at this home in Hermanus in the Western Cape, which is among the assets attached late last year as the South African Reserve Bank executed an ex parte order obtained pending the finalisation of its investigation into alleged contraventions of exchange control regulations.

If the German court were to issue a warrant of arrest, which would be its only means of assuring his attendance, prosecutors could approach South Africa directly for assistance rather than file a request to Interpol, because his whereabouts are known.

Germany and South Africa are signatories to the European Convention on Extradition, which provides for a request for provisional arrest. 

“In practice, a request to a particular state is usually made when it is known that the wanted person lives or resides in that state, while otherwise a search is usually initiated via Interpol diffusions or red or blue notices,” a spokesperson for the German foreign ministry said.

Jooste’s failure to appear in court, and the spectre of such a request, comes just more than a week after the South African government was left fuming at the rejection of its request to the United Arab Emirates (UAE) to extradite Atul and Rajesh Gupta to stand trial on fraud and money-laundering charges. 

Justice Minister Ronald Lamola has made no secret of feeling disrespected by Dubai.

That request was dismissed on technical grounds despite assurances over many months that all requirements had been met, and South Africa was only informed of the court ruling seven weeks after it was handed down. That delay appears to have denied South Africa further recourse in the UAE, as the timeframe to lodge an appeal may have lapsed and it is unlikely the brothers are still in the country.

The National Prosecuting Authority confirmed on Thursday that it was still in discussions with Emirati authorities “to clarify our options”.

In contrast, there is no reason for negotiations with Germany about Jooste to remain anything but civil and collegial, a well-placed official said.

“We can have open, friendly engagements with our counterparts to see how to best let the matter unfold from here. There is a history of cooperation of this kind between the countries.”

There may be some precedent in the strange case of German fraudster Jürgen Harksen.

He fled to South Africa 1993 and settled in Cape Town but sustained a long-running investment scam in which he swindled a fortune from wealthy Germans, while finding new victims here. 

The government agreed to extradite him to Germany because the fraud charges he faced there were considered more important than those he faced in South Africa. The extradition proceedings had moreover begun well before he was charged for crimes committed in South Africa. Harksen spent years in court fighting extradition but was finally surrendered in 2002 and jailed in Hamburg the following year.