A Steinhoff International Holdings logo on display outside the company's offices in Stellenbosch. (File picture: Business Report)

In The News South Africa

Steinhoff board and management don’t know how accounting scandal happened

PARLIAMENT, January 31 – Steinhoff board and management members were on Wednesday unable to answer questions from MPs on exactly what led to the accounting scandal which saw the international company’s share price drop by more than eighty percent.
 
“Until we have those reports, not only from statutory auditors, but from the forensic investigations, we really do not know how this has happened,” said Christo Wiese, the former supervisory board chairman and one of the biggest shareholders of the retailer.
 
Wiese, along with a large contingent of board and management, was briefing three parliamentary committees.
 
Acting board chairwoman Heather Sonn told MPs they were constrained legally in what they could say in public, but revealed that the company had reported the former chief executive Markus Jooste to the Directorate for Priority Investigation, more commonly known as the Hawks in South Africa.
 
Jooste resigned shortly after news broke of the scandal.
 
Wiese said he became aware of the accounting irregularities days before it was confirmed in early December. He was at pains to point out that the auditors who pointed out the irregularities in the 2017 financial statements had been the same company “paid handsomely” to do previous audits, the integrity of which are also now been questioned.
 
Chairman of the supervisory board’s audit committee Steve Booysen said, while initial reports of fraud at Steinhoff being investigated by German authorities surfaced in September last year, irregularities were only confirmed in December.
 
Jooste was asked to make a presentation to explain certain transactions and “more importantly the cash flow of certain transactions”, said Booysen.
 
“Markus Jooste then did send an sms [text message] to me as audit chairman and the content of the sms really led me to the conclusion that that is confirmation of the accounting irregularities and then he later offered that evening to make his presentation for which he didn’t pitch up…”
 
Booysen said Jooste tendered his resignation at 19h45 that same evening.
 
The Steinhoff team said it was due to meet with PriceWaterhouseCoopers who were appointed to do the independent probe into the debacle this week. 
Steinhoff has reported its former chief executive officer Markus Jooste to the Directorate for Priority Crime Investigation (Hawks) for investigation and possible prosecution, MPs heard on Wednesday.
 
“Based on our investigation to date, we have reported the former CEO Markus Jooste to the Hawks in terms of section 31 (b) of the Precca [Prevention and Combatting of Corrupt Activities Act] on suspicion he has committed offences,” said Steinhoff acting chairwoman Heather Sonn while briefing three parliamentary committees.
 
“The matter is now under the Hawks for further investigation and prosecution.”
 
Sonn said while she was constrained in what she could tell MPs on the “accounting irregularities” that caused the company’s share price to crash, she and other board members were committed to comply with regulatory authorities.
 
“We are deeply aware of the impact this has had on investments, pension funds, on reputation of company…on business in South Africa generally and on our nation,” said Sonn.
 
“Our commitment is we will uncover the truth…we will fix what went wrong. We will prosecute wrongdoing.”
 
The Steinhoff scandal wiped billions of rand of government pension funds invested through asset manager, the Public Investment Corporation (PIC).
 
The Government Employees Pension Fund, through the PIC, owned about R28 billion in Steinhoff‚ about 10 percent of the shares of the company, but only one percent of the total assets of the Fund. But following the massive decline in Steinhoff’s share price‚ the GEPF’s investment was worth a little over just R2 billion.
 
– African News Agency (ANA),

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