Markus Jooste must pay R15m immediately for Steinhoff implosion, JSE demands
The sanction against Jooste comes days before Steinhoff is set to be delisted from the JSE and Frankfurt Stock Exchange on Friday, 13 October. The ownership of Steinhoff will move from public investors to its lenders.
The JSE has demanded that former Steinhoff CEO Markus Jooste immediately pay two maximum fines each of R7.5-million, totalling R15-million, for breaching the stock exchange’s listing requirements. In addition to the fines, Jooste is barred from being a director of any listed entity for 20 years.
These sanctions were imposed by the JSE in January, and Jooste appealed at the Financial Services Tribunal for them to be overturned. The Financial Services Tribunal is an independent body that reviews decisions in the financial services sector.
But on Tuesday, 10 October, Jooste lost his appeal efforts, resulting in the JSE’s sanctions against him remaining in place and being immediately enforceable.
“Mr Jooste is immediately liable for the payment of the financial penalties imposed and disqualified from holding the office of a director or officer of a listed company for a period of 20 years,” the JSE said on Wednesday.
The sanctions against Jooste come days before Steinhoff is set to be delisted from the JSE and Frankfurt Stock Exchange on Friday, 13 October. The liquidators of Steinhoff have set the date for the retailer to move from being a publicly listed and owned company to a privately owned one. Ownership of Steinhoff will also move from shareholders to the creditors to whom it owes billions of euros and rands, and the company will then be transferred into a trust.
This is after Steinhoff’s shareholders had voted to dissolve the company and delist it from the Johannesburg and Frankfurt stock exchanges in July, with around 99% approval for this move during a meeting in Amsterdam that was poorly attended.
Read more in Daily Maverick: High noon for soon to be delisted Steinhoff as ownership moves to creditors
Before he resigned in December 2017, Jooste headed Steinhoff when auditor Deloitte refused to sign off the accounts on suspicion that there was accounting fraud at the retailer. Steinhoff eventually admitted to such fraud, resulting in major losses for the retailer’s shareholders — the company’s shares have lost 96% of their value since 2017. The shares of Steinhoff peaked at R96 in 2016, but had crashed to 2 cents by 11 October.
The JSE has fined Jooste for creating a false invoice worth R376-million, which inflated the retailer’s business accounts. The fictitious, handwritten invoice reflected money that had allegedly been paid by a company called TG Group to a Steinhoff subsidiary. The other charge against Jooste was for false and misleading financial statements about the company’s accounts, including for 2015 and 2016.
Jooste’s legal team, led by Francois van Zyl, had argued that Jooste could not be held responsible for the accounting fraud at Steinhoff because the retailer was complex, operating across 32 countries, had many managers who affected financial transactions, did not do business in English, and had to comply with different tax and accounting regimes. Van Zyl further argued that Jooste had relied heavily on local CFOs, accountants, auditors and audit risk committees at various levels within the group.
The defence advanced by Jooste’s team failed to convince the Financial Services Tribunal.
Its ruling reads: “Dealing with probabilities, the question is, what was the cause of the demise of Steinhoff? It was not because of Covid or some eruption on Mount Krakatoa. The applicant [Jooste] did not even attempt to offer an explanation, nor did he deal with the financial restatements.
“We have already explained why we found that the financial information published under his watch was false in material aspects. This was not because of language or legal issues, or some rogue employees in far-flung countries. It was about the core companies in core countries.”
The JSE has argued that Jooste ought to have known that Steinhoff under his watch was publishing and reporting misleading financial statements, thus duping investors and convincing them to buy shares in the company.
The Financial Services Tribunal supported the JSE’s views.
The tribunal said Jooste cannot extricate himself from the accounting fraud that took place at Steinhoff. This is because emails show that Jooste was intimately involved in how finances worked within the group, it said.
“As to seriousness, what is particularly relevant is the loss to the shareholders of billions, the demise of an SA-linked company with all its consequences, and the loss of credibility in accounting methods and financial control of listed companies,” the tribunal said.
“It is important that a message be sent to the business community that playing around with book entries, creating a false image of the financial health of a company and misrepresenting to the public the true state of affairs, whether intentionally or because of gross negligence, is serious and demands appropriate penalties, and not slaps on the wrist.” DM