Nicola Mawson
A lengthy investigation by financial services firm PwC into Steinhoff’s business dealings has discovered that the company not only overstated its profit, but also its total assets and liabilities.
This information is contained in a 7 000-page report that Business Report secured through a Promotion of Access to Information Act request.
One particular matter in which Steinhoff cooked the books – under the guidance of the deceased and disgraced former CEO, Markus Jooste – was a deal in which Steinhoff created a company called Van den Bosch Beheer in conjunction with the latter’s holding company. Van den Bosch Beheer is a Dutch logistics company.
In November 2006, Steinhoff Europe Group Services entered into a joint venture with Holding Van den Bosch, with each entity owning 50% of the merged company, known as Van den Bosch Beheer.
The accounting manipulation started after IFRS 10 became effective for all financial years from the start of 2013. The accounting rule required a company that controls a company to consolidate this company into financial statements.
However, there was a dispute as to whether the company should be consolidated in Steinhoff’s books, or not. Steinhoff concluded that Van den Bosch Beheer should be consolidated into the Steinhoff Group and informed the company of this decision in July in a letter that outlined the rationale behind the consolidation for the year to June 2014.
Having asked Peter van den Bosch, currently a member of the parent company’s advisory board, to sign the letter in his capacity as director of the joint venture, he declined to add his signature to that of Stephanus Grobler, Steinhoff’s former legal head. Grobler has since had R67 million seized by the South African Reserve Bank and has appeared in court on charges of fraud, a pattern of racketeering activities and contravention of Financial Markets Act.
In August 2014, Van den Bosch disputed Steinhoff’s decision to consolidate the entity and provided the alternative accounting treatment of Van den Bosch Beheer as a joint venture. Steinhoff’s own external auditors pointed out that consolidating the entity would be problematic.
Despite this, PwC’s report stated, the joint venture was consolidated into Steinhoff’s finances. As a result, it said that the financial misstatements that would have arisen from incorrectly consolidating Van den Bosch Beheer included that total assets and total liabilities would be overstated, and that profit would be overstated.
Several other people have been arrested in connection with the fraud. The latest, on Friday, saw two additional executives, Hein Odendal and Iwan Schelbert, hand themselves over to police as part of the Hawks’ ongoing investigation into fraud at the company. The two, who were charged with several contraventions of legislation, were released on bail of R150 000 at the Pretoria Specialised Commercial Crimes Court.
Odendal, Schelbert, and another accused, the company’s former legal head, Stephanus Grobler, will appear in court again on May 30. Grobler is also out on bail of R150 000.
Last October former CFO, Andries La Grange was sentenced to 10 years behind bars, with five years suspended for five years on condition that he is not found guilty of fraud during this time.
La Grange’s sentencing followed that of Gerhardus Burger, who pled guilty to three charges of insider trading in contravention of the Financial Markets Act on September 26. Burger was given a five-year suspended sentence and had to pay back the proceeds of insider trading.
Jooste, the kingpin behind what has become known as the biggest corporate scandal in South Africa, reportedly killed himself on March 21 last year, a day before he was scheduled to hand himself over to law enforcement officers.
BUSINESS REPORT
