Steinhoff executives inflated profits by more than R100bn, PwC finds
The 18-month forensic probe found that the retail group inflated its profits by R6.5bn from 2009 to 2017.
A group of Steinhoff International’s directors created fictitious structures and deals that inflated the company’s profits by €6.5bn (R106.2bn) in the years leading up to its collapse in SA’s biggest corporate scandal to date.
The 18-month forensic probe conducted by PwC didn’t identify any culprits by name, but said a “senior management executive” instructed a “small number” of other executives to execute the deals, conducted between 2009 and 2017.
This was often done “with the assistance of a small number of persons not employed by” Steinhoff, the auditing firm said.
Steinhoff’s board launched the investigation after the emergence of “accounting irregularities” in December 2017 led to the collapse of the company’s share price, leading to investors losing about R200bn in value. Then Steinhoff CEO Markus Jooste resigned after the revelations.
The PwC report did not specifically name Jooste as the key figure behind the fraud, noting that Jooste and “certain other individuals” have not yet made themselves available to be interviewed.
“The transactions identified as being irregular are complex, involved many entities over a number of years, and were supported by documents including legal documents and other professional opinions that, in many instances, were created after the fact and backdated,” the report found.
When the scale of SA’s largest corporate fraud first came to light, it sparked a slide in its share price, seeing it fall from R56 per share to R6 in just four days. The fraud and sharp fall in the share price led to investigations by regulatory authorities in Europe, as well as legal action by several investors, including its largest shareholder and former chair, retail tycoon Christo Wiese, who is suing Steinhoff for R59bn.
The PwC report was initially expected to be handed to Steinhoff executives in December 2018. The group said in December that it was delaying the release of the report because the investigation was “significantly more complex than initially anticipated, with multiple work streams operating across a number of jurisdictions”.
Steinhoff has previously indicated that it will not publish the report in full.
Said Steinhoff CEO Andre Du Preez, at its AGM in April: “To the extent that the report refers to claims against third parties, the company would have to take legal advice and may choose not to publish the full report, and to the extent that the report might influence any prosecutions or civil claims, the company may choose not to publish the full report.”