Steinhoff: What’s next for SA’s biggest corporate fraud case?

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JEREMY MAGGS: The suicide of former Steinhoff boss, Markus Jooste, will not have any impact on the ongoing investigation relating to fraud and misrepresentation at the JSE-listed retailer, that’s according to the Financial Sector Conduct Authority (FSCA). I want to explore this in a little more detail now as I’m joined by the former editor of the Financial Mail and author of the seminal book, Steinheist, Rob Rose. Rob, a very warm welcome to you. Before we get to the aftermath, when you heard the news, were you shocked?

Read:


Former Steinhoff CEO Markus Jooste has died


Markus Jooste’s death won’t have an impact on Steinhoff investigation – FSCA

ROB ROSE: Afternoon, Jeremy, good to speak to you again. Yeah, absolutely, I was completely shocked. When I was told about it, I thought it might’ve been one of those conspiracy theories, but it soon became clear that that’s what happened. So it was very bracing.

JEREMY MAGGS: Does anyone, Rob, have any indication of the mood that he was in? He was all set to hand himself over, and then it took this very strange and tragic turn of events.

ROB ROSE: Yeah, I don’t think he was all set to hand himself over, I think he was probably weighing up his options. He’d already had that fine early in the week from the regulator for R475 million. So he probably wasn’t in the best of moods, but I think it was the news that the criminal investigation was actually closing in on him, and he’d been telling people for years that he never thought they’d actually get around to it.

Read: Markus Jooste slapped with a R475m fine for Steinhoff misconduct

So I suppose the revelation that they were actually intending to arrest him was obviously what tipped him over the edge. I don’t know if he would’ve happily handed himself over. I just don’t think he expected it to get to this stage. I suppose to some extent now, we’ll never know; he is never going to appear in front of a judge and plead his case.

JEREMY MAGGS: It was, in many ways, an indication of his hubris, wasn’t it?

ROB ROSE: Oh, absolutely. He was somebody who, he looked down on other people, he was quite scornful of other people’s views. I think that standing in front of a judge and having to explain what actually happened with Steinhoff and admit, concede his error, I think would’ve clashed up heavily against his hubris and his personality, which he’d never actually conceded reality in many parts of this case, which is why the fraud got to the stage it did.

Listen: Before Steinhoff’s collapse, Jooste was described as someone with ‘Midas-like business acumen’

JEREMY MAGGS: Rob, I know that we’re going to step now into the realm of conjecture, but what would’ve happened or what could have happened had he turned himself in last week as might have been the case?

ROB ROSE: So he and Stephan Grobler, who was Steinhoff’s company secretary for many years, were ordered to appear in court on Friday, and Stephan did appear in court. I think this morning he did get bail, partially, from what I understand, because the state’s case isn’t 100% complete. So I think that Markus Jooste, the state would’ve argued against bail, but he probably would’ve got bail on the argument that he has had six years and he hasn’t run anywhere.

So he probably would’ve got bail, and then it would’ve led to a long standoff, probably many years, while the case dragged onto trial.

Jeremy, if you remember the case of Tigon, which was one of the largest 40 companies in the JSE, its CEO (Gary Porritt) was arrested in 2002, and that trial still isn’t complete. So it could have dragged on for many more years, but he would’ve faced charges of fraud and charges of breaching the Financial Markets Act, and it would’ve been quite a lengthy trial.

JEREMY MAGGS: What does this say, Rob, about our ability or inability to effectively investigate financial crimes such as the two that you’ve just mentioned?

ROB ROSE: Yeah, I think that that’s been an issue for a number of years since the Scorpions disbanded particularly, it’s been a big issue because Regal Bank, for example, in 2002, I think they managed to, the Scorpions arrested Jeff Levenstein, who was the CEO of Regal Bank, and he was sent to prison. But since then, we haven’t had many big corporate crimes.

In the case of Saambou, for example, its CEO (Johan Myburgh) and other directors, I think one of them actually died before it got to trial.

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So I think it’s a big weakness and it’s one of those issues that I think the Financial Action Task Force (FATF) mentioned last year, our inability to tackle financial crimes, which is one of the reasons we were a greylisted.

So the state, I think, realises the importance of it, but doesn’t have the skills to effectively do this and I think the jury is very much out on that.

JEREMY MAGGS: I’ve referenced the Financial Sector Conduct Authority already. What happens now, in your opinion, in terms of this investigation? What direction does it take? What needs to change, if anything at all?

ROB ROSE: Well, I spoke to some of the investigators and they were saying that they now have to regroup and see what they do with this particular case because they’re going to have to focus on other people involved in Steinhoff. Certainly, there was a big, I suppose, public demand that people be held accountable for this, and Stephan Grobler and potentially other people being held in the dock will certainly provide some degree of accountability, but it won’t provide a sort of national cleanse that having Markus Jooste in the dock would’ve.

So I think you’ll still want the criminal cases to go on, and I think you’ll still want them to hold people accountable.

In terms of the Financial Sector Conduct Authority, that particular fine of R475 million will be lodged against his estate.

I doubt they’ll get that money back, partially because I’m quite sceptical about whether Markus Jooste actually had that money sitting in an account in South Africa. So I’m not sure if they’ll ever get that money back, but to some extent, I think the size of that fine was symbolic. I don’t think they ever really expected to get that fine out of Markus.

JEREMY MAGGS: All of this is of course, contained in your excellent book, Rob, Steinheist, but maybe give me a sense, give our audience a sense of the scale of the fraud that was perpetrated.

ROB ROSE: Sure, it was immense. The PwC (PricewaterhouseCoopers) investigators talked when they released their findings, which was a few months after the book came out. So I was quite nervous about the book to some extent, hoping that I hadn’t got it wrong.

But the PwC investigation found at the end that there was R106 billion of fictitious transactions over more than a decade.

So actually, the scale was larger than I think we anticipated. Essentially this runs the gamut from creating fictional companies in Europe and using it to send fake invoices to Steinhoff, to boost the profits. It extends far, far more than that. He did deals in which he himself personally benefited out of Steinhoff shareholders to the tune of millions.

It was a large con that was by far the largest, it exceeded Regal Bank, LeisureNet, all the big ones we’ve had in South Africa, by some distance.

I think it cast the spotlight firmly on what our regulators do, what our boards of directors do. You had a board of directors at Steinhoff, which really was a superstar board with three accounting PhDs, and you had an accounting scandal, which does raise all kinds of questions of governance at this company.

JEREMY MAGGS: I’m going to leave it there. If you haven’t read the book, Steinheist, the author is Rob Rose. Rob, thank you very much for joining me.

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