If retailer Steinhoff thought it’d be a slam dunk to claw back R870m in bonuses and pay from former CEO Markus Jooste, it must be sorely disappointed.
Its case is simple: the board only agreed to fork over this mountain of cash to its boss between 2009 and 2017 because it believed the accounts were, you know, true.
This turned out to be a bigger swindle than sport, arts & culture minister Nathi Mthethwa’s insistence that R22m is about what it costs to erect a flag.
As it turned out, Steinhoff’s accounts were padded with “fictitious transactions” to the tune of R106bn, artificial money drip-fed into the company like poison over a decade.
The extent of Jooste’s Stalingrad approach is still bracing. Former president Jacob Zuma must be envious
So, in November 2020, Steinhoff lodged a claim against Jooste clawing back salaries and bonuses. Steinhoff’s CEO, Louis du Preez, is an experienced and savvy corporate lawyer, so he probably knew Jooste wasn’t going to roll over and say: “Of course — would you like repayment in bitcoin or Zapper?”
But the extent of Jooste’s Stalingrad legal strategy — named after Russia’s defence of the city against the Germans in 1942 by fighting every inch, in every room and every house — is still bracing. Former president Jacob Zuma must be envious.
In new legal papers filed on April 20, Jooste denied he was part of any wrongdoing, arguing at one point that he has “no knowledge of these allegations”. It’s the common theme, illustrating that he’s unlikely to admit to even brushing his teeth in the absence of video footage and witnesses.
Even though Steinhoff spent 11 pages of its summons detailing the mechanics of the fraud, Jooste’s response is a blunt one-liner: “These allegations are denied.” In other words, prove it.
And he lodged a “special plea”, arguing that Steinhoff’s claim had “prescribed” as it related to payments before 2017, more than three years before the lawsuit began. Had Steinhoff exercised “reasonable care”, he said, it could have “established the facts from which their claim arose” earlier.
This is some chutzpah, since the reason nobody knew about the schlenter before is that Jooste allegedly went to great lengths to hide it — it was only after PwC’s findings were released in 2019 that the full horror emerged.
Already, last year, Jooste filed nine “exceptions” to Steinhoff’s argument on the R870m claim. But in October, judge Matthew Francis largely batted them away, and ruled the case must go ahead.
When it begins, this case will be watched keenly for how Jooste responds to the specific claims of how this immense fraud was concocted.
For example, when it came to Steinhoff’s property arm Hemisphere, the summons says properties were “sold”, “bought” and “resold” by supposedly independent third parties (which really weren’t). The point was to ensure the properties could be “revalued” after each deal, which led to “significant step-ups in [their] value”.
It was the same with the shady “intangible asset transactions”. Here, Steinhoff sold assets to “ostensibly, but not genuinely independent parties”, which it would then repurchase for a higher amount. But after buying them back, Steinhoff would then recognise these inflated “intangible assets” in its accounts, artificially boosting profits and assets.
In truth, murky entities registered in Switzerland and elsewhere — such as Campion, run by Steinhoff’s former European CEO — allegedly helped Jooste engineer these deals. It was a hustle to create artificial profits and assets, to make investors believe it was all unicorns and rainbows.
After PwC’s investigation, Steinhoff “restated” its accounts, writing down the value of its intangible assets by a mind-blowing €5.8bn for 2016, and halving its value for Hemisphere to €1.1bn.
And yet Jooste argued in his “exceptions to the plea” last year that the allegations “lack particularity, are confusing and, accordingly, are vague”.
Francis rejected this, saying Jooste “requires detail and a level of particularity that goes far beyond what is reasonably required” to respond. In one instance, he said Jooste’s “exceptions” were “over-technical and without merit”.
You can see why the happiest people in this sordid saga are the lawyers
But now, before this case can be argued on the merits, Jooste’s special “prescription” plea will have to be decided.
You can see why the happiest people in this sordid saga, eyeing untold riches, are the lawyers.
As it is, this week Steinhoff asked for leave to appeal against Western Cape High Court judge Gcinikhaya Nuku’s ruling on May 10, ordering the retailer to hand over the 7,000 page PwC forensic report to this publication and amaBhungane.
Steinhoff’s lawyer Robert Driman argued Nuku erred in finding there was no “litigation privilege” attached to PWC’s full forensic report.
The appeal is predictable, even if it’s tilting at windmills. At some stage, that PwC report will emerge, and the only curiosity will be why the retailer fought so hard to suppress it, given that this is meant to be the “new, transparent Steinhoff”.
Secrecy is never a great look. As Joseph Pulitzer, the former US publisher, put it: “There is not a crime, there is not a dodge, there is not a trick, there is not a swindle, there is not a vice which does not live by secrecy. Get these things out in the open.”
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