Markus Jooste reveals his ‘big mistakes’ about Steinhoff
After two years of investigation by two German legal firms on behalf of Steinhoff into allegations under investigation by German authorities, he had had enough
Former Steinhoff CEO Markus Jooste said in parliament on Wednesday that he resigned on December 5 2017 because the group’s board did not accept his proposal that it immediately terminate the services of Deloitte as auditor, appoint a new set of auditors, and publish unaudited financial statements on the scheduled date.
Instead, the board decided to launch a new, independent investigation at the insistence, in November 2017, of the group’s auditor Deloitte, which Jooste said had done an “about-turn” on its previous view that no new investigation was needed. Deloitte had concerns about the independence of a probe conducted on behalf of Steinhoff.
Jooste said in testimony before four parliamentary committees that after two years of investigation by two German legal firms on behalf of Steinhoff into allegations under investigation by German authorities, he had had enough and felt frustrated. He believed that whatever needed to be investigated had already been thoroughly investigated. “I personally believe that everything has already been investigated, for two years, by professional firms and by German authorities for four years.”
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Jooste stressed that he knew not publishing financial statements would have 'dire consequences' and would mean 'financial disaster' for the group and its share price
The legal firms found no evidence that the accounting of the relevant transactions was not in compliance with accounting standards, and that counter-parties to the transactions were not independent.
Jooste said his view was that the auditors should be replaced by more “independent” auditors who were prepared to sign off on the financial statements by the January deadline, and that the unaudited results of the group be announced on December 6 as scheduled.
Jooste told MPs that he was firmly opposed to a new investigation as this would have meant that the group was not able to finalise its 2017 financial statements and that their release would have had to be postponed indefinitely.
Jooste stressed that he knew not publishing financial statements would have “dire consequences” and would mean “financial disaster” for the group and its share price, which would fall immediately as all confidence in the group would have dissipated. It would cause a suspension of credit lines and a loss of confidence by the group’s investors and bankers. This transpired because the Steinhoff share price plummeted on the announcement by the Steinhoff supervisory board that an investigation would be undertaken by auditing firm PwC into accounting irregularities.
When the board did not accept his view, Jooste resigned.
He said he had made it clear that he was not prepared to go through another investigation, which had consumed about 90% of his time for the previous three years while the German authorities were investigating allegations of irregularities. “I made it very clear that if that was not the way the board wanted to go, I did not see my way forward to go through this after I had been through this for three years of my life, fighting and explaining the transactions and have received the reports.”
Jooste insisted that when he left the global furniture retailer in December, he was not aware of any accounting irregularities — which, in his view, means fraud — in the accounts of the group.
Jooste, flanked by two senior counsel and two attorneys, recounted the events leading to the collapse of the Steinhoff share price. At the time of the demise of the share price, a Jooste family trust had 68-million shares worth R3bn. It no longer has any Steinhoff shares.
When he resigned Jooste sent an SMS to close colleagues referring to the “big mistakes” he had made. He explained to MPs that this referred to the joint venture he had entered into with a German strategic partner, Andreas Seifert, in 2007. “It turned out that Dr Seifert was the wrong person to go into business with.” The choice of partner was a mistake as it cost the company all “the drama” since 2015, including the financial losses and the perception of accounting irregularities that led to the group being unable to complete the financial statements in time.
The partnership was terminated by Steinhoff in January 2015 after which Seiffert entered into litigation with the group and reported alleged irregularities to the German tax authorities.
His SMS also said that he would have to take the consequences of the collapse of the group as a man. Jooste explained that these consequences were that he had devoted 29 years of his life to building up a global furniture retailer, which he had hoped to build up in the future.
Jooste conceded that the Steinhoff group grew too fast, too quickly and in too many countries. This was the lesson he had drawn from the collapse of the group’s share price. He said he did not blame anyone for what happened at Steinhoff, including all the people he had worked with who had the interests of the group “in their DNA”.
Under questioning by MPs, Jooste said he was “saddened” by what had happened to Steinhoff and the losses suffered by people. This was caused by the lack of certainty over its financial statements. Jooste insisted that he was not aware of anyone within the group who had deliberately and knowingly contravened its code of conduct, which did not condone any fraud, corruption, dishonesty, money-laundering or deception.
Regarding the restatement of Steinhoff interim financial statements, he said he would have to see the final report to understand why certain write-offs were made.
MPs said they were surprised by Jooste’s lack of contrition for the loss suffered by investors.