Markus Jooste’s fables
Ex-Steinhoff boss Markus Jooste came to parliament well prepared to obfuscate and deflect blame from himself for the retailer’s collapse, but enough emerged for the Hawks to start circling. Will they?
As Steinhoff’s disgraced CEO Markus Jooste was leaving parliament last week after a three-hour grilling, there was a moment few noticed. A member of the Federation of Unions of SA (Fedusa) walked up and shouted in his ear: "How do you feel? We lost billions because of you, how do you feel? And you come here and act as if nothing is wrong. You must be ashamed of yourself."
Jooste, as he has done for months, set his jaw and ignored the taunt — as he ignored the throng of journalists asking how it felt to lose R3bn of his own money, the value of his Steinhoff shares that went up in smoke.
At that stage, the civil servants who belonged to Fedusa had lost plenty. Having bought Steinhoff shares worth R5.7bn, they’d seen that stock tumble to R667m.
Speaking to the FM last week, Fedusa general secretary Dennis George said: "Jooste doesn’t want to take responsibility. When you’re the CEO the buck has to stop somewhere. For him to try to put the blame on someone else is totally unacceptable."
I think the only person that who believed Markus Jooste’s version was Markus JoosteDavid Maynier
George says Fedusa is going to wait until after the PwC report on Steinhoff’s collapse comes out, "and assess what action we’ll need to take — whether to go to court or participate in a restructuring".
He has been meeting with Steinhoff chair Heather Sonn to discuss Fedusa’s strategy. "She’s a person with integrity and a person we can work with to come up with a solution," he says.
Some felt that Jooste’s appearance in parliament served no real purpose — that because he didn’t immediately accept any blame there are now numerous versions of what went wrong and no sense of where the truth lies.
But in fact it was significant that parliament got him there at all. Jooste had gone to court to set aside the summons obliging him to testify.
In his court papers, he argued every technicality under the sun. He said the summons was "facially invalid" (because it didn’t say what documents he had to produce) and "the name and designation of the person who must serve the summons was not specified".
Jooste also said he had "the right not to be compelled to give self-incriminating evidence" and that he’d had "so little time to prepare".
In the end, he reached a deal in which parliament withdrew the summons and he agreed to "be questioned to assist the committees to identify any institutional flaws and challenges" in the regulatory framework.
Still, when Jooste arrived, flanked by a squadron of lawyers, he did what some of his former colleagues had predicted: shift the blame everywhere else, swear blind that he knew of no "irregularities" and portray himself as a victim of principle.
Prime evil in Jooste’s narrative was Andreas Seifert, a notoriously shy Austrian businessman who runs Europe’s third-largest furniture chain, the XXXLutz Group.
In 2007, Steinhoff and Seifert formed a joint venture to "take on Ikea in Europe", according to Jooste. But they fell out in 2014 when Steinhoff bought another Austrian business, Kika-Leiner.
Jooste says Seifert was upset because Steinhoff had made an acquisition in his home territory "where he was the king".
Seifert would reply that in fact he had discovered various problems in Steinhoff’s accounts, including forged documents.
But in Jooste’s version, Seifert then went on a witch-hunt against Steinhoff, laying charges of fraud with the German authorities. Jooste said it was the fallout from these baseless allegations that led to "this perception of accounting irregularities" and the collapse of Steinhoff’s share price.
This is hard to swallow in light of what is emerging in the PwC investigation.
For a start, it is understood that the forensic investigators have discovered widescale deception — including that Jooste allegedly conspired with so-called third parties in Europe to manipulate Steinhoff’s financials.
Earlier this year, Steinhoff had already written down half the property portfolio in its European property arm, Hemisphere, from €2.2bn to €1.1bn. Furthermore, it had "restated" earlier financial results, erasing billions. For example, Steinhoff claimed last year that it had made a €711m profit for the six months to March 2017. But this year, those financials were restated, and the number for that six-month period was in fact a €362m loss — an immense €1.07bn swing in what was originally reported.
This suggests more than just the "perception" of irregularities. And it raises sharp questions over Jooste’s statement that he "did not know of any accounting irregularities".
But Seifert wasn’t the only one in Jooste’s sights. He also blamed Deloitte for insisting on a new forensic probe into claims of fraud, which, he argued, would have delayed the release of Steinhoff’s year-end financials, with "dire consequences". Amazingly, he proposed Steinhoff fire Deloitte and find another auditor.
Jooste said he resigned because "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."
However, at least three sources close to Steinhoff dispute Jooste’s claim that he resigned on principle because Deloitte wanted a deeper forensic probe.
Instead, they say that, four days before he quit, Jooste had flown to Germany to get "further documentation" that Deloitte was seeking.
And when he returned to SA on December 4 last year, he promised to arrive at Steinhoff and brief its audit committee on the documents.
But he didn’t. Instead, he sent a lawyer with a message to then chair Christo Wiese offering his resignation. The lawyer reported that Jooste was in a terrible state, sobbing and saying he had "messed up".
What corroborates this version is that over that period, he had sent an SMS to a few close colleagues in which he admitted to "big mistakes" and said: "I must make it very clear none of Danie [van der Merwe], Ben [la Grange], Stehan [Grobler] and Mariza [Nel] had anything to do with any of my mistakes."
What it means
Jooste’s claims in parliament rang hollow, but criminal investigators, not MPs, should be in charge
The DA’s David Maynier tackled Jooste on the SMS. He swivelled deftly: "The mistakes I was referring to was the choice in 2007 [to make] Seifert our strategic partner."
It was this, Jooste said, that caused all the drama, as Seifert subsequently fell out with him in 2014, and laid a criminal complaint with the German authorities.
Speaking after the hearing, Maynier said he didn’t buy it.
"I think the only person who believed Markus Jooste’s version was Markus Jooste," he said. "He also showed absolutely no contrition about the people who lost money."
As one MP put it, "it’s like Jooste had devised a story and resolved to stick to it".
Shane Watkins, the founder of asset manager All Weather Capital, says it’s clear that, despite what Jooste was saying, there were "major accounting irregularities stretching back many years".
"It was clear that Markus has had upwards of six months to prepare how to respond, and the size of the legal team he wheeled into parliament suggests he did substantial preparation. So it was always going to be a distract-and-deflect strategy," says Watkins.
By contrast, the MPs interrogating Jooste were nowhere near as prepared.
Watkins says it must have been painful for those who lost money to watch Jooste’s parliamentary appearance, as it suggests the beleaguered Hawks will struggle to hold him accountable.
Watkins is among those who never believed the Steinhoff fairy tale. His company never held shares in Steinhoff and he says there were many red flags over the years.
"I’ve always believed you can’t buy poor-quality businesses that no-one else wants and do well," says Watkins. "You can put as much lipstick on a pig as you want, but it’s still a pig."
Mkhuleko Hlengwa, one of the MPs who grilled Jooste, found it "very difficult to believe what he said … There was a great deal of legal obfuscation on his part. It was about going through the motions and [it] sanitised his conscience that he appeared before parliament."
But "at least we know what kind of a character we’re dealing with, so law enforcement agencies have their work cut out for them", says Hlengwa.
This is a critical point. Parliament did what it could to pick holes in Jooste’s account, but it isn’t a court. It again demonstrated the gaping hole created by the Hawks’ ineptitude.
As the committee’s chair, Yunus Carrim, put it at the end, in a statement aimed at the criminal authorities: "Surely there’s enough here for you to act … Parliament can only do so much, but ultimately, it’s the regulators and the Hawks and the National Prosecuting Authority that must do their jobs."