ANALYSIS: Jooste hit with R122m fine for warning ex-Springbok prop, chauffeur to sell Steinhoff
The regulator says the ‘warning SMS’ Jooste sent to his confidantes urging them to sell their Steinhoff shares may just be the most expensive SMS ever sent in SA
It’s nearly three years later, but Markus Jooste, flagged as the mastermind behind SA’s largest fraud, is finally facing some sort of reckoning. In this case it’s for tipping off his inner circle to sell Steinhoff shares before the retailer cratered in December 2017.
On Friday the Financial Sector Conduct Authority’s Brandon Topham revealed that Jooste would be liable for a penalty of R122m -and potentially as much as R161m -for insider trading, under the Financial Markets Act.
In this case, on 30 November 2017 -just a week before Steinhoff admitted to “accounting irregularities” and Jooste resigned “with immediate effect” — he sent an infamous text message to four individuals, including Jaap du Toit, one of the founders of the PSG Group.
It read: “Steinhoff is going to struggle to process all the bad news in America for a long time, so there are better places to invest your money, immediately take the current price and delete this SMS and don’t call anyone.”
Du Toit didn’t act on it, but it turns out the three others did. And those who sold the shares would have saved themselves hefty losses: Steinhoff’s share price was R55 at the time, but within a week it plummeted 61% to R17.61.
The three others who did act on it were all fined by the FSCA on Friday.
One of them, it turns out, was Jooste’s chauffeur, Marthinus Swiegelaar. He sold his shares a few days after getting the SMS, but he was only fined R18,328, which was the loss he avoided by selling the shares.
The FSCA said Swiegelaar provided “the highest level of co-operation during the investigation and sold significantly [fewer] shares than the [others]”.
However, another person who acted on Jooste’s tip was former Springbok prop Ockie Oosthuizen, a long-time acquaintance of Jooste’s, who died last year. The FSCA fined Oosthuizen’s company, Ocsan Investment Enterprises, R115,8m.
Topham said Oosthuizen “deliberately misled investigators during questioning and thus failed to provide meaningful co-operation”.
The other person who got the SMS was Gerhardus Burger, who sold his entire Steinhoff shareholding, which was held by two family trusts. He has been hit with a R3m fine.
Ironically, Jooste didn’t make any money from this.
Topham says that under the insider trading rules, this doesn’t matter — the fact that he tipped off others, based on his inside knowledge, is all that counts.
Together, the total fine for this “tip” is R241m.
Speaking to a media briefing on Friday, Topham said: “that must be the most expensive SMS sent in SA history”.
Jooste appeared before the FSCA, but argued that not only wasn’t he an insider, but he hadn’t sent any inside information. He then argued that the FSCA’s processes were “unconstitutional”, partly because he wasn’t allowed to cross-examine witnesses.
Topham says this just isn’t how the FSCA’s investigations work.
“The penalty of R161,5m imposed on Jooste includes a multiple of three times the losses avoided due to the transactions executed by the recipients of the warning SMS, plus [further amounts for] his joint and several liability with two recipients of the SMS,” he says.
While he has 30 days to pay, this isn’t a done deal yet.
Jooste can still appeal against this finding to an FSCA tribunal, and given how he’s fought Steinhoff and the authority at every step, this seems likely. Jooste may even opt to go as far as the Constitutional Court, given the argument he raised during the investigation, which would drag this out for years.
Insider trading is, however, a criminal act. The question is, besides the penalty, will Jooste face prosecution for this?
Topham said the regulator will now turn over the case to the National Prosecuting Authority, which will be responsible for taking it further.
Separately, the Hawks are also investigating Jooste’s role in the wider fraud — in which Steinhoff’s accounts were cooked to the extent that it included R106bn in fictitious profits over more than a decade, according to a PwC forensic report.
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