EXCLUSIVE: Pay back the money: Steinhoff demands R870m from Markus Jooste
Exclusive: Steinhoff files court papers to claw back the salaries and bonuses of Markus Jooste and Ben la Grange
Steinhoff looks set to make yet more corporate history.
In an unprecedented move it is claiming R870m from former CEO Markus Jooste and an additional R272m from former CFO Ben la Grange for "unjustified enrichment".
On top of those hefty bills the furniture retailer is demanding interest and legal costs from the two former executives.
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Steinhoff is not just going after the incentives and bonuses paid to Jooste and La Grange. In a totally unexpected move, it is also going for their base salaries. The claim against Jooste dates from 2009 to 2015 and against La Grange from 2015 to early 2018.
A summons, which contains a detailed list of the financial damage allegedly wreaked by Jooste, with the help of La Grange in the final two years before the company’s share price collapsed, has just been lodged with the high court in Cape Town.
The 33-page summons fleshes out many of the shocking revelations contained in the 2017 and 2018 annual reports, which were recently released after 18 months of interrogation by an international team of forensic auditors.
The no-nonsense legal document directly links Jooste and La Grange to the widespread fictitious transactions and accounting irregularities that led to R200bn being wiped off Steinhoff’s share value in December 2017.
Steinhoff ostensibly entered into transactions with the Campion/ Fulcrum group, the Talgarth group and the TG group "having little or no economic value and not at arm’s-length", says the summons. It goes on: "Transactions resulting in apparent profit and loss creation involving the sale and purchase of entities, trademarks, brands, intellectual property, rebates and know-how" were also ostensibly entered into with the same companies.
After pages of damning allegations the summons states: "As a consequence of the fictitious transactions and the accounting irregularities, the financial position of Steinhoff International Holdings Pty during the period 2009 to 2015 and Steinhoff International Holdings NV during the period 2015 to 2017, was materially overstated and required restatement." The restatement wiped €8.2bn off the group’s balance sheet.
Steinhoff says if it had been aware of the "true facts" no base salary would have been paid and no bonuses or "award shares" granted. They were paid and granted on the "mistaken belief" they were due. "The defendants [Jooste and La Grange] are accordingly required to repay … all base salaries paid, all bonuses paid, and the then value of the shares so awarded," says the summons.
Jooste has 10 days to respond to the unprecedented legal move and La Grange one month.
In an e-mailed response to the FM, La Grange confirmed he had received the summons and said he was working through it. "I don’t wish to comment on the claim other than by way of the legal process," he said. The FM was unable to make contact with Jooste.
A corporate governance analyst described the court action as an excellent step. "There may be difficulties in terms of burden of proof but this is a noble and principled initiative by Steinhoff."
The summons leaves no doubt that Steinhoff’s supervisory and management boards regard Jooste as the major player behind the irregularities.
The claim for base salaries as well as bonuses is based on Steinhoff’s contention that "accounting irregularities" led to an employment situation that was contrary to the express or implied terms of their employment contracts.
Steinhoff is arguing the payment of base salaries as well as performance and project bonuses to Jooste and La Grange were dependent on "the sound and successful financial performance" of Steinhoff.
And that "approval of long-term incentives would not have been sought at AGMs … in the absence of sound and successful financial performance".
The dramatic legal action is without precedent in SA and marks a significant departure from the corporate tradition of dealing with senior management crises behind closed doors. If successful it would not only result in considerable hardship for Jooste and La Grange but could have widespread consequences for executive remuneration practices. The case is likely to be followed closely by the board of Tongaat, where calls have already been made for former CEO Peter Staude to repay several years of bonuses.
To date only one JSE-listed company has forced its executives to repay remuneration. In 2015, as a result of the company’s poor performance, two directors of construction and materials group Distribution & Warehousing Network agreed to repay some of the multimillion-rand bonuses they were given.
That repayment was made without the involvement of the courts and in far less dramatic circumstances than exist at Steinhoff.
Steinhoff has frequently reminded shareholders of its clawback rights, most recently in its 2018 annual report where it said that while no clawbacks had been made, "both the current management and supervisory board confirm their respective commitment to make use of their clawback rights where appropriate".