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Steinhoff investigation finds group of former executives inflated profits

Steinhoff entered into a number of transactions, some of which were fictitious or irregular, investigation finds.

Steinhoff’s long-awaited probe into an accounting scandal that almost destroyed the South African retailer in late 2017 found that a small group of former executives and other non-Steinhoff executives structured deals that “substantially” inflated profits and asset values.

The forensic report by auditors at PwC said a number of deals were implemented over several years that enabled Steinhoff to artificially boost earnings. The summary of the report didn’t identify any of the executives involved and said that former CEO Markus Jooste has not yet made himself available for an interview with PwC investigators. Jooste, who has already been referred by the company to a local anti-graft police unit known as the Hawks, couldn’t be reached for comment as his phones didn’t ring. His lawyer didn’t immediately respond to an emailed request for comment.

Jooste didn’t do it alone. A myriad of third-party deals allowed the retailer’s accounts to be manipulated. About 100 auditors at PwC labored on the report for well over a year, and pushed back an original deadline of end 2018 due to the complexity of the work. The publication may trigger a domino effect as Steinhoff’s new management, plus regulators and law authorities around the world, seek to bring those responsible to account. Steinhoff can now proceed with publication of 2017 and 2018 audited earnings, needed to show the retailer is keeping sales moving as Steinhoff aims to finalize its debt restructuring.

Read the investigation summary here

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Let’s live in hope that at long last there will be some retribution against all directors who were part of the board since inception of all these fraudulent business activities. If there was any form of collusion by overseas parties then they too must face the music. This debacle also raises some very interesting questions around director remuneration, what their function is on the board and to what extent they understand the business model. Also those directors who are on the board currently but were also part of the previous board should be questioned on whether they performed their fiduciary duties ethically and honestly or were board members meeting nothing more than conversations around quality and robustness of the wine industry in and around Stellenbosch. Further if you look at the names of the directors their qualification and their history in business then Jooste certainly made a massive dent in their business acumen

In Frankfurt the share is doing relatively well…..as at 19h00?….please explain.

If there is a great deal of uncertainty surrounding a group their share will trade at a discount to the fair price. The release of the PWC document gives a little more certainty which is reflected by the price increasing. Furthermore, the Frankfurt exchange only closed after the report was released on SENS and that’s why their market was able to respond. However, it should be noted that Steinhoff’s current share price isn’t really based on financial information as all existing information is not audited and many previous years financial statements will be restated.

Yes, the current share price does not reflect its actual value! Agee 100%

Assuming there are actual NAV post legal fees recoverable assets of R5 per share to recover from the thieves…

Let hope the South African share owners, not shareholders as well, will treat the share with the rationality it deserves.

Markus Jooste did not act alone. Each and every director and senior management on the board has to be investigated. An overstating the assets to the minimum value of in excess 6 BILLION EUROS is takes careful planning and people acting in concert. Each and every legal document produced after the fact as well as the legal opinions produced after the fact to back up fraudulent transaction should include investigation of the legal professionals involved. Too many law firms bow down to the will of the wealthy instead of giving genuine unbiased legal advice. It has to end. Investigators will now hopefully look at previous companies some of these directors were involved in with new eyes. The specific mention of Pepkor as being excluded from dubious transactions sticks out like a sore thumb. We can only hope it was not solicited.

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