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Steinhoff to get record R53m fine after discount  

FSCA reduces the penalty from R1.5bn on account of Steinhoff’s new leadership.

Steinhoff International was given a record R53 million ($3.6 million) fine by South Africa’s financial regulator for failing to properly disclose accounting problems to shareholders.

The Financial Sector Conduct Authority reduced the figure from an initial R1.5 billion in light of the retailer’s precarious financial position, according to Brandon Topham, divisional executive for investigations and enforcement. The FSCA is concerned that putting too much pressure on Steinhoff’s balance sheet could result in job losses, he said.

Read: The winners in the Steinhoff mess

“This is a record fine, but we did have to reduce it quite significantly,” Topham said in an interview. “We had to consider shareholders and employees who have already taken a lot of pain.”

The fine is Steinhoff’s first sanction by regulators or legal authorities for improper disclosure since the emergence of an accounting scandal in late 2017, though numerous investigations are taking place around the world. The owner of Poundland in the UK and part of Mattress Firm in the US lost 98% of its market value after the crisis erupted and has been battling for survival ever since.

The FSCA announced the fine on Thursday, ahead of press briefing at its office in Pretoria. Steinhoff has previously incurred smaller penalties for the late reporting of financial statements.

“We are pleased that the matter has now been brought to a conclusion and that the FSCA has recognised our full co-operation with the investigation,” Steinhoff Chief Executive Officer Louis du Preez said in a statement. “There are no further enforcement FSCA actions outstanding against the Steinhoff Group.”

Jooste case

The regulator is also pursuing a civil case against former Chief Executive Officer Markus Jooste, who quit the day the scandal broke, and will support criminal prosecutors in their efforts to make a case against him and others who played a role in the wrongdoing, Topham said.

Steinhoff has managed to stay afloat and last month secured a crucial deal with creditors, enabling the company to skip principal and interest payments on about 9 billion euros ($9.9 billion) in debt until December 2021. However, several outstanding legal claims endanger its ability to continue as a going concern.

Read: Steinhoff’s effort to recoup executives’ salaries faces lengthy legal battle

Steinhoff is trying to recoup a combined R1.1 billion in salaries from Jooste, former Chief Financial Officer Ben la Grange and other former executives for failing to prevent the accounting crisis. Jooste and La Grange have filed objections to the lawsuit.

The FSCA is also investigating potential insider trading ahead of the 2017 share-price collapse. The probe is currently centred on allegations against an individual and should be finalised next month, a representative said in parliament in Cape Town last week.

Last year, Bloomberg News reported that Jooste advised friends to sell Steinhoff shares days before the stock collapsed.

© 2019 Bloomberg L.P.

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COMMENTS   21

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The R200bn is gone.. The fine could be anything it doesn’t matter to those shareholders anymore. Although those that were responsible seem to still be fine?

Oh please this must be a joke! What the public in SA has been yearning for is to see criminal prosecution for the largest commercial fraud in this country’s history. PwC has worked for a year on their report so they should have all the details. Moreover as you say, the “fraud was perpetrated by a small group of executives” so pursue them. In SA you get 15 years for fraud over R500,000. So if they forged some document somewhere for more than and stole R500,000, charge them and lock them up. How difficult can it be??

It is now hoped;

1. Claimants will go after ALL (Jooste / Wiese/ La Grange, others) past and current board members (Sonn and Du Preez) execs and non execs personally for any and all losses and damaged suffered.

2. Other Regulators will charge, sanction, fine the past and present board members, execs and non execs who were members during those years

3. Hawks and NPA will arrest, charge, demand bail, take passports away from these individuals

Hawks! Hahahahahahahahahah

They don’t even know what an LBO or DCF is. How are they going to present their own fraud charges. They have detectives with “college diplomas”.

Jooste is done. Just be patient.

Mr Haha..

Are you trying to deflect the blame from Steinhoff (which is considered by the law to be a legal) to Jooste.
Steinhoff is legally responsible for the losses that shareholders suffered (in addition to all other parties involved).

@Peter2 What happened to Peter1?

Wild assumptions there. Never once said Jooste should not go to jail. I’m just realistic. You are like the “newdawn CR17” fairies. Jooste must be tried in Germany. He is not respected there, nor does he have financial muscle in Germany. In South Africa he is safe as houses.

Why should current shareholders get punished at all? Punishment should go to Markus and Wiese (who oversaw the Mattress Firm acquisition). Explain to me how fining the company in its current structure makes any sense? DO you want to personally fire the thousands (let’s say 20 000 employees)? Didn’t think so.

THe root problem is 8 executives (that we know of) who did all of it. I personall don’t care about the financial accountant who put through the entries on the software. They were just being told what to do. The instigators was Markus. Until he gets sent to prison, nothing will change in South Africa. Fining a company trying to stay afloat means nothing. Regulators failed investors, analysts failed investors, the media failed investors. Get off your high horse and accept that.

The virus was the executives and their fictitious revenue and buying groups. Not a guy/gal making ZAR 8k a month trying to support a family, or even a retail investor buying shares at ZAR1.00 (That’s meaningless and pure speculation, so what).

This. Is. Exactly. How. The. Lawsuits. Will. Play. Out.

Out is you and your fraudulent posts everywhere on the internet.
You’ve been posting these fraudulent posts it’s been a year and a half, yet the price keep going down.
Game over Mr Haha, back in the 2008 it was debatable what’s the underlying value of Steinhoff, but now it’s crystal clear, there’s absolutely no value in Steinhoff, and so the actual value of share would be zero, and not one cent above zero.

@peter2 You don’t know that. The market decides the price, not me or you. I never claimed to know the underlying value. I never suggested anyone should buy the company.

Just saying I think it’s not finished. The price is ZAR1.00, not zero like you claim. Could it go to zero, yes. You don’t know that for a fact.

I will add that people like you said Steinhoff is finished “for the past 2 years”, yet here we are. External financing organized for Mattress Firm, Conforama, Pepkor and Poundland.

If you want to debate the share price, zero or not, go ahead. But I am willing to bet you that I know more about Steinhoff’s restructuring and re-org plans than most. I am basing my decision to hold and acquire on reading past bankruptcy cases, trust in CURRENT management.supervisory board, creditors powerful position yet not so powerful to convert to equity, reading every word of the re-org documents, and my personal outlook. The lawsuits are a massive issue and I think >50% probability of finally sinking the company we know of in the current structure (even that is a thumbsuck because how can you possibly predict litigation outcomes). You may not like it, but I don’t care. You sound like a Democrat (Hilary) trying to silence everyone who doesn’t share your ideas.

You stepped into my world, I didn’t attack your sarcastic name calling. Love how you also never provide input showing the homework you did. Just an armchair expert. I try to provide a different side of the table. Sorry you lost all your money in the crash. Not my fault.

I see Value.

Full disclosure. Forgive this emotional reaction:

Really?!?!

From R1.5bn to R53 million?!?!

A 96,467% discount “on account of Steinhoff’s new leadership”

What a joke!!!

When I see things like this I just want to shout write South Africa off!

If this is how things like corruption is dealt with, don’t bother.
As Bossasa, Guptas and all the other state capture links provide numerous examples of this useless legal system. Looks great on paper, but never plays out like it is suppose to.

Guard what you have, it might get stolen sooner that you think.

Yip …so everybody body makes money out Steinhoff other than the shareholders who were lied to and misled. Good one…..

@allanh Precisely my point.

Punishing the powerless. While the regulators get applause for doing NOTHING. Hawks are still trying to figure out what “rebates” and “buying groups” mean.

Punish the root cause, Jooste. Use all the resources to put him behind bars. Have a poster boy for corruption. he deserves it. Why take away people’s livelihoods who don’t even have a share account. Hell, I’d even lose all my share value if it means the company is saved and no layoffs take place if a break-up happens.

Angry investors associate people like me advocating for the survival as a thumbs up to corruption. What a joke. But fail to realize the mess if the group is placed into bankruptcy and sold off to more vultures.

@tripleleveretf

You said “Why take away people’s livelihoods who don’t even have a share account” and I don’t agree with this, you can’t have emotion play a role in a scenario like this where you are looking at a corrupt directors and a company that should have never existed, at least not in the capacity that it did.

That’s life, people and companies do things they shouldn’t and it’s the legal systems purpose to take them down and out. The people who were not involved in the decisions or corruption then just need to find new jobs they same way they would if the company went bankrupt due to any number of reasons.

If the law doesn’t take companies that operate like this down and throw their directors and the guilty in jail we’ll keep seeing corporate companies and their directors stealing, lying and getting away with it because they don’t get taken down.

Let the hammers of justice rain down on the company and the people who were involved in the corruption behind the curtain.

@icedcoffee

You keep on mentioning “companies” that operate like this, when a 9000 page document pinpointed 8 executives. My local carwash has more employees than that. It’s a specific group of people at the top.

Even Enron corruption was widespread from Skilling, the traders, and associates, financiers (100s of people).

While I agree with your point that emotion should probably take a step back. I don’t think you truly understand the group structure.

Steinhoff’s issues are not due to underlying units underperforming. Hell, even Conforama is a decent business if it was manager properly. The issue lies in treasury (centralised function) which was completely abused as a slush fund for Wiese. So again, why should people lose their jobs if blame can be pinpointed to a central figure like Jooste.

Another issue I have. Sinking steinhoff IS going to cause chaos to a very delicate SA economy. So taking emotion completely out of it, is WILD. What will change corporate culture is a rich oke being in prison. That will scare the daylights out of boards, managers and even, senior employees. THAT is how you fix a broken culture. Not sinking a massive group for the sake of it.

It’s like finding 8 bad apples out of 20 000 and destroying all 20 000. What is the point? Remove and punish the infected parts. The value has been lost, so why double down. What lesson does that teach if Wiese and Jooste are in Hermanus and Camps Bay.

Thanks for a constructive dialogue. I mean that. We can disagree, it’s good. Just don’t like the “up in arms” approach when people are trying to fix a mess.

*jooste slush fund

You are so right. Jooste will walk free with his funds. If you steal small you go to jail. If you steal big you get to spend the money stolen and no one goes to jail.
We are now a country of thieves, rapists, murders, looters, and liars. Where to from here? Well if you cannot beat them join them…..

If this is the amount that the whole company is fined with, it doesn’t create the expectation that the guilty individuals will be fined by much. Unless they get jail time.

What was the combined total remuneration of the top five executives at Steinhoff during the past financial year?

Bottom line : if you got burnt investing directly in Steinhoff, well put your big girl panty on and suck it up : you got fooled by very shrewd crooks. I feel for the people that were invested via advisors and fund managers that were paid to know better. Sue them. Anybody with half a brain and an understanding of operating cashflow and acquisition accounting would EVER have invested in Steinhoff.

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