Former Steinhoff CEO Markus Jooste insists that European subsidiary companies produced specific earnings figures from 2011 and 2013 to assist him to manipulate the Steinhoff books. Profits of certain divisions were decided ahead of time.
A press release from the Oldenburg regional court details how Jooste used a network of companies and fictitious transactions that were difficult to comprehend to conceal losses in subsidiaries. He and some of his managers also excessively inflated property asset values. This inflated profit at Steinhoff Europe.
The release was issued on Tuesday when Jooste failed to appear in court and the case was suspended to enable the court to decide whether to issue an arrest warrant as requested by Oldenburg prosecutors.
Jooste is charged with complicity in false representation of financial statements or inciting/encouraging managers to falsely represent these.
According to the charges, Jooste would tell MDs of Steinhoff Europe Group Services, Siegmar Schmidt and Dirk Schreiber, to inflate earnings with the end financial result decided in advance. This was done by buying and selling shell or inactive companies.
Schmidt and Schreiber will appear in court in May in a separate case.
Jooste’s co-accused, George Alan Evans, paid a €30,000 fine for the state to drop the charges against him.
Key to the charges is a company separate to Steinhoff called Talgarth Capital, which participated in these fake transactions.
In the first charge, the court says Steinhoff Europe opened a subsidiary named Tau Enterprises.
Jooste and Evans acquired a shelf company in 2010 from the British Virgin Islands.
Tau Enterprises then bought this shelf company for €60,000 in November 2011 and named it Winecott. Tau then sold this shelf company to Talgarth in an agreement backdated to June that year for €840m and booked a net income of €829m. No money changed hands.
This transaction inflated Tau’s profit and hid what would have been a loss of €500,000 that would have affected Steinhoff at group level. Jooste was linked to signing certain documents key to this transaction.
In 2012, in addition to Tau Enterprises, Schmidt and Schreiber started a new subsidiary called Omega with the express aim of inventing €700m in profit, a figure decided on by Jooste.
In April 2012, Omega (95%) and Tau (5%) jointly bought a stake in a company called Top Retail investments from a subsidiary of Talgarth for €100 per share, a total of €100,000.
They then renamed Top Retail as AMB and sold this in June 2012 back to Talgarth for €325,000 a share. No money changed hands.
This again inflated the profit of Tau and Omega, which otherwise would have booked losses. Tau recorded €16m and Omega €308m.
These fake profits inflated Steinhoff’s 2012 annual financial statements.
In 2013, Tau and Omega resold AMB for even more money and booked further income. Omega recorded an additional €329m from the resale of this inactive company to the same buyer.
The release states a whole series of fictitious transactions helped Omega avoid booking a genuine loss in 2013.
Jooste, Evans, Schreiber and Schmidt overvalued property assets by €820m in the June 2014 accounts.
Manipulating balance sheets is punishable by up to three years in prison in Germany. However, charges could prescribe — expire under a statute of limitations — and it is not clear if an arrest warrant is issued for Jooste if he will fight extradition and delay ever appearing in court.
While Jooste is yet to see a day in court, Steinhoff is insolvent with debt exceeding assets by €3.2bn. The firm is investigating a transaction in which lenders will take over the company, leaving shareholders with nothing. It owes lenders €10.2bn.
The share is now trading at 22c after being at R46.25 on December 5 2017, a day before company auditor Deloitte announced it would not sign off on Steinhoff’s accounts.
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