The JSE has demanded that former Steinhoff CEO Markus Jooste pay the R15m it fined him for breaching listing requirements, while he has also been barred from being a director of a listed entity for 20 years after losing the bid to have the matter reviewed.
Jooste had approached the Financial Services Tribunal for relief. He had earlier succeeded in his attempts to have financial penalties suspended pending the review of the case by tribunal.
The verdict on the review deliberations was delivered on Tuesday in favour of the JSE, meaning that two fines of R7.5m and public censure will be enforceable.
“Mr Jooste is immediately liable for the payment of the financial penalties imposed and disqualified from holding the office of a director or officer of a listed company for a period of 20 years,” the local bourse said in a statement on Wednesday.
Before he abruptly resigned in December 2017, Jooste headed the global retailer when auditor Deloitte refused to sign off the accounts, leading to unprecedented destruction of shareholder capital as the share price melted away.
The JSE has fined him for creating a false invoice worth R376m, which inflated accounts. The fictitious, handwritten invoice reflected money that had allegedly been paid by a company called TG Group to a Steinhoff subsidiary.
The other infraction was for false and misleading financial statements about the company’s accounts, including for 2015 and 2016.
His legal team, led by Francois van Zyl, tried in vain to persuade the tribunal that the local bourse was harsh in barring Jooste for two decades.
The argument on behalf of Jooste was that Steinhoff was too complex for him to pick up the fraud in which he is accused of participating. His legal team said he and the group placed reliance on local CFOs and accountants in the 32 jurisdictions Steinhoff operated in and that some of the countries did not have English as an official language.
Van Zyl also argued that Jooste and the JSE had not had sight of the damning PwC report into the rot at Steinhoff, and the bourse on this basis could not act against Jooste.
These arguments failed to sway the tribunal.
“Dealing with probabilities, the question is what was the cause of the demise of Steinhoff? It was not because of Covid or some eruption on Mount Krakatoa. The applicant [Jooste] did not even attempt to offer an explanation, nor did he deal with the financial restatements,” reads the ruling.
“We have already explained why we found that the financial information published under his watch was false in material aspects. This was not because of language or legal issues, or some rogue employees in far-flung countries. It was about the core companies in core countries.”
Meanwhile, liquidators of Steinhoff have set October 13 as the final winding up date for the debt- and fraud-stricken furniture retailer, bringing its time on the boards of the JSE and the Frankfurt Stock Exchange to an ignominious end.
The decision to dissolve the company was taken earlier in the year after failed efforts by management to pull it back from the brink. Steinhoff had embarked on a restructuring to avoid declaring bankruptcy at the end of June, when more than €10bn in debt was due.
The decision means that Jooste, 62, can only be a director of a listed entity when he is in his 80s, effectively ending his corporate career.
The JSE has argued that Jooste ought to have known that Steinhoff under his watch was publishing and reporting misleading financial statements, thus duping investors.
In 2019, PwC released a damning report that pointed to Jooste and other directors who, it said, had recorded income from fictitious and/or irregular transactions between the 2009 and 2017 financial years.
PwC said the fraud saw the group’s profits inflated by €6.5bn in the period.
The tribunal said Jooste cannot extricate himself from the accounting fraud that took place at Steinhoff. This is because emails show that Jooste was intimately involved in how finances worked within the group, it said.
“As to seriousness, what is particularly relevant is the loss to the shareholders of billions, the demise of an SA-linked company with all its consequences, and the loss of credibility in accounting methods and financial control of listed companies,” the tribunal said.
“It is important that a message be sent to the business community that playing around with book entries, creating false image of the financial health of a company and misrepresenting to the public the true state of affairs, whether intentionally or because of gross negligence, is serious and demands appropriate penalties, and not slaps on the wrist.”
Update: October 11 2023
This story has been updated with new information.
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