Steinhoff has been in a legal stand-off with some of its former employees including Markus Jooste, for a couple of years now. Steinhoff is an international retailer that mainly deals with furniture and household goods. The company’s South Africa branch has been making headlines for the wrong reasons recently.
The Steinhoff furniture retailer sort the help of PWC in 2017 to audit its accounts, and this triggered the ongoing Steinhoff International scandal. The audit uncovered a lot of irregularities in the firm's financial statements, which led to the company’s shares taking a major tumble. The drop in share price made Steinhoff shareholders, who had invested in the company, to lose their hard-earned money. The company is yet to recover from the fraud with the case still ongoing.
What you need to know on the Steinhoff vs. Markus Jooste legal battle
what happened to Steinhoff? The collapse of Steinhoff share price was not the beginning of the scandal. German authorities were the first to notice irregularities in late 2015. The authorities raided the company’s Westerstede offices, demanding to see their balance sheet.
Steinhoff was a major player in the furniture retail industry competing with other giants like IKEA. After auditing of the account books, fraud of around $7.36 billion was uncovered, that happened between 2009 and 2017. The forensic report was 3000 pages long. The names implicated in the scandal include; Markus Jooste, Ben le Grange, Dirk Schreiber and Stehan Grobler who were executives at the company when the fraud occurred. Additionally, Alan Evans, Siegmar Schmidt, and Jean-Noel Pasquier were also mentioned in the PWC report.
Steinhoff scandal summary
What did Markus Jooste do? Markus Jooste was the immediate former CEO whose resignation had raised some suspicions leading to the accounting probe. Markus, together with other executives, were strongly connected to firms that were supposed to be independent, using them to fake earnings and thus trick people into investing in the company. The company had a lot of irregularities in its balance sheet that had not been noticed by the shareholders.
The cooked books lured innocent South Africans into investing in the company, thinking it was profitable and anticipating its share price to rise. Thus, many people lost the money after the uncovering of the scandal, and the share price fell. There were also accusations of tax fraud against Steinhoff.
Markus Jooste latest news
Recently, Steinhoff took to the court with demands that Markus Jooste, the former CEO, pays back R870 million. Ben la Grande, the former CFO, is also being asked to pay back R272 million. The company is claiming the two former executives enriched themselves illegally using the company’s resources. The company is also asking that the two former executives pay for interest and legal cost.
Moreover, Steinhoff is also demanding that Jooste and La Grande also pay back their base salaries and bonuses, which have been included in the figures above. According to documents, Jooste and La Grande are to blame for the accounting irregularities that led to the company losing R200 billion in share value. The case is still in court with Markus Jooste planning to oppose the demands.
The Steinhoff scandal is one of the biggest cases of fraud in South Africa and Africa as a whole, and led to publication of the book, Steinheist. The scandal has attracted interest from the parliament with some people questioning the role of the JSE in protecting individuals. The fact that German authorities were investigating the company way before the discovery of the fraud, and South African authorities did nothing, raised eyebrows. The scandal has left a huge stain in the corporate world.
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The Steinhoff saga is a major indicator that people should not base the decision of buying shares on a company’s outlook. Leadership and financial books should be the key to the decision. Executives like Markus Jooste can easily falsify financial statements of their companies luring innocent investors. Before investing in any company, try to seek professional help from someone experienced in buying and selling shares.