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Abu Dhabi, UAEMonday 24 September 2018

Former CEO reported to police by world's second-biggest furniture firm

Steinhoff seeking to isolate itself from Markus Jooste, who quit when the South African retailer reported the accounting irregularities on December 5

Customers stand in the entrance of the Steihoff operated Leiner flagship store in Vienna, Austria. Akos Stiller/Bloomberg
Customers stand in the entrance of the Steihoff operated Leiner flagship store in Vienna, Austria. Akos Stiller/Bloomberg

Steinhoff International Holdings reported former chief executive Markus Jooste to South Africa’s anti-graft police, pinning the blame for an accounting scandal squarely on the man who built the retailer into a global force.

The owner of Mattress Firm in the US, Conforama in France and Liener in Austria, among many others, referred Mr Jooste to the unit known as the Hawks on Tuesday based on its investigation into financial irregularities, acting chairman Heather Sonn told policymakers in Cape Town on Wednesday. The company has enough evidence to suggest the former CEO may have committed offences that breached the country’s corruption-fighting act, she said.

“The matter is now in the hands of the Hawks for further investigation and prosecution,” Frankfurt and Johannesburg-listed Steinhoff said in an accompanying presentation. The retailer still doesn’t know how the crisis began and a probe into its accounts led by PwC will be completed as quickly as possible, Ms Sonn said.

The move against Jooste shows Steinhoff is seeking to isolate itself from the company’s former leader, who quit when the retailer reported the accounting irregularities on December 5. Ex-chairman and biggest shareholder Christo Wiese was also at the hearing with policymakers, and said news of the scandal came to him as “a bolt from the blue” and that he had no prior knowledge of any wrongdoing. Mr Wiese, 76, has seen his net worth more than halve to $2.3 billion as Steinhoff’s shares plunged by 85 per cent.

“To detect fraud in a company is an extremely difficult, if not impossible task,” Mr Wiese said. “And it becomes more difficult when, as is alleged in this case, the CEO is directly involved.”

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Auditor Deloitte, which refused to sign off on Steinhoff’s 2017 accounts ahead of the announcement of irregularities, had previously rubber stamped financials for the two previous years that now need to be restated, said Mr Wiese, who quit Steinhoff last month after a brief stint in an executive role. “They are your first line of defence as a company board” and yet the firm “missed things”, he said.

Deloitte is fully co-operating with South Africa’s auditing-industry body regarding its investigation into the company’s handling of Steinhoff’s accounts and is confident it acted professionally and lawfully, Lwazi Bam, CEO of Deloitte Africa, said last week.

Mr Wiese and Ms Sonn were appearing at a hearing called by three parliamentary committees to deepen their understanding of the crisis and subsequent investigations by the company and regulators. The Public Investment Corporation, which manages government worker pension funds, was also present and said its 9 per cent shareholding has lost more than 16.5bn rand (Dh5.14bn) in value.

Mr Wiese became Steinhoff’s biggest shareholder when he sold Pepkor, Africa’s biggest clothing chain, to the company in 2015. Mr Jooste had previously expanded the South African retailer into Europe with acquisitions such as Conforama and Harvey’s in the UK. Steinhoff now has more than 40 brands stretching from Australia to the US, all of which are still in operation as the company shores up liquidity and retains the faith of lenders.

Dutch law firm BarentsKrans said Wednesday it’s starting legal proceedings on behalf of Steinhoff investors. Steinhoff is also under investigation by Dutch and German authorities.

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