Steinhoff’s shareholders, including ordinary citizens and pension funds, lost about R250 billion when Steinhoff collapsed in December 2017.
Although not much is known so far about the secret PwC report on Steinhoff, what we know so far is that former Steinhoff chairman, Christo Wiese, could have lost his entire business empire if Steinhoff had not imploded when it did and that CEO, Markus Jooste, thought he could sidestep the ramifications of the accounting fraud by urging his cronies to stand together.
PwC analysed and investigated allegations of potential accounting irregularities and/or potential noncompliance with laws and regulations against various Steinhoff entities and its former executives, concerns raised by Steinhoff’s external auditor, Deloitte and any other issues brought to PwC’s attention requiring investigation in relation to the Steinhoff Group.
After 14 months, PwC produced a report of more than 3 000 pages with over 4 000 documents as annexures. At the time, on 15 March 2019, Steinhoff said it could only provide an overview of its understanding of the report’s key findings, adding that the report and the related information gathering and investigation are subject to legal privilege and are confidential.
Two media houses applied for the report to be released, but Ibex, as Steinhoff is called now, took the matter on appeal after the High Court ordered it to hand over the report to Rob Rose who was editor of the Financial Mail, owned by the Tiso Blackstar Group and Karabo Rajuili from amaBhungane.
Ibex decided not to appeal the SCA’s judgement. The Western Cape High Court instructed Ibex in 2022 to hand over the report in terms of the Promotion of Access of Information Act (PAIA). Access to the report was granted to Netwerk24 and News24 following a request in terms of the Promotion of Access to Information Act.
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Wiese lost about R52 billion in Steinhoff collapse
According to News24, Wiese ultimately lost about R52 billion due to the Steinhoff crash as well as his status as a dollar billionaire, but it could have been far worse. He considered using Steinhoff as a vehicle to consolidate all his companies and had already sold his Pepkor stake for Steinhoff shares.
Jooste approached Wiese in 2017 with a new deal to buy his stake in Shoprite. Wiese was in his seventies and wanted to “find a very top-class management team with the right sort of balance sheet structure and put my businesses under one umbrella because it was getting pretty widespread,” he told the PwC’s forensic auditors in 2018.
His businesses included shares in Shoprite, and property companies and his holding company Brait was a big shareholder in Virgin Active — and Premier which owns Snowflake.
Wiese (83) told News24 he has not seen the full PwC report yet but that he expects to receive it soon. He joined the Steinhoff board in 2013 as a non-executive director and became chairperson in November 2015.
He stepped down about a week after Jooste’s abrupt resignation in December 2017. In the transcript of his interview with PwC that is part of the secret report, Wiese says that Steve Booysen, another former director told him it would be better if he did not stay on the board as everyone knows that he was going to sue Steinhoff, which would make his position untenable.
ALSO READ: Who could still be charged for financial irregularities at Steinhoff?
Wiese extremely impressed with Steinhoff’s board according to PwC report
Wiese was the biggest shareholder and single creditor. He told PwC that he was “extremely impressed” with Steinhoff’s board as “everything was done correctly.” He also knew some of the other directors and said they were some of South Africa’s luminaries.
According to News24 the transcripts show that Wiese did little formal due diligence before the Pepkor deal, which was concluded in early 2015, while the PwC forensic team seems sceptical that enormous transactions, such as the Pepkor deal, were concluded based almost solely on presentations from the Steinhoff management team.
Wiese told the PwC team that he trusted Jooste, saying “I did a R62 billion deal with Jooste on a handshake. Why would I not trust him?” He also said that Steinhoff “was not a bunch of cowboys going out and paying whatever people want”.
Wiese was never accused of being involved in any irregularities, but the auditors kept asking him whether he understood his role as independent chair of the board and whether he believes he fulfilled his fiduciary duties.
The PwC team could, for example, not find detailed financial analysis in any of the directors’ board packs for their quarterly meetings. The report found that “information on results compared to budget [and] compared to prior year by [the] cluster of entities” was absent.
ALSO READ: Steinhoff was born in sin – report
PwC report contains email Jooste sent day after he resigned from Steinhoff
After seeing the full report, News24 also reported that Jooste was betting he could dodge the repercussions of the company’s accounting fraud as long as he and his allies “stand together”. Until now, little was known about Jooste’s manoeuvres after he abruptly stepped down as CEO on 5 December 2017.
The email record in the report shows that Jooste started reaching out to confidants on 6 December 2017. He sent Siegmar Schmidt, a German colleague who was head of Steinhoff’s key European divisions, a copy of a proposed investigation drawn up by Deloitte, Steinhoff’s auditors.
In the email, Jooste said: “This is the sh*t they come with that we will have to fight together.” And later “[…] we must stand together like always!”.
Schmidt was found guilty of 20 counts of tax evasion and sentenced to six years in jail by a German court last year. Jooste was supposed to appear with Schmidt and Dirk Scheiber in the German court but claimed he could not leave South Africa because he would be arrested.
He committed suicide on 21 March, the day before he was supposed to hand himself over to the Hawks.
ALSO READ: Steinhoff’s special deal to prevent shareholders from suing Wiese
PwC report shows Jooste and allies spend years pumping fake money into Steinhoff
According to the PwC report, Jooste and his allies spent years creating a web of complex structures and shell companies to pump fake money into Steinhoff, but the “trend of increasing profits with fictitious income continued and appeared to become less sophisticated”.
The key document was a fictitious R376 million handwritten invoice Jooste created in November 2016. According to News24, PwC found there appeared to be “no legitimate underlying business reason” for it to exist. Jooste gave the invoice to La Grange to process, who then forwarded it down the line.
La Grange was sentenced to an effective five years in jail earlier this year for processing what he admitted was the “completely fabricated” invoice. It could also create problems for Stéhan Grobler, Steinhoff’s head of treasury, who was arrested in March on fraud and racketeering charges.
According to the PwC report, Grobler was one of the Steinhoff executives who created documents or gave instructions for money to be transferred between Steinhoff bank accounts to “create the impression” the invoice was legitimate. However, he denied any wrongdoing and is out on bail of R150 000. He will appear in court again on 14 February.
