Fund manager lays criminal charges against Jooste, wants Wiese to step down

Cape Town - A Johannesburg fund manager has laid criminal charges against former Steinhoff CEO Markus Jooste at the Sandton police station. 

Benguela Global Fund Manager's chief investment officer Zwelakhe Mnguni told Fin24 by phone on Thursday that he lodged the criminal complaint with police on Tuesday. 

The fund manager has also written to interim Steinhoff chief Christo Wiese, asking him and the company's entire board to immediately step down, saying many of their clients had “lost substantial amounts in direct Steinhoff investments”. 

Mnguni said that while Benguela sold off the totality of its Steinhoff stock in September 2017, the firm wrote the letter and approached police as they believed in responsible investing in South Africa.

While Benguela doesn't currently have exposure to Steinhoff shares, Mnguini said the Steinhoff scandal could "undermine trust in the larger environment" and it was incumbent on fund managers to do the right thing. 

'Failed to protect shareholders' 

In a joint letter to Wiese, also sent on Tuesday, Mnguni and Benguela's head of research Karl Gevers said that Steinhoff’s governance structure had failed to protect its shareholders. 

Wiese, who is Steinhoff's largest shareholder, took over running the company on a temporary basis after Jooste abruptly stepped down last Tuesday, 5 December.

While the Johannesburg-based fund manager said they do not believe Wiese was complicit in “what appears to be criminal acts”, the Steinhoff board should have taken earlier steps to thoroughly investigate allegations of accounting and tax impropriety. 

In response to a request for comment, a spokesperson for Steinhoff on Thursday afternoon in a short statement said the company could not comment on the criminal complaint lodged against Jooste, as he was no longer an employee of the company and "we cannot comment on his personal affairs".

Fin24 could not reach Jooste for comment for this story. 

"Regarding the letter of Benguela we refer to our press release issued on December 11th about the strengthening of independent governance at Steinhoff," the statement read. 

In its December 11 statement, Steinhoff announced that it had constituted a board subcommittee, composed of independent non-executive directors and headed by Johan van Zyl, to bolster the independent governance of the group. The other members are Dr Steve Booysen and Heather Sonn.

The company also said that PricewaterhouseCoopers had started a forensic investigation. 

Steinhoff shares went into freefall last Wednesday following the company announcement late on Tuesday December 5 that Jooste was resigning "with immediate effect", and that PwC had been retained to investigate "accounting irregularities requiring further investigation".

On Thursday Steinhoff warned shareholders to trade cautiously as its financials for 2016 would also need to be restated, and could no longer be relied upon.

The Stellenbosch-headquartered retailer's 2017 audited financial results have also been delayed. 

The company's stock, which was trading at just over R46 a share on Tuesday evening last week, plummeted to a low of R6 last Friday, wiping billions off Steinhoff’s market capitalisation.

By 15:30 on Thursday, Steinhoff stock was trading at R9.44 on the JSE.

‘Elected to dismiss’ 

The Benguela letter noted that the Steinhoff board was aware that German authorities were investigating people associated with the retail conglomerate since at least 2015, but appeared to have “elected to dismiss these claims [of impropriety] out of hand”. 

The German investigation refers to a probe by the public prosecutor's office of Oldenburg in Germany into “four current and former managers of a group” for possible accounting fraud.

In a previous statement sent to Fin24, German prosecutors said the investigation was looking into whether the balance sheet of the company in question – which German media has identified as Steinhoff or one of its affiliates – may have been inflated. 

Prosecutors say they were still scrutinising and evaluating a cache of “extensive documents and data” obtained during searches. The prosecutor's office said it could not yet say when its investigation would be complete. 

In November 2015, ahead of its listing of the Frankfurt Stock Exchange, Steinhoff had confirmed in a media announcement that German authorities had searched the Westerstede offices of Steinhoff Europe Group Services (SEGS), a German subsidiary of the group. 

Benguela said that, given that this investigation was well-known to the board, the Steinhoff leadership should have been more proactive when subsequent allegations of financial wrongdoing came to light.

In August 2017, for example, German business magazine Manager-Magazin wrote that then Steinhoff CEO Jooste was being investigated for possible accounting fraud. 

At the time Steinhoff dismissed the article, saying “the company rejects the allegations of dishonesty contained in the statements [by Manager-Magazin].

"In particular substantial facts and allegations are wrong or misleading,” it said at the time. 

While Bengeula has become one of the first entities to ask for the resignation of Steinhoff's board, others groups have asked that the composition of the board be changed.  

On Wednesday the government employee’s pension fund and its asset manager the Public Investment Corporation said they would insist on the appointment of at least two independent non-executive directors on Steinhoff’s board following its dramatic share price collapse.

The Progressive Professionals Forum, meanwhile, previously said it would lay charges againsrt Jooste. 

* Update: this artices was updated on Thursday December 14 at 22:30 to reflect Steinhoff's response. 

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