Former Tekkie Town owner questions PwC 'extreme coyness' in Steinhoff report

Why was PwC's recently released report on Steinhoff "extremely coy" about naming the persons involved in the "reprehensible activities" at the global retailer and in providing much detail of the actual transactions in question? Why did it eventually take an order by a parliamentary sub-committee to force the revelation of some names? These are some of the questions raised by former Tekkie Town CEO Bernard Mostert in an affidavit to support an application by him and other former Tekkie Town owners, asking for an interdict to prevent Steinhoff or its subsidiary Pepkor (formerly Steinhoff Africa Retail) from selling Tekkie Town.

Given what has been revealed about irregularities at Steinhoff, the former owners of Tekkie Town are still hoping to get Tekkie Town back from Pepkor and instituted separate legal proceedings in this regard late in 2018. A court date for that hearing is still to be announced.

Mostert has said in the past that, following the collapse of Steinhoff, "it became clear" that the former Tekkie Town owners' exchange agreement was based on the Steinhoff financials, which the company had subsequently admitted contained irregularities, and the Steinhoff shares they received in exchange turned out to be "worthless".

PwC conflict of interest?

In his most recent affidavit, Mostert claims the reason why PwC was – in his view - so "extremely coy" in its Steinhoff report, might be partly due to the circumstance that, "far from being a wholly independent investigator", PwC is actually Pepkor's auditor and has been for a number of years.

Mostert states that he finds it "peculiar" that PwC has not pointed to what he deems to be potential conflict in the past.

In his view, "the public, who lost billions in the Steinhoff implosion, need to at least understand how PwC approached the forensic investigation in those inevitable segments where there may have been a significant conflict of interest".

Fin24 reported in May last year that Pepkor - then still known as Steinhoff Africa Retail (STAR) - appointed PwC as its external auditor.

When asked to comment on Moster's allegations in his affidavit, Fulvio Tonelli, chief operating officer of PwC Africa, responded to Fin24 that he is "unable to comment, as we are bound by the rules of our profession regarding client confidentiality. The rules prohibit us from commenting on matters relating to clients".

Asked about the PwC allegations made by Mostert in his latest affidavit, Pepkor referred Fin24 back to PwC for comment.

Pepkor also referred Fin24 to its audited financial statements for 2017 and 2018, which were cleared by the PwC report.

Pepkor said it, therefore, "unequivocally stands by its results".

In a statement issued by the JSE News Service (SENS) on March 18, 2019, Pepkor referred shareholders to the findings released by PwC in the overview of its forensic report on Steinhoff International Holdings.

Pepkor results 'unaffected'

Pepkor CEO Leon Lourens commented in the SENS statement that "the findings confirm what we have always known. Pepkor's financial results for the 2017 and 2018 financial years therefore remain unaffected.

"This again illustrates that the appropriate financial and corporate governance structures are in place within Pepkor. It also confirms the values and principles which we stand for and on which our business was built. Pepkor will continue to operate in this way and remains focused on creating value for our customers and other stakeholders."

Mostert, on the other hand, says in his most recent affidavit in the application attempting to prevent Pepkor from selling Tekkie Town, that he and the other former Tekkie Town owners are concerned that recent sales of assets by Steinhoff could be a sign that Tekkie Town is at risk of being sold or used as security to raise funds.

Insulated assets

Mostert claims in his latest affidavit that Steinhoff, under the guidance of Markus Jooste, insulated its SA assets as they were aware of potential legal matters starting to arise from Europe. At the time of the creation of STAR, these senior executives of Steinhoff's were, according to the PwC findings, already aware and complicit in the creation of "fictitious assets" and income in the Steinhoff structures. "The financial affairs of the (Steinhoff) and its wholly owned and formerly wholly owned subsidiaries remain under investigation and the full extent of the malfeasances and the consequences thereof have not yet been fully identified," Mostert's latest affidavit states.

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