Founder: Turnaround Talk
On 3 July 2020, the North Gauteng High Court in Pretoria made a landmark decision when it declared former South African Airways Chairperson – Dudu Myeni – a delinquent director for life.
This decision was important as it paved the way for the airline’s business rescue application. Further, the decision was deemed an important victory for the South African legal system and its fight against rampant corruption and questionable corporate leadership.
Before the Myeni drama, South Africa had to deal with the Steinhoff issue which proved to be one of the biggest accounting scandals that the country had to deal with in its history. The ramifications were huge with CEO Markus Jooste receiving plenty of criticism for the debacle.
In another overt stance against blatant corporate abuse, the JSE has fined Jooste R15 million and has barred him from being a director of a listed company for a period of 20 years.
Making a stand
The News24 article points out that The JSE has levied two R7.5 million fines against former Steinhoff CEO Markus Jooste as well as barring him from serving as a director for two decades, due to failures at the helm that prompted SA’s biggest-ever accounting scandal.
Jooste has informed the JSE he does not agree with the decision and has challenged it, the JSE said in a statement, with the Financial Services Tribunal on Tuesday dismissing the suspension application, other than with regards to the fines.
Photo By: News24
The article adds that the JSE said it is opposing Jooste’s challenge, but the ruling on Tuesday means it is in a position to impose its public censure and bar him from holding any directorships.
Maximum fine
The News24 article points out that The JSE said it had imposed two fines of R7.5 million, the maximum allowable. One is for releasing financial statements that did not comply with listing requirements, and contained incorrect, false and misleading statements, and the other is for a fictitious invoice that falsely inflated income by R376 million.
In August, the JSE fined Steinhoff’s former CFO Ben la Grange R2 million and barred him from acting as a company director for 10 years, in part for processing that fictitious invoice. The handwritten note, allegedly given to La Grange by Jooste, was also used by SA Reserve Bank to convince a court to sign off on an order to attach Jooste’s assets.
The article adds that Jooste’s abrupt resignation in December 2017 triggered a share price collapse and has been an existential threat to Steinhoff, which managed to settle multiple lawsuits against it. Despite this, firm still has debt of €10 billion (R185 billion), and is looking to reach a settlement with its creditors that would see them owning most of the company, and delisting.
Six year battle
Sasfin Securities Chief Global Equities Strategist, David Shapiro, told News24 that it has taken six years for these types of sanctions to materialise, adding it was a complex case with multiple threads, which made it difficult for organisations to make decisions hastily.
“I think what has happened is that it has been very difficult for all these organisations [such as the JSE] to impose penalties against him, and to challenge him, and to bring him to order, because the issues around Jooste are so complex and they couldn’t get full details of the investigations.”
Shapiro said this move by the JSE was as a step in the right direction and probably foreshadowed further legal cases, both criminal and civil, that would likely be brought against Jooste in the coming years.
“Sooner or later we are going to see some of the big cases against him [Jooste]. He is going to be spending a lot of time now fighting off cases and defending himself.”
Photo By: Gallo Images
Casparus Treurnicht, Portfolio Manager and Research Analyst at Gryphon Asset Management, told News24 that the JSE would have been compelled to follow protocol and conduct its investigation, and that fining and disqualifying Jooste from holding a directorship were obvious actions to take.
He said these actions were “probably the least of Markus’ worries”.
Treurnicht said Jooste would “most likely oppose these steps and use delay tactics for as long as it takes”, adding that this was in keeping with the “character that the market might have created of him after all that’s happened”.
The News24 article points out that Treurnicht said he could not say anything further as it was a complex matter with multiple unknown factors, adding that the law must take its course.
Steinhoff is still waiting for a court date in its bid to recoup R850 million from Jooste. The company has launched a civil case to claw back the money paid in salaries, bonuses, and other incentives to its former CEO.
The News24 article points out that a case of accounting fraud, laid by German prosecutors against Jooste, is also expected to go to trial early this year. A case against two former Steinhoff executives, who are living in Germany, is set to begin on 3 May.
