Steinhoff’s European finance boss Dirk Schreiber has been sentenced to three-and-a-half years in jail for incorrect representations of the firm’s balance sheets and for aiding and abetting loan fraud, making him the first person to face a prison term related to the mammoth fraud.
He was sentenced by the higher Oldenburg regional court in Germany with one year considered served, due to the length of time the process has taken. This means he will spend two-and-a-half years behind bars.
Multinational retailer Steinhoff, listed in Frankfurt but primarily run out of Stellenbosch, hid debt in off-balance sheet companies and inflated profits through fictitious transactions under the leadership of South African CEO Markus Jooste.
When auditor Deloitte would not sign off on the accounts in December 2017, the share price collapsed, leading to a loss of R200bn by investors and South African pensioners. However, not one person in South Africa has been jailed or charged by the National Prosecuting Authority.
Jooste was supposed to appear in the same court in Germany earlier in 2023 but failed to appear. The court has issued an arrest warrant for Jooste, but no extradition request is believed to have been received by South African authorities.
Former European director Siegmar Schmidt was sentenced by the Oldenburg Regional Court on Monday to a suspended sentence of two years for aiding and abetting the misrepresentation of accounts on balance sheets in the European division of Steinhoff. He was also ordered to pay a fine of €72,000 (R1.4m) in monthly instalments of €2,000 each.
The media release said Steinhoff hid losses through fictitious transactions with a network of companies that were difficult to comprehend and it overvalued fixed assets in the European part of the Steinhoff Group. It used these sham transactions to create false profits for the group as a whole. A previous court media release explained how this was done on the instruction of Jooste.
Schreiber has admitted to knowing the transactions were fake, Bloomberg previously reported, and intends to provide authorities with more evidence.
Bloomberg reported that a forensic probe in South Africa by auditor PwC uncovered €6.5bn of irregular transactions with eight firms over eight years and named both Schreiber and Schmidt as involved.
The report remains confidential and is the subject of a court case between Business Day’s sister publication, Financial Mail, and investigative journalist body amaBhungane, which both want it released. In 2022 the Western Cape High Court ordered Steinhoff to release it but the firm is appealing the decision.
Steinhoff has been taken over by hedge funds that are owed €10bn. It will be held by a Dutch trust that will slowly sell off all remaining assets, including just over 40% of South African firm Pepkor. Shareholders will keep 20% of the company, which will delist from the JSE and Frankfurt stock exchange, but the shareholders are expected to earn nothing because debt exceeds the value of the assets.
Investors who lost their investment in 2017 when the share price crashed were part of a R24bn cash and Pepkor share settlement finalised in 2022 after more than two years of negotiations and court cases.
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