Steinhoff collapse likened to Enron
Publish date: 10 May 2019
Issue Number: 70
Diary: CompliNEWS
Category: Forensic
Legalbrief Forensic
Steinhoff's delayed 2017 financial accounts released Tuesday showed alleged fraud that drew comparisons to Enron and raised questions about the viability of what was once the world’s second-largest furniture retailer. Business Day reports that the company’s shares were down almost 8% in Frankfurt last night, leaving it with a market valuation of just €490m after it said the value of its assets had dropped by about R250bn compared with previously released 2016 numbers. After the write-downs, the firm was left with a €4.03bn loss, a swing of nearly €5.5bn over the previous period. 'In my opinion, there is no value left,' said Peter Armitage, founder of Anchor Capital. 'It’s hard to believe it is so big. Remember the world’s biggest fraud was R650bn,' he said in reference to Enron.
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Former CEO Markus Jooste received the equivalent of about R34m in bonuses without required approvals in the months before the global retailer almost collapsed. Jooste was awarded €500 000 on 1 March 2017 from Steinhoff’s European unit on his own instruction, according to the company’s 2017 annual report. This payment was neither proposed by the human resources and remuneration committee nor approved by the supervisory board, the retailer said in the publication, notes a Fin24 report. The ex-CEO then got another €1.57m from the same unit on 31 May of that year, also on Jooste's instruction. While the board had approved this amount, Jooste received the payment up front and in full, rather than over three scheduled tranches in October 2017, November 2017 and in October 2018. 'Management could not find evidence of approval by the remuneration committee authorising this upfront payment,' Steinhoff said in the report.
