The JSE has disqualified Ben la Grange from holding the office of a director or officer of a listed company for 10 years. This is after he failed to fulfil his duties as Steinhoff’s chief financial officer “with the necessary due care and skill”.
On Friday morning, Steinhoff announced the penalty, which also imposes two public censures and two separate fines of R1-million each on La Grange.
The Steinhoff scandal has been described as the biggest case of corporate fraud in South Africa’s history. On 5 December 2017, Markus Jooste suddenly resigned as Steinhoff chief executive amid an investigation into accounting irregularities at the firm.
Steinhoff’s share price plunged by more than 95%, erasing tens of billions of rands in shareholder value.
On the same day, Steinhoff told shareholders that its board had approached PwC to perform an independent investigation into the matter. The full report was never published.
But Steinhoff did publish an 11-page overview of the forensic investigation, which showed that a range of “fictitious and/or irregular” transactions inflated the profits and assets of the group by over €6.5-billion between 2009 and 2017.
One of the fines against La Grange relates to Steinhoff’s consolidated financial statements for the 2015 and prior financial periods and for the 15 months ended 30 September 2016, which did not comply with International Financial Reporting Standards and were incorrect, false and misleading in material aspects.
The other is for La Grange’s breaches of the listings requirements in respect of the so-called “Steinhoff at Work Transaction”.
Steinhoff at Work was a subsidiary of Steinhoff Investment Holdings Limited. Steinhoff joined a structure referred to as the “buying group” through its involvement with the TG Group, which purportedly negotiated and collected volume rebates for the retail holding company as well as other third parties.
In mid-November 2016, Jooste created a handwritten document indicating the pro rata contributions which Steinhoff at Work would be entitled to receive from TG Group in the amount of €23.5-million.
But there was no actual transaction nor any legitimate commercial reason that supported the information or calculations contained in the handwritten document.
Jooste gave this document to La Grange to generate an invoice to the TG Group for the contributions to be received by Steinhoff at Work. La Grange instructed others to process the invoice as well as the pro rata contributions in the Steinhoff at Work accounting records for the financial year ended 30 September 2016.
The contributions were never negotiated or collected by the TG Group, which did not pay for any of these contributions that had been accounted for as income by Steinhoff. The result of this fictitious transaction was that Steinhoff at Work’s income was falsely inflated by R376.6-million. This in turn falsely inflated the income of Steinhoff.
Without this fictitious income, Steinhoff at Work’s stated operating profit of R47.5-million would have actually been a loss of R329-million. The loss should have been reflected in Steinhoff‘s consolidated financial statements.
According to Steinhoff, La Grange confirmed to the JSE that Jooste instructed him to generate the invoice. La Grange maintained that he was not aware that the income was false and that he did not apply more scrutiny to determine whether the transaction was genuine.
A public censure imposed against Steinhoff on 20 October 2020 found that the company’s previously published financial information for the 2016, 2015 and prior financial periods was “incorrect, false and misleading in material aspects”. This incorrect information was disseminated to shareholders, the JSE and the investing public.
The JSE found La Grange’s failure to comply with provisions of the listings requirements led to the dissemination of this false financial information.
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