In the process of balance sheet manipulation at the Steinhoff furniture group, two ex-managers have been sentenced to imprisonment and suspended sentences. An arrest warrant has been issued for former CEO Jooste.
In the trial surrounding the balance sheet scandal at Steinhoff, two former managing directors of subsidiaries of the international furniture group have been convicted. A 52-year-old defendant faces a three-year and six-month sentence for misstatement of accounts in two counts and aid in credit fraud, the presiding judge at the Oldenburg district court said. A 64-year-old was sentenced to two years’ probation for two counts of misrepresentation. The verdict is not yet legally binding.
Arrest warrant for ex-boss Jooste
According to the indictment, the background to the process was sham transactions that were difficult to understand and inflated valuations of fixed assets in a network of companies belonging to the Steinhoff Holding, which were said to have concealed losses at subsidiaries between 2010 and 2014 and reported alleged profits for the entire group controlled from South Africa. The instructions for this came from the company headquarters.
In a separate trial, the Oldenburg public prosecutor’s office therefore also accused former Steinhoff CEO Markus Jooste, whom they regarded as the alleged main perpetrator and mastermind of the balance sheet manipulations. However, the former head of the company, who lives in South Africa, did not appear at the start of the hearing before the district court in April.
His German lawyer, Bernd Groß, said at the time that an agreement between Jooste and the South African judiciary that had been in place since 2017 did not allow his client to leave the country. The public prosecutor’s office then applied to the court for an arrest warrant. “The reason for detention is the risk of flight,” prosecutor Frank Lohmann explained. The process is suspended.
Difficult to understand bogus deals
The managing directors of European subsidiaries who have now been convicted are said to have received orders from Jooste to manipulate their balance sheets and then implemented them. According to the verdict, the judges considered it proven, among other things, that the shares of a company that was not economically active at all were traded between subsidiaries at completely inflated prices.
At the end of a complicated chain of bogus transactions and subsequent purchase price increases, the company shares in question with a nominal value of 100 euros were estimated at a purely fictitious unit price of 675,000 euros. Instead of a net loss for the year, one of the subsidiaries reported a surplus of more than one billion euros for 2013, which had a corresponding effect on the balance sheet of the entire Steinhoff group.
In another case, according to the judgement, the value of an Austrian furniture group was also artificially increased as part of further complex assignment transactions between subsidiaries. Therefore, in 2014, the acquiring Steinhoff subsidiary reported around 820 million euros too much for these holdings, which was again reflected in Steinhoff’s balance sheet. According to the court, other parts of the indictment were already time-barred.
market value close to zero
In 2017, irregularities in the balance sheet plunged Steinhoff International Holding into a deep crisis and destroyed almost the entire stock market value of the company. It was down 98 percent; tens of thousands of shareholders and business partners demanded more than eight billion dollars in compensation. The group’s shares, which were still listed at five euros in 2017, are now traded at around one cent in Frankfurt trading.
CEO Jooste resigned at the time and declared that he had no knowledge of accounting fraud. In January 2022, the South African judiciary responded to a proposal by Steinhoff Holding to pay 1.4 billion euros to settle the numerous disputes.
Steinhoff has its roots in Westerstede in Lower Saxony. Today, however, Steinhoff International Holdings, which operates worldwide, has its headquarters in Amsterdam and is controlled from South Africa. The group set up by the company founder and namesake Bruno Steinhoff from Westerstede was long considered Europe’s second largest furniture group. In Germany, Steinhoff was known for the furniture chain Poco, which has now been sold to competitor XXXLutz.