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Getting Away With (Financial) Murder

Getting Away With Financial Murder

Getting Away With (Financial) Murder

It’s not the ending anyone wanted.

Nor, to be honest, the one most of us would have predicted.

Markus Jooste, disgraced former CEO of fallen corporate giant Steinhoff, was found dead on Thursday of last week.

The cause? An apparently self-inflicted gunshot wound to the head.

His alleged suicide came just 24 hours after the Financial Sector Conduct Authority (FSCA) issued him with a fine of R475 million, which he had to pay “on or before Friday, 19 April 2024.” The FSCA also announced it planned to pursue a criminal case against him.

A day later, according to a report in the Daily Maverick, “Lieutenant Malcolm Pojie of  SAPS confirmed that the Hermanus police opened an inquest docket after they responded to a shooting incident at about 14.40pm on Thursday afternoon at Kwaaiwater beach in Hermanus.”

The incident was the tragic culmination of 7 years’ worth of investigation and accusations from local and international government authorities – most notably the South African Reserve Bank – and staunch denials from Jooste.

How The Mighty Have Fallen

Prior to things going spectacularly south in 2017, Steinhoff and Markus Jooste were the darlings of the JSE.

The company was also listed in the Netherlands and Germany, while in South Africa, based on its (later proven to be grossly exaggerated) profits, the Public Investment Corporation spent literal billions buying up shares in Steinhoff, using money from the Government Employees’ Pension Fund to do so.

Heartbreakingly, although Jooste undoubtedly made some extremely savvy business decisions during his tenure as CEO, he also made some equally questionable ones.

Before his death, Jooste and several other Steinhoff managers were accused of artificially inflating the profits from the good decisions while conveniently hiding the results of the bad ones – all the while secretly moving billions of Rands out the country.

By 2017, the game was up, and the fallout from years of fraudulent activities began to be felt.

Auditing firm PwC exposed $7 billion in overstatement of group sales. Euphemistically referred to as “accounting irregularities” this meant investors had based their decisions on false information. The result was billions of Rands in losses.

It also wiped more than R200bn off the JSE, erased half the wealth of tycoon Christo Wiese, and reduced the pension funds of millions of innocent people by a staggering R12 billion.

By this point, even the wily Jooste was unable to keep the wool pulled over the eyes of the South African Reserve Bank.

Chickens Start Coming Home to Roost

Reserve Bank investigators claimed Jooste had been involved in close to R5 billion in questionable cross-border money flows, bringing him in contravention of South Africa’s Exchange Control Regulations.

In October 2022, after exhaustive, multiyear investigations, they attached all assets they could link to Jooste. The Daily Maverick reports that these included:

  • The Lanzerac Wine Estate in Stellenbosch – despite Jooste’s attempts to conceal his ownership.
  • Four tracts of land linked to the Klein Gustrouw winery in Stellenbosch.
  • The contents of Jooste’s large Hermanus compound in Voëlklip (The house outside which he reportedly shot himself).
  • The Jooste family’s Silver Oak Trust.
  • Five cars registered to his wife and chauffeur.

They also seized cell phones and other digital devices.

In addition, after revelations came to light in that Jooste had allegedly tried to entice former SA Reserve Bank divisional head at the FinSurv department, Raymond Paola, to sign off on many unlawful cross-border transactions, R5.5-billion of Steinhoff’s funds in the company’s local bank accounts were frozen.

And yet, in the middle of all this, Jooste continued to claim innocence.

He stated in interviews with the FSCA that he was “unaware of” and had never participated in any financial irregularities.

The FSCA, however, said that while, on the surface, Jooste co-operated with their investigations – attending interviews on the dates and times agreed to with his lawyers – his responses to most questions were “not actual answers to the questions,” and that he “failed to provide information relevant to the investigation in a cooperative manner.”

He had, at the time of his death, also failed to pay a R20 million fine for insider trading previously imposed by the FSCA (and which he somehow managed to get reduced from an eye-popping R161.6 million). Jooste was challenging it in the high court.

Last week, when the R475 million fine was issued, Alex Pascoe, head of FSCA’s market abuse investigation team, stated that he believed Jooste wouldn’t “immediately pay the penalty,” anticipating that he would launch an appeal, and that the case would ultimately end up in the Constitutional Court.

“A long road of litigation and Stalingrad strategy [delaying tactics in court proceedings] lies ahead,” he said at the time.

All this is now, of course, moot, although the Daily Investor reports that while Jooste’s criminal case will be dropped because of the alleged suicide, civil claims may still be pursued.

In addition, according to a report by Sky News, the FSCA has said Jooste’s death would not affect its investigation, and that it is legally entitled to recover the fines from his estate.

This is a very recent and rapidly evolving story, and I for one will be eagerly awaiting the final resolution.

Because, although suicides are always tragic when you think about the legacy it leaves for the victim’s family, the issue of personal liability for company corruption is one I feel very strongly about. Yet its lack of application is something that plagues South Africa’s corporate landscape with relentless regularity.

Back in 2019, respected journalist Adriaan Basson wrote in a News 24 article on the lack of personal culpability and prosecution for corrupt executives, “It’s time to see some CEOs in orange jumpsuits.”

Referring to them as “thugs in suits,” Basson’s contempt for these executives is glaringly evident.

Jooste is (or was) of course, just one of many who got away with financial murder.

You may remember the case relating to former Eskom chief executive Matshela Koko.

Over a year after the first arrests were made, the state was still not ready for trial. Eventually, the Middelburg specialised commercial crimes court struck the case off the roll.

Afriforum Private Prosecution Unit spokesperson Barry Bateman believes cases like this are indicative of the NPA’s “unofficial” strategy of enrolling cases purely to look good on paper.

“People are arrested or summoned to court only to hear a prosecutor apply for a postponement for further investigation,” he said. “That’s all the state does – further investigating. It never finalises dockets.”

So, can savvy CEOs really just operate with impunity? Is there no hope of justice ever being done – and being seen to be done?

I fervently hope not.

Perhaps I’m being optimistic, but maybe the dogged investigation into Jooste’s dealings herald the start of better things to come.

We finally saw the Reserve Bank and the FCSA show some muscle, and the results of the Steinhoff/Jooste investigation (however undesirable Jooste’s final decision was) may well give CEOs pause, making them think twice before committing the kind of fraud that costs both lives and livelihoods.

Time will tell.