Steinhoff Investigation update

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Finance Standing Committee

04 September 2019
Chairperson: Mr M Maswanganyi (ANC)
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Meeting Summary

Steinhoff Latest Results
Steinhoff follow-up, with DPSA Minister present – 19 March 2019
Steinhoff matters: Mr Markus Jooste – 5 September 2018
Steinhoff matter: Ben le Grange – 29 August 2018
Steinhoff: follow-up meeting – 28 March 2018
Steinhoff International challenges – 31 January 2018

 

The Standing Committees on Finance and Public Accounts and the Portfolio Committees on Police and Public Service and Administration, Planning, Monitoring and Evaluation met jointly to get an update on the investigation into the Steinhoff Holdings collapse that had led to a loss of R20 billion that the Government Employees Pension Fund had invested in the Public Investment Corporation. The meeting was a continuation of meetings held with various stakeholders during the Fifth Parliament. There had not been much progress since the last meeting in March 2019.

Steinhoff Holdings indicated that it was continuing to operate as a going concern but was apprehensive about litigation against the company from a large number of shareholders. Steinhoff had been working with Regulators and law enforcement agencies in South Africa and with Regulators in other jurisdictions. The company had released the outstanding financial reports and was up to date with financial reporting. The company had had a turnover of €10.113 billion but profitability was a problem and had been very low.

National Treasury noted that there were a lot of complexities and the local authorities had jurisdiction where the crime had been committed in South Africa, but other crimes had been committed in other parts of the world, for example in Germany. Germany had started investigating in 2015 and that, too, seemed to be going very slowly. The investigation was slow because of the way in which the companies had been structured. It was important to note that Steinhoff as a company was domiciled in the Netherlands, listed on the stock exchange in Frankfurt, and with a secondary listing on the Johannesburg Stock Exchange.

The Companies and Intellectual Property Commission reported that Steinhoff International Holdings had complied with its Compliance Notice and a Certificate of Compliance was subsequently issued in September 2018. The Compliance Notice had required Steinhoff to identify the individuals involved in the falsification of records and to institute criminal and civil action against them within six months, and that had been done.  Steinhoff had contacted the Commission for assistance in the establishment of a Social and Ethics Committee. No directors could be declared delinquent until there had been a finding in court.
The Financial Sector Conduct Authority was investigating the Publication of False Statements by Steinhoff. The investigation focused on the 2016 to 2018 Annual Financial Statements issued by Steinhoff. The Authority had had access to, and had read, the PriceWaterhouseCooper forensic report. Steinhoff was assisting with all the information necessary to complete the investigation. The Authority was investigating Steinhoff, the entity, as well as individuals who knew or ought to have known that the Steinhoff Annual Financial Statements were false and misleading. It would finalise an Administrative Action in September 2019 and a press release would be issued indicating the results.

The Independent Regulatory Board for Auditors stated that South African auditors had been responsible for the consolidated audit opinion up to the year ended 30 June 2015. The Regulator had extended the investigation scope since its last appearance before the Committee and was currently investigating the audit files for the period 2009-2016. The 2017 and 2018 South African audited statutory Annual Financial Statements of Steinhoff had not been issued to date. The progress of the investigation was reliant on the issuance of those statements.
 
The Directorate for Priority Crime Investigation (the Hawks) reported that to date four complaints or dockets had been received together with a report. The Directorate explained that inquiries would be converted into a case docket as soon as it had received certain statements but the report from Steinhoff that the company had been instructed by Parliament to provide had not been released. The report consists of 152 arch lever files, with pages in excess of 3 150. Annexures to the report are in excess of 4 000 documents. Steinhoff has also not finalised its statement initiating the case.

The Directorate had found irregular transactions amounting to €6.5 billion but the amount might change as the investigation unfolded. The transactions involved entities in South Africa and abroad. Only four companies of a total of 60 Steinhoff companies were registered in South Africa. The National Prosecuting Authority informed the Committee that it was working with the Directorate and had placed its top three prosecutors on the investigating team.

The Johannesburg Stock Exchange informed Members that in respect of Steinhoff Investment Holdings Limited, there had been public censure and a fine of R1 000 000 for failing to publish an announcement on the Stock Exchange News Service in respect of Moody’s rating action of 7 December 2017 and for the late announcement of Moody’s further rating action on 28 December 2017. Pepkor Holdings Limited had been publicly censured and fined R5 m. The Stock exchange was considering the conditions under which it would lift the suspension of trading by Steinhoff as that would be in the best interests of everyone. The Stock Exchange was working on proposals to strengthen its regulatory approach to new and existing listings.

Questions were dominated by the Committees’ attempts to get an understanding of how, or if, Steinhoff had met its commitment to give the law enforcement agencies and the Regulators access to the accounting report that it had commissioned from PriceWaterhouseCooper.

Members asked if Steinhoff was acting in the interests of the public at large, how much had board members earned in fees and what justified those fees, what did Steinhoff have to say to pensioners who had paid for their criminal activities and who was going to jail.

They further asked the Hawks why it had not obtained a subpoena to access the PriceWaterhouseCooper report from Steinhoff, what was Mr Jayandra Naidoo’s role in the R20 billion issue and if he had benefitted, and why the investigations were progressing so slow.

Members asked what the Companies and Intellectual Property Commission was doing? Why could it not find some delinquency? National Treasury was asked how the situation could be better regulated to prevent this from happening again. One Member had questions for the joint Committee. What did it seek to achieve from the enquiry? Did it want the monies back in the pension fund or did it want criminal charges against Steinhoff? Did it want the auditing firms to account or did it want the regulatory authorities to deal with corruption?

The Committee agreed that there would be a follow-up meeting.  The National Prosecuting Authority and the Directorate for Priority Crime Investigation were asked to prepare separate reports for this meeting. The focus of this meeting would be on how the money was going to be paid back. The Government Employees Pension Fund and the Public Investment Corporation would be invited to attend.


 

Meeting report

Opening remarks
Mr Maswanganyi took the Chair, accompanied by his colleagues, the Chairperson of the Standing Committee on Public Accounts (SCOPA) Mr M Hlengwa (IFP) and the Chairperson of Police Ms T Joemat-Pettersen. The Chairperson of the Portfolio Committee on Public Service and Administration, Planning, Monitoring and Evaluation (PSAPME) sent apologies and hoped to join the meeting when his Committee had completed its meeting.

Mr Maswanganyi noted that this was a follow-up to the five previous meetings since January 2018 on the Steinhoff matter.  The meetings had been held jointly by the Standing Committee on Finance, SCOPA, the Portfolio Committees on Police, Trade and Industry, and PSAPME. The last meeting had been held on 19 March 2019.  Regulatory and criminal investigations into the collapse of Steinhoff shares had been ongoing since December 2017. He would not go into the history of the collapse.

The question was why Parliament had an interest in Steinhoff, a private company. The interest lay in that fact the Government Employees Pension Fund (GEPF) had invested, via the Public Investment Corporation (PIC), almost R20 billion in Steinhoff. Parliament had and oversight role over PIC, GEPF and other bodies. The pension of government employees was a matter of concern for Parliament. Law enforcement agencies were assisting in ensuring that there was consequent management in the matter and that money had to be returned. What was concerning was that no culprit had been brought to book to date. People were staying in beach houses and nothing was being done. One could not have one law for the rich and another for the poor.

The Committees normally received a briefing from Steinhoff about what had the company had done and whether the pension money was safe. The Members would also receive briefings from law enforcement agencies, departments and regulators.

He requested that all presentations be made before questions and answers were put to the presenters as the Members had to go to the House at 15:00. He asked that presentations be concise and to the point. He officially declared the meeting open.


Briefing by Steinhoff
Ms Heather Sonn, Chairperson of Steinhoff Holdings, and Louis du Preez, Group CEO, would present those items that Parliament was interested in. They were accompanied by Tyrrel Murray, Investor Relations Executive, and Robert Driman, a Director at Werksmans Attorneys.

Ms Sonn informed the Committee that two directors from the Supervisory Board had resigned following the Annual General Meeting (AGM) and two new directors had been appointed at the AGM: Paul Copley and David Pauker. A Governance, Social and Ethics Committee had been established. The Management Board had had two departures since March 2019. A Chief Compliance and Risk Officer (CCRO) had been appointed.

PriceWaterhouseCooper (PwC) had been appointed by Werksmans Attorneys to conduct an independent investigation. All investigations were being managed by an independent Forensic Investigation Committee.
An Overview of the PwC report had been released on 15 March 2019. The findings had been considered in the preparation of the 2017 and 2018 audited financial statements recently released. Key findings had been shared with various Regulatory Authorities but the report could not be released due to the privileged nature of the report. Subsequent to the report, further ongoing forensic work had been initiated, including investigating possible claims against third parties and entities. The investigations would not impact on the financial statements tabled at the AGM.

As far as litigation was concerned, several legal proceedings had been initiated against Steinhoff, including various shareholder class action groupings in the Netherlands, Germany and South Africa, the Amsterdam Enterprise Chamber and various vendors, predominantly in South Africa. The Litigation Committee was evaluating and implementing recovery and other claims against various third parties.

Steinhoff had been working with regulators and enforcement agencies in South Africa: The Financial Sector Conduct Authority (FSCA), the Independent Regulatory Board for Auditors (IRBA), the Johannesburg Stock Exchange (JSE), the Companies and Intellectual Properties Commission (CIPC), relevant police investigative teams and enforcement agencies, and accounting regulators, where relevant. The company was also working with Regulators in other jurisdictions. Since the last parliamentary briefing, Steinhoff had engaged with the Hawks to ensure open lines of communication and to ensure that any grounds for misunderstanding were resolved

Concerning financials, Mr du Preez reported that the 2017 Audited financial statements had been released on 7 May 2019; the 2018 audited financial statements were released on 18 June 2019; the half-year results for 2019 had been released on 12 July 2019. The 3rd Quarter 2019 Trading Update was released on 29 August 2019. Steinhoff International Holdings N.V. was up to date with financial reporting.

Mr du Preez concluded by assuring the Committee that Steinhoff supported the Regulators and the law enforcement agencies dealing with the matter.

Briefing by National Treasury (NT)
Mr Ismail Momoniat, Deputy Director-General (DDG) and Head of Tax and Financial Sector Policy, NT, stated that he would not speak on behalf of the Regulators who were all in the meeting but he did share the concern of the joint committees that little appeared to be happening on the investigative front regarding Steinhoff. He added that very little was happening regarding law enforcement in other areas, such as Vrede Dairies, VBS, Tongaat Holdings. The list went on. 

Mr M Dirks (ANC) rose on a point of order. He told the DDG to leave Estina Dairies out of the matter. He should stick to the report on Steinhoff. He was already agitated by the lack of progress with Steinhoff. He was not going to listen to Treasury discussing other matters. Leave Estina Dairy out. Leave Tongaat out.

Mr Momoniat informed the Chairperson that that had been his only reference to Estina but the point that he was making was that all the investigations were being dragged out and they all impacted on Treasury as it had some involvement.

On Steinhoff, he noted that there were a lot of complexities and the local authorities had jurisdiction where the crime had been committed in South Africa but other crimes had been committed in other parts of the world, for example in Germany. Germany had started investigating in 2015 and that, too, seemed to be going very slowly. The investigation was going slowly because of the structuring of the companies. It was important to note that Steinhoff as a company was domiciled in the Netherlands, listed on the stock exchange in Frankfurt with a secondary listing on the Johannesburg Stock Exchange (JSE). There were exchange of information requirements and that meant dealing with many agencies. He believed that the counterparts were getting assistance from other countries. Almost all the financial agencies were at the meeting. Steinhoff was not regulated but some subsidiaries could be regulated. Steinhoff was listed on the JSE and so perhaps something could be done there.

Briefing by Companies and Intellectual Property Commission (CIPC)
Adv Rory Voller, Commissioner, CIPC, reiterated the role of CIPC. At the last meeting, he had confirmed that CIPC had issued Steinhoff with a compliance notice in January 2018. Steinhoff International Holdings had complied with the Compliance Notice and a Certificate of Compliance was subsequently issued in September 2018. The Compliance Notice required Steinhoff to identify the individuals involved in the falsification of records, and to institute criminal and civil action against them within six months. 
Applications in respect of delinquency, i.e. Section 162(3) of the Companies Act and /or disqualification, i.e. (Section 69(8(b) would be considered as and when the required information became available to the CIPC. It needed to be mentioned that some of the directors who might be implicated in the PWC report were not directors in South African companies and could not be declared delinquent and /or disqualified in terms of the South African Companies Act.
Although it was not currently a requirement for an external company to establish a Social and Ethics Committee, Steinhoff had contacted the CIPC for assistance in applying for the establishment of a Social and Ethics Committee in South Africa. Steinhoff had requested CIPC’s advice in respect of the person whom it had identified as the director / person not being involved in the day-to-day management of the company's business. CIPC had informed Steinhoff to approach the Companies Tribunal for a decision in terms of Regulation 142. When the matters are finalised, CIPC would make application to the Tribunal to declare any identified directors delinquent.
There had been concern at the previous meeting about the naming of individuals against whom action had been taken and he was pleased to say that finally the names had been given and were in the public domain.
CIPC and the Department of Trade and Industry were working on legislation to make the institution of social and ethics committees compulsory in all companies. They were also looking at an Amendment of the Companies Act.
Briefing by the Financial Sector Conduct Authority (FSCA)
Mr Alex Pascoe, Head of Market Abuse, FSCA, gave a briefing on the status of the investigations being conducted by FSCA.

The investigation into Insider Trading as per Section 78 of the Financial Markets Act (FMA) was ongoing. That investigation focused on several section 78 offences, that is, an insider who disclosed inside information to other persons, an insider who had encouraged other persons to trade, and persons trading on inside information. The investigation was close to completion and would be presented to the FSCA for a decision by October 2019.

The second investigation was into the Publication of False Statements as per section 81 of the FMA by Steinhoff. The investigation focused on the 2016 to 2018 Annual Financial Statements issued by Steinhoff. The FSCA had access to, and had read, the PwC forensic report. Steinhoff was assisting the FSCA with all the information necessary to complete the investigation. The FSCA was investigating Steinhoff, the entity, as well as individuals, who knew or ought to have known, that the Steinhoff Annual Financial Statements were false and misleading. FSCA was in the process of completing an Administrative Action which would be finalised in September 2019 and a press release would be issued indicating the results.

Mr Pascoe noted that FSCA had received full co-operation from Steinhoff.

Presentation by the Independent Regulatory Board for Auditors (IRBA)
Mr Bernard Agulhas, CEO, IRBA, informed the Committees that the IRBA had jurisdiction over external auditors only and not over internal auditors or accountants.

The investigation by the IRBA into Steinhoff International Holdings Limited, now Steinhoff International Holdings (Pty) Limited (“Steinhoff”), focused on South African auditors and whether they had complied with international auditing standards and the code of conduct. The South African auditors were responsible for the consolidated audit opinion up to the year ended 30 June 2015. Steinhoff International Holdings NV (“Steinhoff NV”) listed on the Frankfurt Stock Exchange at the end of 2015, after which the lead audit role moved to the Netherlands.

The IRBA investigation was very broad and complex due to the fact that it needed to, inter alia, understand the alleged accounting irregularities perpetrated by management; understand the split of transactions jurisdictionally; understand the restatements in terms of the time periods that they relate to; and determine whether there were any matters that ought to have been identified by the South African auditors on the accounting irregularities.

IRBA had extended its investigation scope since its last appearance before the Committee and was currently investigating the audit files for the period 2009-2016.  Following the PwC forensic report, which had been issued in March 2019, the IRBA was given access to the report by the Steinhoff attorneys on 8 August 2019. The IRBA was bound by the confidentiality agreement but was currently reviewing the report.

The consolidated audited financial statements of Steinhoff NV for the period ended 30 September 2017 had been issued in May 2019 and in June 2019 for the period ended 30 September 2018. It was important to note that the 2017 and 2018 South African audited statutory Annual Financial Statements of Steinhoff had not been issued to date. The progress of the investigation was reliant on the issuance of the South African audited statutory Annual Financial Statements of Steinhoff.

Briefing by Directorate for Priority Crime Investigation (DPCI)
Lieutenant General Yvonne Matakata, Acting National Head, DPCI, introduced Major General Khana, Head of the Commercial Unit, who presented the report.

Major General Khana indicated that it was a joint presentation with National Prosecuting Authority (NPA) and that sensitive information would not be presented in order to avoid information being compromised as there was a live broadcast of the meeting.

Mr I Morolong (ANC) rose on a point of order. He stated that the Major General had said that he had sensitive information but he had also alluded to the fact that the meeting was being broadcast live. He wished to request that the sensitive information be withheld as the Members of the Committees did not want to carry the blame for sensitive information getting into the wrong hands.

The Chairperson replied that Mr Morolong was emphasising that which had already been alluded to. The process in the meetings had always been that sensitive information was not divulged. The Members did not need to know the details of phone taps or who was about to be caught. The Hawks presented the general thrust. What Parliament wanted was the R20 billion so that it could be given back to the PIC.       

Major General Khana said that to date four complaints (dockets), had been received together with a report in terms of Section 34 (1) of the Prevention and Combating of Corrupt Activities Act of 2004, relating to the Steinhoff matter. Those investigations had since been combined into one criminal investigation, namely, Sandton CAS 612/08/2018. The allegations were that Steinhoff Investments Holdings Ltd (SA) had been submitting false, misleading and/or deceptive financial statements in order to attract investors, in contravention of the Financial Markets Act. Upon the allegations becoming known during December 2017, the value of the shares had dropped significantly, resulting in substantial prejudice to the investors.

Major General Khana explained that inquiries would be converted into a case docket as soon as the Unit received certain statements. It had not received the report from Steinhoff as instructed by Parliament at the last meeting. Ms Sonn had told him that the report had professional privilege and that Steinhoff would not share it. Ms Sonn said that she was protecting the shareholders of Steinhoff but the police had to protect everyone in the general public who had been harmed by the Steinhoff matter. When the Hawks had decided to take the matter to court, Ms Sonn said that the Hawks could see or view the report but not have a copy. Together with the NPA, the Hawks had accessed the report to read it but Steinhoff had not told them what the findings of the report had been in terms of wrongdoing. A team of Hawks officials and NPA prosecutors had read the report.

Secondly, Steinhoff had not given a statement so that the police could prosecute those who had carried out the fraud. Initially, the night before appearing in Parliament, Mr Booysen of Steinhoff had said he would get all the information from the report and make a statement about all the wrongdoing. However, the document had not been received and Steinhoff had said that someone else from the company would prepare an affidavit and not Mr Booysen. That statement presenting all the wrongdoings as per the report had not been submitted to the Hawks. He hoped that Steinhoff was in the process of finalising that statement. It was his belief that there had been a duty on Steinhoff, since 2015, to warn potential investors and that was a non-disclosure to not tell investors.

Irregular transactions amounting to €6.5 billion had been identified but the amount might change as the investigation unfolded. The transaction involved entities in South Africa and abroad. Four companies of a total of 60 Steinhoff companies were registered in South Africa.

In terms of the investigation, 60 statements had been filed in the docket. They related to subpoenas served on bank accounts and bank information received and authenticated by statements; affidavits obtained from witnesses; affidavits with registration documents for entities involved.

During May 2019 to June 2019, the investigation and prosecution teams had analysed the PWC report.
The report consists of 152 arch lever files, with pages in excess of 3 150. Annexures to the report are in excess of 4 000 documents. The PWC Report had identified an alleged inflation of SIH profits and/or asset values through the recording of fictitious or irregular transactions that had happened over a number of years from 2009 to 2017. Certain executives from Steinhoff had colluded with external third parties in various international jurisdictions during the execution of the fraudulent transactions. Various complex flows of funds had taken place through various national and International accounts that were to be investigated and bonuses had been paid to the Executives based on the misrepresented performance of Steinhoff.

In presenting the way forward, Major General Khana said that the investigation was ongoing. The CIPC had been given information in August 2018 but under the requirement of non-disclosure. However, certain Acts expected entities such as CIPC to disclose such information to the SAPS. It was important to obtain that information because the interest of the general public weighed much higher than the interests of Steinhoff. The report from Steinhoff on what had been done wrong was urgently needed.

Major General Khana said that the report from FSCA was important because that information could tell the Hawks and the NPA a great deal. Publishing misinformation about the company with an intention to mislead the readers was fraud and the person who had prepared the information had to be charged with fraud. He was awaiting that report and the affidavit from Steinhoff.

The team would further engage with internal and external role players. In excess of thirty statements of potential witnesses had been identified in the case plan and they had to be obtained.

Briefing by the Johannesburg Stock Exchange (JSE)
Ms Nicky Newton-King, CEO, JSE, appreciated the opportunity to update the Committees. She briefly indicated the scope of the JSE regulations and their involvement in Steinhoff matter.

The JSE was the frontline regulator and did the initial investigation and then handed over the investigation to the FSCA.  The JSE had not delisted Steinhoff Holdings because it had a secondary and not a primary listing on the JSE.

In respect of Steinhoff Investment Holdings Limited, there had been public censure and a fine of R1 000 000 for failing to publish an announcement on the Stock Exchange News Service (SENS) in respect of Moody’s rating action of 7 December 2017 and for the late announcement of Moody’s further rating action on 28 December 2017.

Pepkor Holdings Limited, previously Steinhoff Africa Retail Limited, had been publicly censured and fined R5m of which R1m was suspended for a period of 24 months for failure to disclose specific the Domestic Medium-Term Note (DMTN) Programme guarantee for Steinhoff Services Limited as well as other guarantees and loans to directors/key management personnel.

JSE was involved in ongoing engagements with Steinhoff International Holdings’ regulators and was considering the conditions under which it would lift the suspension of trading of Steinhoff Preferential shares as that would be in the best interest of everyone. JSE would be meeting the Frankfurt Stock Exchange and the Dutch Authority for the Financial Markets (AFM) the following week to discuss the progress of their investigations. JSE was having engagements with PWC and Werksmans regarding the PwC Report.

Action taken by JSE included a Consultation Paper on proposals to strengthen JSE’s regulatory approach to new and existing listings which had been issued in September 2018 which had resulted in 74, generally supportive, responses. It had proposed amendments to listing requirements and those were currently under consideration for approval by FSCA.

Ms Newton-King added that, generally, if a company had a listing internationally and a secondary listing on JSE, the JSE simply accepted the conditions of primary listing stock exchange but it now had a list of stock exchanges with acceptable levels of requirements. JSE would also impose other requirements on secondary listings. She reminded the Members that JSE could set rule but guardians of governance, boards, etc. had a role to play and needed to ask the difficult questions. Finally, she added that it was not just about rules, but also about enforceability of rules.

Remarks by the National Prosecuting Authority (NPA)
The Acting Director of Public Prosecutions in Pretoria, Adv George Baloyi and Adv Marshall Mokgatle, Regional Head of the Special Crime Unit arrived just before the Committee moved to discussion.

Adv Baloyi informed the Committee that the NPA did not have a separate presentation and that the NPA had given input into the presentation by the DPCI and so it had been a joint presentation.

Discussion
Dr D George (DA) stated that he was new to the matter but what did seem clear was that there had been a corporate governance failure of spectacular proportions and no one had been held to account and that had had an impact on the GEPF and other pension funds that had invested in Steinhoff.  What did Steinhoff have to say to pensioners who had paid for their criminal activities? Who was going to jail? He asked National Treasury how the situation could be better regulated to prevent that situation from happening again. The CIPC had said it was not really able to bring criminals who were foreign directors to account. Was Adv Voller saying that the law had to be changed? The FSCA had said that the investigation was ongoing. There did not seem to be an urgency. Was it not possible to set up a timeline and then pursue things relentlessly according to that timeline? 

Dr George suggested to IRBA that, not for the first time, auditors had failed to do the job that they were paid very generously to do. Was the JSE saying, when it spoke of the failure of governance, that laws needed to be beefed up or were the laws simply ignored by the governance structures? He told the Hawks that he was stunned that Steinhoff was putting itself ahead of the public. Were there no criminal or civil charges that could be brought against the obstructers? If there any, he suggested that the Hawks pursue such charges.
Why was Steinhoff obfuscating? After all that it had already done, should it not be cooperating with the authorities?

Mr S Somyo (ANC) appreciated the reports but he was stunned by the fact that the Hawks had been unable to conclude their investigations because they had been frustrated by Steinhoff. Steinhoff itself had said that it was safeguarding itself against the litigation risk of a class action. Would that not be a factor in allowing the Hawks full access to their own information as that could be a critical step towards finalising the process in terms of criminality?

Mr Somyo was disappointed that Treasury seemed to feel it did not have a role to play but the room was filled with Treasury’s own financial entities. Treasury had to get involved. He thanked the Hawks who were eager to move on the case.

Mr O Terblanche (DA) thanked presenters for their insightful presentations. He observed that urgency was lacking. He noted a laissez-faire approach to the matter. The NPA had arrived two hours after the start of the meeting and he hoped that was not how they went about their daily work. He was encouraged by the presentation of the Hawks but the Directorate was too patient and had to remember that defeating the ends of justice was a crime in itself. That was something the Hawks could pursue to get some urgency there.

Ms B Swarts (ANC) stated that when Ms Sonn started her presentation, she had thought that Members were in a board meeting because all that they were told was who had been replaced on the board and what had happened. The report was very short. There was some arrogance there. Ms Sonn had treated the Members as if they were investors. She was not impressed with Steinhoff.

Ms Swarts asked about the role of Treasury if Steinhoff was not a regulated entity. Its role was very dim. She noted that CIPC had issued a Certificate of Compliance but then there were all the other rules and regulations that regulate how the company functions but it was not in SA. There was no clarity there. Three cases had been closed by FSCA. What were they? FSCA had not provided any information on the cases. If the three had nothing to do with Steinhoff, why had they investigated them?

Mr Dirks was extremely disappointed in the report by Steinhoff. The report spoke of the AGM, operations and compliance. The Hawks had confirmed that Steinhoff was only concerned about itself and its image. It was shocking that it had not even laid a complaint with the Hawks. It was only about Steinhoff and its image. He was interested in the poor exploited workers who were exploited by White Monopoly Capital who took R20 billion of their money. Was that R20 billion recoverable?  Steinhoff could not tell him that it was not sure whether it was recoverable.  He wanted to tell the workers that the money was gone; that it had been stolen.

Mr Dirks asked what Mr Jayandra Naidoo’s role was in the R20 billion issue? Had he benefitted? He turned his attention to Treasury. The Sixth Parliament was not going to accept the new tendency. Everyone, including Eskom, were all hiding behind state capture and they were stealing even as they hid behind state capture. He did not want to know from Treasury that the Hawks were too slow. He was going to continue asking the difficult questions. Treasury had to stop hiding behind the pushback campaign.

Mr A Lees (DA) said that the Steinhoff collapse was the biggest collapse in SA history. But the company was still trading and so there was still a chance for some shareholders to get the money back. Despite the fraud, there was some merit in trying to save the company and build value so that the investments from GEPF might be recovered in the future. The executives and board of Steinhoff had an enormous responsibility. Part of the obligation on Steinhoff had to be that they had to work with regulatory entities. At the last meeting the same issues had been raised and the Hawks were still waiting for the statement. He addressed the Steinhoff representatives directly: Louis, Heather, where was the statement? Why was it taking so long?

Mr Lees added that in March 2019, the Committee had castigated the Hawks because they had only followed one transaction in 18 months. How many transactions had they since followed? Were they completely reliant on reports from PWC to do their job? Why had they waited five months to get the report? There had been no sense of urgency over the past 20 months. In respect of the restrictions on the report so that the Hawks couldn’t work with it, he asked what other agencies were doing with the report if they could not use the information. In March the decision had been agreed to that Steinhoff would make that report available immediately. FSCA had immediately applied for the report. It was five months later and no one had unrestricted access.

He asked what CIPC was doing? Why could it not find some delinquency? Mr Jooste was not feeling the pinch. Were they also relying on the PWC report? Could anyone explain why the biggest corporate fraud in SA was taking so long to finalise? He asked IRBA whether the auditors had been deregistered and if not, why not.

Mr A Whitfield (DA) asked if Steinhoff thought that it was acting in the interest of the public at large. Were the interests of its shareholders aligned to the interests of the public and how had it acted in the interests of the public and the victims of the fraud?  He asked the Hawks, given the multi-jurisdictional nature, which international partners the Hawks and NPA were collaborating with, how they were collaborating and what the nature was of those investigations.

Mr Whitfield noted that JSE had approved a list of changes regarding secondary listings. Had JSE discovered loopholes in stock exchanges where companies had their primary listings? Which stock exchanges would be on the list of approved stock exchanges and could the JSE provide one or two examples of the fundamental requirements for approving a stock exchange?

Mr Morolong commented that it was the first time he had engaged with Steinhoff. Since it was a classic case of corporate government failure, he asked how much board members had earned in fees and what justified those fees? In previous reports, the names of Steinhoff executives involved in the fraud case had been withheld. Why was Steinhoff protecting its executives? Why had the names of executives been withheld? How many executives had been suspended or dismissed? CIPC had to find a basis for declaring directors fraudulent or not. Deloitte was to be replaced as auditor. Had a determination been made that the poor auditing was part of the fraud?

Ms P Abraham (ANC) said that she joined other Members in condemning the quality of the report from Steinhoff. Some people had done some work. Slide 5 spoke of the Litigation Committee that was in place but how far had they gone? She questioned the financial situation of Steinhoff. At what cost were investigations being carried out and what were the timeframes of the investigations? It seemed to be business as usual at Steinhoff. She asked the JSE if Steinhoff preferential shares were still suspended.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Ms Abraham told the Hawks that she felt their frustration but asked whether they did not have investigative powers. If so, why had they not subpoenaed Steinhoff? The NPA had given the same response the previous time but the Hawks had seemed to think the NPA would have something to add. SAPS and the NPA were two separate entities for a reason, so what could the NPA add to what Hawks had said? The two organisations had been invited separately. What did the NPA have to add? The FSCA had indicated that there had been leaked information but were they more interested in the person leaking the information or the wrongdoing at Steinhoff? Where was their real interest in the matter?

Inkosi E Buthelezi (IFP) had had two questions for Steinhoff but they had been asked. He asked if Steinhoff could help by explaining why it was frustrating the investigations. It seemed that Steinhoff had much to hide. When would Steinhoff give the statements, why had the company done so not and when would it give the reports? Could their responses be very specific? The report by Steinhoff had not helped.

Mr B Maneli (ANC) said that although it seemed like Members were repeating themselves, it was necessary to emphasise the report.  It was unfortunate that the report from Steinhoff had not touched on the issue of the statement. People were leaving the company and that would lead to other excuses. When would Steinhoff hand over the statement? Not providing it was defeating the ends of justice. When agencies had received the report, it had only gone so far. The company had used the report to correct certain things, such as establishing a social and ethical committee, but how ethical was it not to cooperate with the state law enforcement agency? Had there been any attempt to recover money from the auditors as people had invested based on the financial reports? Too often the auditors just walked away. Sometimes, the external auditors were left alone or they got a small fine despite the loss of billions of Rand. The pensioners needed to know if they would get their money back.

Mr B Hadebe (ANC) asked where Steinhoff’s interests lay when they could withhold information disguised as being on the basis of professional interest. Did the company not see the public interest in the case? The malicious compliance had to come to an end. The Hawks should not deal with the issue with kid gloves. Did the Hawks not have teeth?

Mr F Shivambu (EFF) said that the Committee Members were underestimating the complexity of the situation. The situation related to a multi-national company owned by SAs but involved internationally. The Committees should look into that aspect. What did the Committees seek to achieve from the enquiry? Did they want the monies back in pension fund or did they want criminal charges against Steinhoff or were they wanting the auditing firms to account, hence IRBA, or did they want the regulatory authorities to deal with corruption? What did Parliament want to achieve? There was no focus by the Members.

He gave Members some of the facts. The exposure of the GEPF through the Public Investment Corporation (PIC) was about R28 billion which was about 10% of the entire company and then there was the deal through Lancaster 101, owned by Jayandra Naidoo, where the PIC had invested R9.3 billion in a 50-50 structure, of which 50% of the investments would be given to workers but that was still in the preferential structure stage. The previous year, the PIC had written off R4.3 billion lost to Lancaster 101, which was not recoverable.

Mr Shivambu said that if the focus was to recover the money, Members should get a response from PIC as to why the R4.3 billion had been written off. That money was irrecoverable. At the same time the PIC had written off money loaned to Sekunjalo. Members had to know if there were other interventions that could be explored to recover at least some of the money. What were the loan agreements? What happened when the value of companies to which money had been loaned dropped off?  There were other corporations that Jayandra Naidoo was involved in and he was sure that Mr Naidoo was playing a role in Steinhoff in one way or another. What did the Committees want to achieve in all those things?

The Standing Committee on Finance needed to get a better explanation from the PIC. What was its investment policy? What did they do when they were over-exposed such as the way in which they were currently over-exposed to Naspers? What were they going to do when Naspers faced the same situation as Steinhoff? The Committee needed to address that issue because the prosecution would not go anywhere. National Treasury’s attitude towards the whole thing was repulsive. IRBA and FSCA were useless. Too many audit firms had been involved in corruption in SA but no audit firm had ever been held accountable. They only isolated the individual who had to take account. The KMPGs, etc. still existed in that space and there were no consequences for those audit firms although they had been involved in suspect practices.

If the intention was to recover the money, the PIC should explain why they wrote off the R4.3 and why they had made a loan of almost R10 billion to buy less than 2% shares in Steinhoff. 

Ms Z Majozi (IFP) agreed with Mr Shivambu. She asked how the regulatory model would work, seeing that it was an international holding. There was no clarity on what Steinhoff was going to do going forwards, especially in respect of the misguided bonuses paid to the executives. Once the Hawks got the report, could they conclude the investigation or how did they want Parliament to help?

Responses
Ms Sonn apologised for not seeming to take the matter seriously or for seeming arrogant. She did take the matter very, very seriously. She hoped some background might help to answer some questions. In the events of 2017, what had occurred following the resignation of the CEO, was that the company had run into problems regarding liquidity and so in the interest of shareholders, the company had to continue. It had to maintain liquidity in the underlying trade and ensure that there was liquidity and that it remained a going concern. The people who had stayed at Steinhoff were those who had run into the burning building. Had the creditors called for their money, there would have been no company by that time. Her first port of call was to make sure there would still be a company.

Steinhoff had drawn a picture of the biggest loser and, from a humanity point of view, that was the group of pensioners in SA through the investment of the GEPF. The pensioners had lost the most and so the goal was to repay the debt to GEPF because if Steinhoff could get there, it could achieve all the smaller goals of repaying stakeholders. Steinhoff was trying to reach that goal. That was its commitment.

Concerning litigation, on 16 April 2019, the company had asked the public who intended to sue to make themselves known to the company. Those people included the shareholders of the company who were involved in the class action. Steinhoff had to find a strategic solution to litigation so that the board and the executive could maintain control of the company. If there were a liquidation, assets would be sold below value and the company would not be able to pay out all its debtors. The board and executive wanted to control any restructuring of the company to keep it solvent.

Regarding the comments by the Hawks, Ms Sonn said she had been in the situation before. Her approach as Chairperson of the company had been cooperation, transparency and access to the report in respect of all agencies. A draft statement was currently with the Hawks at their request. She had to be careful because she also had to protect the company against inbound litigation in the interest of shareholders. She was disappointed that the entire meeting had focused on Steinhoff not releasing the report. Steinhoff had a difficulty as it had to protect the privileged nature of the report. If there was criminal action, that should run its course but the documents would be used by the criminal defence, especially if there was an uncontrolled civil action. Steinhoff believed that criminal action should be taken against those responsible for the situation. The company could not take charge of a criminal prosecution but they had acted civilly and they had released financial results which had been a massive task.

Ms Sonn said that she had mentioned the AGM because it was important for Members to know that the board was keeping the company going responsibly. Initially, Steinhoff had been concerned about protecting the privileged nature of the document but the NPA had become involved and the Hawks had found what they wanted. Previously, the Committee had requested a report each Friday and she asked that that request be re-instated because it would help to get to the bottom of the blockages.

Mr Hlengwa asked about the report and not the nuances. Was Ms Sonn saying that she had handed over the report?

Ms Sonn said that access had been granted and her understanding had been that there was satisfaction with the situation. She was disappointed with what the Hawks had said.

Mr Dirks, on a point of order, suggested that the Chairperson keep the presenter on track so that she answered the question that she had been asked: had the report been handed over? Access was not handing over.

Mr Maswanganyi asked the Hawks if the report had been handed over.

Major General Khana replied that it had not been handed over.

Mr Dirk suggested that Mr Maswanganyi ask what Ms Sonn meant by “given access” and that he find out what the Hawks needed.

Ms Sonn responded that she had understood that between Hawks and the NPA the access to the report was satisfactory for what they needed. She suggested asking the NPA if it concurred with the Hawks.

Mr Maswanganyi asked Ms Sonn if she had not handed the report over to the Hawks and NPA.

Ms Sonn responded that the report had not been handed over but access had been provided and she had understood that had satisfied their needs. She reiterated that she had to protect the interests of shareholders from inbound litigation.

Mr Hlengwa recalled that at the last meeting, the directive was to hand over the report. Was it handed over? The reason that the Committees were focusing on the issue was because she was not answering the question directly.  If the report was not handed over, the Hawks were within in its rights to say that what had been agreed to had not happened. If that had happened Hawks would be viewed in a different light. The NPA had said that it agreed with the presentation by the Hawks. The arrangement was of the NPA was a little strange but the Committee would deal with that as a separate issue.

Mr Buthelezi reminded the Chairperson that the Hawks had also mentioned the statement from Steinhoff that had not been submitted and Ms Sonn now said that the statement was with the Hawks.

Ms Sonn submitted that there had not been a decision to hand over the report. Steinhoff had agreed to meet with the Hawks and the NPA and to explain the privileged nature of the report. Steinhoff had met with them and they had had access to the report. It was a question of the access and they had received access. The issue had been about providing access, not handing over.

Mr Hlengwa found it difficult to understand how Ms Sonn could listen to the Hawks saying that they had had access but the report had not been handed over and now she was arguing about whether it was necessary to hand it over. Was it not fundamentally strange for her to say that she wanted to control the report that would unblock the issue and allow for criminal proceedings? She was agitating everyone. She needed to give a categoric response as to whether the report had been handed over. The Committee needed to know what the situation was so that Parliament could deal with the Hawks in terms of parliamentary processes. The more she spoke, the more suspicious the matter sounded.

Mr du Preez suggested that he could assist from a legal perspective. He stated categorically that there was no benefit for Steinhoff not to cooperate with the Hawks, financially or otherwise. The management team of Steinhoff had to either try to save the Group or to liquidate. The team had decided to try to save the Group, and, in doing that, they had to take into account the interests of many stakeholders. Handing over the report to the Hawks would influence other stakeholders. For example, people in Germany were giving evidence, there were the German regulatory authorities, and inbound and outbound litigators. Other regulators had said that morning that they were satisfied. The only way to recover any money was to save the Group.

Mr Maswanganyi said that Steinhoff had, in the meetings of 31 January 2018 and 27 February 2018, made a commitment to cooperate with the regulators and the law enforcement agencies. In the meeting of March 2019, there was a reference to the PwC forensic report and that it should be accessed by the regulators and the law enforcement agencies. From day 1, there had been an understanding and a commitment by Steinhoff to cooperate with the regulators and the law enforcement agencies had said that they were instigating civil claims against those involved. He read a list of names of those to be prosecuted from the minutes of 19 March 2019: Markus Jooste, Dirk Schreiber, Ben le Grange and Stephan Grobler,
Siegmar Schmidt, Alan Evans, Jean-Noel Pasquier, and Davide Ramano. 

Parliament’s interest was to recover the pension funds that belonged to GEPF. He did not know of any person or company that did not allow the law enforcement agency to conduct its business. If the Hawks did not follow up with Steinhoff, they would be accused of having two standards – one for rich and one for poor. If the Hawks and NPA did not pursue the matter, they would lose credibility and would not be able to pursue poor people who could not afford the lawyers that Steinhoff could afford.

Adv Baloyi placed it on record that the teams from the NPA had had access to the report on two occasions so they had had a peek into the report on two occasions. It was an accounting-driven report and not a forensic report driven towards criminality. The prosecuting team had formulated some views on what format the forensic report should take. They would have to take a peek and then they would formulate a mandate for the forensic report.

The Chairperson said that the NPA was confusing the matter. What was a ‘peek’? Could he simplify the explanation?

Adv Mokgatle explained that the NPA had a team of investigating prosecutors who were guiding the Hawks. The prosecutors and the Hawks had access to the report at the PwC offices in Johannesburg. On reading the report it had become apparent that the report was indicating accounting errors so it would serve the prosecution no purpose. The Hawks could use it to formulate charges. Since the March 2019 briefing, the NPA had had eight case planning meetings with the Hawks.

Mr Dirks interjected that the NPA was not responding to issue at hand.

The Chairperson requested the NPA to continue.

Adv Mokgatle stated that in the 20 years that he had been with the Unit, the NPA had not dealt with such a big case but the best prosecutors were on the case and the lead prosecutor was the one who had prosecuted the Land Bank successfully. The NPA had already received a request for assistance from the German authorities but the NPA needed banking account statements to be able to assist and it did not have those statements. The investigation was continuing. He understood the frustration of Members but it was a complex matter.

Ms Swart stated that Steinhoff had said that it was not about their financial gains. Were they an NGO, a charitable organisation, if it were not about money? They talked about who would lose if they were liquidated. When the Hawks went to Midrand, they had had a peek: they were told that they could read and then go. No matter what the report was about, it had to be handed over if the Hawks was saying that the report would take the investigation further. There were no timeframes. It was loose. Was the NPA saying that they would resolve the matter in 20 years? But they had the perpetrators and they had to be prosecuted. Not having timeframes, meant it was just talking. The NPA had to “chronically” say that they had looked at the report that they did not have and would have to wait for the SAPS to start an investigation which would lead to the proper investigation. She wanted timeframes. 

Ms Swart repeated several of the statements in siSwati and then made the point that Steinhoff could not be liquidated because then it would have to tell the Members where the workers’ money would come from.

Mr Dirks said that despite specific questions, Steinhoff had not answered specifically but had answered in a generic way. Perhaps Steinhoff should be called to SCOPA. Steinhoff had evidence in the report and that was the problem with capital. He could assure Steinhoff that the Hawks would never deal with the report irresponsibly. Capital undermined the state law enforcement because capital wanted to run the state in SA. That was the problem in SA. Capital was running the country. He believed that Steinhoff had to hand the report over to the Hawks. Should the Hawks have to run back every time they wanted to check something? He repeated what the Hawks and NPA had said.

He added that it was clear that certain powerful people in SA did not want to be prosecuted and some of them had been in UDF with him but that did not matter. They had done wrong and had to be prosecuted, even if they had been in the UDF with him.

Mr Morolong explained to the NPA that the Hawks was on record stating that it was not getting the reports. That was tarnishing the reputation of the NPA. It was behaving like a kid who was bullied by big brothers. The NPA knew that not having access to the report would compromise the investigation. If the NPA was refused access to take the report to its own offices, it had a responsibility to invoke the law and take the matter to court. If the NPA did not do that, it was setting a bad precedent for the future. Other SAs would want to be treated in the same way that the NPA was treating Steinhoff.

Mr Hadebe was going to change his tune about “having access” to the report having listened to the summary of the previous meeting. He had heard the NPA say that it was a complex matter. The Germans had already made a request to the NPA, so the Germans were well ahead. The NPA had to deal with the case expeditiously and take into cognisance that Steinhoff had to give access to the report. NPA should consult with the Hawks. Did the Hawks have what it wanted? Was there more that it wanted? The NPA’s articulation of the situation suggested that the Advocate was fine with what he had and could complete the matter. It seemed that Steinhoff was being treated with kid gloves. He needed the understanding of whether the NPA had what it wanted. It was that simple and straightforward.

Mr Somyo said that it was clear that there had been an agreed way. Each party had its own modus operandi. There was no point in addressing the detail. The main thrust of Parliament was that if the investigation was going to be empowered by the sight of or a copy of the report, that had to happen. Parliament simply needed to know what was needed for the investigation. Steinhoff should be part of such investigatory processes. Some form of a statement had been submitted by Steinhoff but clearly it was not enough.

He added that from Steinhoff’s side, it was clear that class action was a huge threat and the company was trying to avoid damaging its position. His view was that whatever Steinhoff had to do to protect itself, it should not hinder the investigation process to be undertaken by the state institutions. If there were any agreements, they had to be adhered to. The Members wanted tight timeframes and to be assured that success would follow. Steinhoff had to commit itself to full cooperation. The matter had been discussed sufficiently.

Mr G Skosana (ANC) noted that what complicated things was that the NPA and the Hawks were not singing from the same hymnbook. The NPA could not use the accounting report for prosecution purposes but the Hawks said that they could not move because the report was outstanding. But the Hawks and NPA were supposed to be working together. The report that NPA was talking about, was that report not assisting the Hawks? The NPA could not use the report but apparently the Hawks could.

Major General Khana said that it was unfortunate that they did not seem to be singing from same hymnbook. He did not disagree with the Member. He did agree with Mr Shivambu that the matter was complex. There was no ambiguity. At the last meeting, it had been agreed that Steinhoff would hand-over the report: Had he got it? He had not. It would help if the Hawks could deal directly with Steinhoff and not a bunch of lawyers. Steinhoff was the complainant and he only dealt with the complainant, not the 12 attorneys who had been in the room. He had told the attorneys that he dealt with the complainant, not attorneys. The Hawks and the lawyers had spoken about the report.

Major General Khana’s job at the commercial crimes unit required the appointment of auditors to report on what they found wrong. That forensic report would make the matter understandable so that it could lead to prosecution.  To be told “read only” was unacceptable. Steinhoff had to attach the relevant documents to each point. The document had to be understandable to the investigating officers and to the court. The Hawks was considering appointing its own accountants but if they did, they had to say that the accountants would take 20 years to resolve the matter, and he would have to explain the cost of accountants to understand the 15 000 documents.

He spoke about the importance of the statement. Steinhoff had made the initial report and had said that the company would explain when the accounting report was ready. That statement would explain exactly what the wrongdoings were and would give the police pointers for what they were going to investigate in order to bring charges. He did not need to name the accounting company and lawyer. To say that they were reputable would be sufficient. Why were there so many drafts of the statement? Why were the statements falling short? It was not for the police to tell Steinhoff what to add. The police needed pointers. They were looking at possible charges. If the Hawks had to subpoena their own complainant to give them documents, the defence would “slaughter” them. The Hawks had discussed the issue and the attorney was very straight with them. He said that he was not giving the Hawks the report and if they insisted, the attorney would go to court to oppose handing over the report.

Further discussion
Mr Dirks asked if he could be recused. He said that the Committees were not going to get anywhere with Steinhoff as the company was not interested and the NPA did not want to prosecute anyway. The pensioners would never get their money.

Mr Maswanganyi denied Mr Dirks’ request to leave, stating that he had to play his oversight role.

Ms Joemat-Pettersen suggested that the Committees needed to ascertain the role of the courts in SA because Steinhoff fell under the laws of different countries and the Dutch courts had primacy because the company was domiciled there. The line of questioning should also understand the legal prescripts and the fiduciary responsibility that the Committees had under SA law.

Ms N Tolashe (ANC) stated that Steinhoff had not responded to the questions asked earlier on. The Chairperson had read the minutes which had indicated the undertaking that Steinhoff had made to provide the necessary documents. She suggested that the meeting should identify the problem so that it could be dealt with there and then. Steinhoff was not giving straight answers. The replies were woolly. Commitments had been made and Steinhoff had to respond to that. The NPA and Hawkes seemed to have opened an escape route for Steinhoff because they had said different things.

Ms N Mente- Nqweniso (EFF) stated that the Hawks needed to construct a docket. Without that docket, the matter could not go to prosecution. The complainant had to provide information for the docket. The docket started with the A1 form completed by the complainant. Parliament had called everyone to a meeting – Steinhoff, Hawks and the NPA – and they had had to go away and resolve the issue. Steinhoff had commissioned the report under discussion. Why had Steinhoff commissioned a report, what did they wish to establish and why were the findings of the report not put into a statement? Who had commissioned the report? The report had proved their suspicions. They had to go back and write the statement and then the report became evidence of who had taken the money. Once there was a docket, the NPA could fit in.  Steinhoff’s lawyers could not make the statement or complete the A1 form. That had to be Steinhoff management. If Steinhoff refused to make the statement, it should tell Parliament at once and then the Hawks and NPA would indicate how to use the court to obtain the Steinhoff report.

Response by NPA
Mr Baloyi said the NPA had commissioned a forensic report after getting access to the auditing report and when it had been compiled, relevant information would be distilled from the auditing report so, at the end, they would sit with a forensic report compiled on the auditing report.

Mr Baloyi addressed other issues that had arisen. He apologised for late arrival of the NPA but, according to the agenda, the NPA had to report at 12:20 and he and Adv Mokgatle had thought that they were early. It was his first visit but he would, in future, arrive for the commencement of proceedings. He added that the NPA was satisfied with investigations which were on course. The facts were convoluted but the NPA had three experienced prosecutors, including a Deputy Public Prosecutor, on the case. He would ensure that once the docket was enrolled, it would be prioritised. The team was working very methodically according to very clear guidelines, responsibilities and timeframes. He was concerned about the time it was taking to get the matter to court but the law would not allow the NPA to take single aspects of the case to court. He had to wait until the investigation was complete and then make a decision on whether to prosecute.

Further discussion
Mr Hlengwa said that it was clear that they had been at sixes and sevens since starting the process and there was a need to re-look at the operating procedure at Parliament. At every meeting, Steinhoff said they were cooperating and there was no dispute but the Hawks were frustrated. The Hawks and the NPA should clarify how they were working as they had different views of the reports. They had one report but had presented divergent views. The NPA was happy with a peek but the Hawks were not. The Hawks were speaking about non-compliance or malicious compliance of an agreement in Parliament. One could not but side with the Hawks as they were speaking to an agreement made in Parliament. If Steinhoff had complied, it was a very superficial compliance.

He added that the issue at hand was that money belonging to pension fund. The engagement did not auger well. Steinhoff had to go back to the drawing board and think about how it would engage with Parliament. There were frustrations but the Committees had to get responses. The Members did not want to interfere but people had to be held to their commitments.

Mr Shivambu stated that when he had asked where the Committees’ interests lay, the Chairperson had said that it was the money. He asked that Steinhoff explain if it was possible to recover the share value of the workers’ money that was invested in the company. If the focus was about getting the money, there should be a civil claim against the company. The emphasis should be on civil claim but, at the same time, the criminal prosecution had to be pursued against those who had done wrong or committed a crime. But Parliament wanted to get the money. There were a lot of people suing to get their money. There were even claims by Christo Wiese and GT Ferreira. Why was the GEPF, which had exposed the assets of the workers, not pursuing civil claims to recover the money? Within what time period could there be recovery, dependent on the growth of Steinhoff?  Everyone was agitated but it was a wild goose chase because NPA would not get the money. Everyone could be prosecuted and jailed but it would not give the workers the money. Prosecutions were less important than the money. Parliament should not go around in circles.

Ms Majozi said that the NPA had to bring its own presentation. The NPA and Hawks were not on the same page. There was confusion about the positions they held regarding the report. Steinhoff had to be held accountable. It could not come and give Parliament two options: the company had to be maintained or liquidated. That was arrogance. Were they willing to cooperate and provide the report to the Hawks or not? Then the House could determine a way forward.

Mr Whitfield asked that Members receive responses from other entities so that they could conclude the work that they had come there to do.

Ms Swarts said that Members had been following presentations on what the presenters wanted to tell the House. There were too many gaps and the information came up only after probing. The interest of the joint Committees was the money. Steinhoff should not expect Members to feel pity that the company might close down. The management had just come from an AGM so they could not be talking about liquidation. The AGM should tell them where the money was and how the workers were going to get their money. Members did not want to be treated as investors. Everything the CEO had said about re-structuring and appointing new people might be good for them but it was not good for the workers. Mr du Preez had said that he told his daughter that all he did was address litigation risks and that might be nice for him and his daughter, but the Members were not interested in that. They just wanted to know where the money was.

Mr Dirks said that Mr Maswanganyi had not brought the key role players to Parliament:  PIC and PIC board member, Maria Ramos. The PIC had to say when it would institute civil claims. He wanted a clear answer as to whether the money was recoverable as he would be there for five years and afterwards, he was coming back again. He would hold Steinhoff accountable and he would fight with Steinhoff if it said the money would be returned and it was not.

Responses

JSE
Ms Newton-King replied to Dr George. She could not say if the relevant guardian needed more legislation as she was not an expert on the legislative frameworks of the governance structures, but certainly all of the entities should have a code of conduct requiring them to report matters of concern to a chairperson of a board.

She informed Mr Whitfield that exchanges from which JSE took inward listings without further requirements were Australia, New York, Toronto, NASDAQ, the Euronext stock exchanges in Amsterdam and Brussels, Swiss Exchange, London Stock Exchange, Frankfurt and Luxembourg. They were major exchanges. The concerns that the JSE had around other exchanges were the prompt disclosure of financial, the regulations around related party transactions, disclosure of directors dealings and smaller matters.

Mrs Newton-King responded to Ms Abraham. The Steinhoff bonds had been delisted early the previous year and the preferential shares remained suspended. If information got into the public, the suspension of the shares could be lifted. Mr Shivambu had referred to the complexity of dealing with international players in such a matter. The JSE had ensured that it had, as Regulator, developed relationships and MoUs with international counterparts.  The relationships made a big difference in being able to unpack relevant information when required.

FSCA
Mr Pascoe responded to the concerns about a perceived lack of urgency.  All investigations had timelines and proper plans to which investigators adhered. The three cases related to insider trading had been finalised and one would be completed by the following month. Regarding the false and misleading statements investigations, it was partially competed. The FSCA had to finalise the administrative action and then a statement would be made. The Viceroy complaint had come from a foreign jurisdiction and FSCA was awaiting a response from foreign regulating authorities.

Concerning the three investigations and why they had been closed, Mr Pascoe said that through complex process of analysis prior to the announcement by Steinhoff regarding the misstatements, FSCA had found three trading accounts looked suspicious as a result of size, etc. and there had been a possible suspicion of insider trading. However, the finding was that there was insufficient evidence for an accusation of insider trading and the cases had been closed.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
The investigation into the leaked information was continuing as FSCA was looking at a possible leaking to other parties and so they were investigating to see if people had avoided losses at that time. The penalty would be an administrative fine which would be paid out to those who had suffered losses.

CIPC
Adv Voller responded to the question about why there had not been any delinquency action. He explained that a delinquency action flowed from an order under the courts and none of the requirements in section 67 of the FMA had been met to take the matter to court.  The CIPC had taken on numerous cases of delinquencies and been successful but there was nothing to take before court in respect of the Steinhoff case, as yet.

Concerning the Compliance Certificate, once the CIPC had set out the pre-conditions that needed to be met in terms of the Companies Act, CIPC had stipulated the conditions to be met. With the information before CIPC in the Steinhoff matter, there were three: to open civil cases, to open criminal cases and to name the people who were responsible for the matter and for the loss. Cases had been opened and the only issue CIPC had had was the naming of those people. As everyone now knew, the names were commonly known, so the requirements of the non-compliance certificate had been met. If there was a court judgement, CIPC would be able to take further action.

Regarding the question of whether the law should be changed, Adv Voller pointed out that it was not only SA-based directors who were responsible, but some were in foreign jurisdictions. South African or not, the issue was that the director had to be involved in a South African company and some of those named by Steinhoff were not involved in SA companies.     

Steinhoff
Mr du Preez explained that the financial investigation by PwC was primarily done in order to enable the company to publish financial statements. Management had looked at the PwC reports and that had led to 30 pages of re-statements in the financial reports. That was the result of management’s interpretation of the PwC report.

The turn-over for the first nine months of the 2019 financial year was €10.113 billion. The challenge was not the turn-over but the profitability and the profitability was not sufficient to service the debt which was too expensive. To resolve debt through capital restructuring, Steinhoff needed to deal with the litigation because no one was going to do business with the company until it had sorted out the litigation. To deal with the debt, the company was looking at each of the companies to determine what it should sell and how it should enhance profitability. That led to trying to save the group, bring down the debts and allowing the share price to increase. The other way to recover money was via litigation.

Mr du Preez stated that the PIC had instituted proceedings against Steinhoff and he had had many meetings with the PIC lawyers to attempt to manage the litigation risk and find possible solutions. That was the issue regarding the R20 billion. But there were many other stakeholders that had invested, including Eskom pension fund. 65% of shareholders were non-South Africans and the interest of those parties had to be taken on board. Fees of the supervisory board fees had been approved at the AGM and were in the public domain.

Regarding the Executives, he said that Steinhoff’s commitment was to leave no stone unturned. As Ms Sonn had said earlier, all current executives had been appointed post-2017. Some people had been dismissed and many people had moved on because of the re-sizing of the company. There had been over 320 people in the Group Services across the world and those services had been re-sized to just over 100 people. Very few jobs had been lost in SA and none at operational levels. Summonses had been issued to reclaim bonuses and salaries to former management board members as far back as 2009. Those matters were being contested by the individuals concerned.

NPA
Mr Baloyi recapped the issue of the report. The case-planning team understood that what was required was the complainant statement from Steinhoff. The team did have a management plan and cut-off dates. The issue of the report should not be clouding the Committee. The NPA needed the complainant statement to move forward and the police could always get that report if they needed it.

Hawks
Major General Khana said that he had touched on most of the issues in his earlier explanations. There were two ways to get access to the documents: a section 205 or a search warrant. He had explained the issues with those mechanisms but the Hawks would work with NPA, as suggested by Ms Mente, and look at those issues. The Hawks would meet with the NPA to discuss the possibility of instituting charges. Adv Mokgatle had responded to Mr Whitfield’s question about collaboration on multi-jurisdictional requests.

IRBA
Mr Agulhas explained that the current fine for auditors was R200 000 per offence so even if an auditor was found guilty of ten offences, the maximum fine was very low. The amendments to the legislation required the Minister to set a maximum amount and hopefully that would have an impact on the behaviour of auditors. The previous Standing Committee on Finance had attempted to move the Bill through the process as quickly as possible but it had been unable to enact the Bill and the matter had been raised at IRBA’s first meeting with the new Standing Committee on Finance. That Bill addressed the penalty issue.

Mr Agulhas stated that IRBA had been subject to the same conditions as others in terms of the Steinhoff report. IRBA had to sign a non-disclosure agreement and was not given the report but only granted access to it. The auditors had not been de-registrated as the current legislation required lengthy due process of auditors and again IRBA was awaiting changes contained in the new legislation. Regarding the urgency and the power that IRBA had, he explained that IRBA was not investigating the accountants but the auditors who were Deloitte. IRBA had to work through the same complexity referred to earlier. It had taken PwC 14 months to prepare the report with a massive team working on it and he had only one investigator. The were 3 000 pages and 15 000 annexures. Access to the report had only been given on 8 August 2019. He also required the 2017/2018 statements for the SA companies of Steinhoff and there were 30 pages of re-statements alone. That would give the Committees some idea of what the IRBA still had to do.

Concluding remarks
Mr Maswanganyi stated that there would be a follow-up meeting but he required separate reports from NPA and Hawks at the next meeting as they were not a joint institution. The GEPF and PIC would also be invited as well as the unions who represented the workers whose money was at stake.

The issue in the next meeting would be how the money was going to be paid back and the Committees would not be chasing the Hawks and NPA. He asked Mr Momoniat to meet with PIC and, at the next meeting, to explain to the Members how the money would be paid back.

Mr Maswanganyi requested the Secretary to provide new Members with the previous minutes and presentations. He declared the meeting closed.

The meeting was adjourned.



 

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