Steinhoff fabricated transactions to bloat profit, investigation finds
The long awaited PwC investigation into the financial dealings of South African retail conglomerate Steinhoff International Holdings has found evidence of approximately €6.5 billion ($10.4 billion) in fictitious and irregular transactions made over the course of almost a decade, contributing to the $9.2 billion hole found in the company’s finances in late 2017.
The transactions, which have been traced as far back as 2009, and which were reportedly made at the behest of senior management, had the effect of substantially inflating the profit and asset values of the business over an “extended period”, according to PwC’s report.
While these transactions were made to appear to come from third-party entities, PwC believes they were actually closely related to the group of executives making the transactions in the first place, and were then being justified by documents created after the fact and backdated.
“The Boards believe that the facts identified in the PwC report raise serious allegations, against the senior executive in particular,” Steinhoff’s response to the report reads.
The executives in question, who have not been named by the company, will be contacted and asked to assist further investigation into a number of still unanswered questions – particularly surrounding the ultimate beneficiaries of the transactions.
In light of the findings, the group is developing a remediation plan, which will seek to improve the governance of the business, remedy the accounting irregularities identified in the investigation and properly assess the investigation.
Moving forward, Steinhoff noted it will fully assist with any criminal investigations into the individuals who perpetrated these actions, and will work toward the recovery of losses incurred and damages suffered by group.
Steinhoff delayed the release of its 2017 and 2018 financial statements in December 2018 until the completion of the report, which Steinhoff noted was “significantly more complex than initially anticipated.”
The business is expected to release both reports in April 2019, with Steinhoff chairperson Heather Sonn noting the group sincerely regrets the revision to the reporting timeline.
“While substantial progress has been made, the volume and complexity of the work required, including the interactions between the various parties, has been significantly greater than initially anticipated… we continue to approach these projects with maximum effort and commitment as we seek to bring them to conclusion,” Sonn said.
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