Steinhoff International Holdings NV lost a case against a former business partner related to how it reported financials for 2016, the first major legal setback for the global retailer as it battles an accounting scandal.
The owner of French furniture chain Conforama, Mattress Firm in the U.S. and Pep clothing in Africa should amend its accounts for that year, the Amsterdam Enterprise Chamber ruled Monday in a case brought by Andreas Seifert’s OM Handels and MW Handels businesses. The lawsuit pre-dates the reporting by Steinhoff of financial wrongdoing that’s wiped almost 90 percent off the value of the company.
OM had accused Steinhoff of committing false accounting by not acknowledging its shareholdings in POCO Einrichtungsmarkte GmbH, a German furniture retailer. It’s one of three European cases Seifert’s businesses have brought against Steinhoff, which reported wider financial wrongdoing in early December.
The shares fell 3.5 percent in early trade in Johannesburg. That pared a 14 percent recovery in 2018 after December’s freefall.
Steinhoff, which is registered in Amsterdam and has its main base in South Africa, has already said it needs to restate 2016 accounts alongside financials for 2015 and 2017. The company is being investigated by regulators and courts in various jurisdictions and is in regular talks with lenders about maintaining liquidity.
Former Chief Executive Officer Markus Jooste has been referred by Steinhoff to a South African anti-corruption police unit, while major investor and Chairman Christo Wiese has resigned and been forced to sell a large portion of his shareholding. The company has appointed PwC to investigate the wrongdoing.
The retailer was told by the Dutch Enterprise chamber to amend its reporting of POCO to reflect that it has a 50 percent controlling interest instead of 100 percent, Steinhoff said in a statement Tuesday. The Seifert businesses should be credited with a 50 percent non-controlling interest. The company said it’s studying the judgment and whether there are grounds to appeal, while also considering the impact on its accounts.
The court also ruled that Steinhoff must pay OM Handels’s legal costs of 3,398 euros ($4,215). Legal proceedings in Germany, which also relate to the ownership structure of POCO, are due to be heard later this year. The third Seifert claim, which concerns ownership of Conforama, was filed in Austria in 2011 and has yet to conclude.