Steinhoff pays for PwC to help South African police graft probe

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Steinhoff International Holdings NV is paying for forensic auditors at PwC to help South African anti-corruption police investigate alleged financial wrongdoing that brought the retailer to the brink of collapse.

While PwC completed its own more than 3,000-page probe on behalf of Steinhoff last year, legal authorities have shown little sign of progress in identifying those responsible for transactions that caused Steinhoff to report accounting irregularities in late 2017. The Frankfurt-listed stock remains more than 98 percent lower than before the announcement, and the company faces years of legal battles brought by those who lost out.

Steinhoff “agreed to contribute funds to cover a substantial portion of the costs of the PwC work, due to the size and complexity of the investigation required,” it said in a statement on Tuesday. “The funding is to be provided on an arms-length basis, with the retailer having no involvement in the investigation.”

Steinhoff and an elite law-enforcement division have repeatedly squared off in parliament over why the authorities have made so little progress holding individuals to account. Former CEO Markus Jooste quit at the time the accounting discrepancies came to light, and PwC’s report linked him to deals that may have led to the financial collapse. He denies wrongdoing.

Conforama future

Steinhoff remains in operation after a series of asset sales and a deal with creditors to skip payments on about 9 billion euros ($10.1 billion) of debt through 2021. However, the company said Tuesday its Conforama business in France faces an uncertain future following lockdowns to contain the coronavirus, as it has been unable to secure a state-guaranteed loan for which it is eligible. Steinhoff is “exploring all possible options” for the unit, the company said.

Trading across the group as a whole “has been significantly better” than expected at the early stages of the pandemic, as stores benefited from pent-up demand, Steinhoff said. All subsidiaries, other than Conforama, have sufficient liquidity, the retailer added.

The Hawks, as the South African police unit investigating the Steinhoff collapse is known, have said they were only able to make serious headway with their investigations after being given full access to the PwC report, which was completed in March 2019. A year ago, the police said the probes had been fast-tracked and more people were being assigned to the job.

PwC uncovered 6.5 billion euros of irregular transactions between Steinhoff and eight firms between 2009 and 2017. The deals, orchestrated over several years, enabled the owner of chains from the U.S. to France to artificially boost profits and asset values, the report found.

Since releasing a 10-page summary last year, Steinhoff has limited access to the full document. It paid PwC at least 35 million euros for the investigation and technical accounting support, according to its annual reports.

Bloomberg News
PwC International accounting Accounting fraud Forensic accounting