The alleged mastermind behind the fraud, the then CEO and now deceased and disgraced, Markus Jooste, apparently killed himself on March 21 last year, a day before he was set to hand himself over to law enforcement officials. Picture: Henk Kruger/Independent Newspapers
Nicola Mawson
The Steinhoff implosion, an accounting scandal at Tongaat Hulett, and dodgy financials at Enron are all examples of corporate fraud that were laid bare through sources that put key information into the public domain.
The latest development in the Steinhoff matter came on Friday, when two additional executives, Hein Odendal and Iwan Schelbert, handed themselves over to police as part of an ongoing investigation into fraud at the company by the Hawks. The two, who were charged with several contraventions of legislation, were released on bail of R150 000 at the Pretoria Specialised Commercial Crimes Court.
Odendal, Schelbert, and another accused, the company’s former legal head, Stephanus Grobler, will appear in court again on May 30. The alleged mastermind behind the fraud, the then CEO and now deceased and disgraced, Markus Jooste, apparently killed himself on March 21 last year, a day before he was set to hand himself over to law enforcement officials.
Jooste had long blamed an Austrian businessman, Andreas Seifert, for the company’s demise, arguing that it was Seifert who instigated investigations into its dodgy financial affairs, a situation that auditors Deloitte confirmed in 2017.
Many such cases have come to the public’s attention through people who have supplied what can be considered inside information to third-party entities, said Chris Logan, owner and chief investment officer at Opportune Investments.
This, he said, included the Tongaat issue, where an outside analyst, who was very familiar with the industry, blew the whistle after at least six months of intense investigation.
Tongaat was implicated in an accounting scandal in 2019.
If people think that the regulators have sufficient time and budget to scrutinise every set of financial result with a magnifying glass, which have been signed off they would need to have a massive budget, said Logan. “You are living in Cloud Cuckoo if you think the regulators can pick all this up,” he said.
Logan does feel that there should be better mechanisms and protection for those who expose this sort of fraud, including investors who short sell the shares, which could be an indication that they are not happy with the information that the company is disclosing.
“Don’t shoot the bearer of bad news,” he told Business Report.
MFA, a trade association for the global alternative asset management industry, explained on its website that some short sellers conduct in-depth research and analysis that exposes financial fraud and corruption, including in the Enron corporate corruption scandals. It was also short sellers who correctly pointed out that the US housing market was too hot before the 2008 Global Financial Crisis.
Paul Miller, director at AmaranthCX, said that businesses cannot be regulated not to fail, as failure is part and parcel of free enterprise, and fraud will happen.
“The danger is, we try to regulate for all possibilities and increase the burden of regulation to such an extent that it becomes a dead hand on enterprise and growth,” he said.
Miller says the “edge cases like the obvious criminality at Steinhoff” should not be used to suggest that “we should further ratchet up the regulatory burden on ordinary business”.
While Miller said there was a need for an environment that was more conducive to whistleblowers, South Africa did not have a good record for protecting such people.
What may be a better solution, he said, is for whistleblowers to be paid a significant share of any fines imposed in cases where criminality is discovered. This would enable people to secure their own protection in a manner similar to that taken in the United States.
BUSINESS REPORT