Was Steinhoff Hiding Debt By Selling Themselves Their Own Poor Performing Companies?
There is a lot of speculation about what the admitted Steinhoff financial irregularities are. Now comments by Viceroy (a company that researches companies with signs of questionable accounting practices) are shedding light on some of the ‘behind the scenes‘ transactions which might have been making the books look better than they actually were.
For info on who Steinhoff are and why they got into trouble click HERE
It seems that at least 3 big transactions in which Steinhoff were involved had the firm itself (or one of the big bosses) on both sides of the sale.
Selling Firms To Yourself?
Steinhoff has a reputation for buying big businesses. For example, in 2015 they bought Pepkor for R86 Billion. It now seems (it is claimed) that on at least 3 occasions the firm was selling poor performing books (firms) off to…themselves.
Steinhoff sold off JD Group’s consumer financial division (JD Consumer Finance) to Wands Investments in January 2016. Wands is a subsidiary of Campion Capital. This business was incorporated by (among others) with former Steinhoff Europe CEO Siegmar Schmidt.
So, Steinhoff sold this poor performing business to their European CEO. They then put that sale down as a profit in their books even though experts are saying they will never get all the money it was sold for.
A second poor performing business Capfin (in the UK it is known as Southern View Finance) was also sold to the same firm (Campion). Capfin focused heavily on lending to Pep and Ackermans clients but had a serious run-in with the NCR which caused it problems in 2015. After the NCR nailed Capfin for reckless lending, Steinhof went ahead and sold it to the firm of their European CEO.
The last one is a bit tricky as it seems that Steinhoff loaned around R5 900 000 000 to a firm called Genesis (also owned/run by it’s own European CEO) to buy kika-Leiner. They then bought kika-Leiner back 6 months later from Genesis for around R1 569 000 000 more than had been paid (with the loan they themselves had given). This then netted the European CEO’s firm and those running the show R1.5 Billion in profit in just 6 months for holding onto the purchased company. Was this a scheme to make some quick bucks to benefit their own management?
‘it just looks suspicious even if everything ends up being totally above board’
The trick is that at the time Steinhoff kind of forgot to mention that they were involved on both sides of these transactions so, it just looks suspicious even if everything ends up being totally above board. These transactions seem to have moved businesses from the loss column into the profit column on paper and may have been hiding big financial problems.
Trying to Figure It Out
Steinhoff themselves are investigating all the alleged financial irregularities with the help of PwC and Deloitte. So too are the authorities in various countries. If any of these claims turn out to be true and real fraud was committed, heads will roll and it will be the end of an era for the former JSE powerhouse. Sadly, since so many pension funds are tied into the shares, negative outcomes will affect not only employees of it’s many subsidiaries but also pensioners countrywide.
*Please note: The size of these figures and convoluted nature of these transactions makes it all very confusing so, while we have tried to report accurately on this matter, only further investigation by authorities will clarify what the heck is really going on.