JSE censures, fines and ‘disqualifies’ former Steinhoff CFO Ben La Grange

The JSE on Friday publicly censured former Steinhoff CFO Ben La Grange, imposing fines totalling R2 million and immediately barring him from being a director of any JSE-listed company for the next decade.

It said in a Sens statement that the censure and penalties relate to La Grange breaching several provisions of the JSE’s Listings Requirements by “failing to fulfil his duties and responsibilities as the Chief Financial Officer with the necessary due care and skill”.

This was during La Grange’s tenure as CFO of disgraced retail giant Steinhoff International, which was rocked by an accounting scandal also under former CEO Markus Jooste’s watch a few years ago.

The JSE’s censure and penalties on La Grange are thus effectively related to part of his involvement in the Steinhoff accounting debacle, which almost brought the company to the brink of collapse.

Read:
Steinhoff’s Ben La Grange claims innocence [Aug 2018]
Steinhoff scandal: a three bucket wonder [Aug 2018]
The curious case of Steinhoff CFO Ben la Grange [Jan 2018]

In the Sens statement on Friday morning, the JSE referred stakeholders to an announcement it published on Sens back in October 2020, wherein the bourse “imposed a public censure and financial penalties amounting to R13.5 million against Steinhoff as a result of its transgressions of the Listings Requirements”.

It added: “Pursuant to the JSE’s investigation into the conduct of certain individuals that presided at the company during the periods in question, the JSE has concluded its investigation against Mr La Grange in his capacity as the Chief Financial Officer of Steinhoff at the time of the transgressions” referred to above.

The JSE highlighted the suspicious “Steinhoff at Work Proprietary Limited” transaction, which was part of its investigation.

“Steinhoff at Work was a subsidiary of Steinhoff Investment Holdings Limited whose ultimate holding company was Steinhoff which has a dual listing on the JSE. Steinhoff joined a structure referred to as the ‘buying group’ through its involvement with the TG Group Holding SA and its subsidiary companies… whereby volume rebates were purported to be negotiated and collected by TG Group for the Steinhoff group as well as other third parties,” it notes.

According to the JSE, during mid-November 2016 former Steinhoff CEO Markus Jooste created a handwritten document indicating the pro rata contributions which Steinhoff at Work would be entitled to receive from TG Group in the amount of €23.5 million.

“There was no actual transaction nor any legitimate commercial reason that supported the information or calculations contained in the handwritten document,” the says the JSE.

“Mr Jooste gave this handwritten document to Mr La Grange in his capacity as the Chief Financial Officer of Steinhoff to generate an invoice to the TG Group for the contributions to be received by Steinhoff at Work from TG Group.”

“Mr La Grange instructed others to process the invoice that had been given to him by Mr Jooste as well as the pro rata contributions in the Steinhoff at Work accounting records for the financial year ended 30 September 2016,” the bourse points out.

“As there was no actual transaction to support the invoice, the invoice issued by Steinhoff at Work was false,” says the JSE.

“Thereafter, other Steinhoff representatives created various documents and gave instructions for monies to be transferred between Steinhoff Group bank accounts to create the impression that the pro rata contributions were actually paid to Steinhoff at Work by the TG Group and to be used as audit evidence for the Steinhoff at Work September 2016
audit,” it adds.

According to the JSE, the contributions were never negotiated or collected by the TG Group and TG Group did not pay for any of these contributions that had been accounted for as income by the Steinhoff Group.

“The result of this fictitious transaction by the processing of the false invoice was that Steinhoff at Work’s income for the fifteen months ended September 2016 was falsely inflated by R376 649 872, which in turn falsely inflated the income of the Steinhoff group which was subsequently restated,” says the bourse.

“Without this fictitious income, Steinhoff at Work’s stated operating profit of R47 545 585 should have been a loss of R329 104 287 and this loss should have been reflected in Steinhoff’s consolidated financial statements,” it adds.

“Mr La Grange acknowledged and disclosed to the JSE that he was requested by Mr Jooste to bring to book income into the accounts of Steinhoff at Work which was, according to Mr Jooste, Steinhoff Group rebates procured by the TG Group,” the JSE notes.

“Mr La Grange further disclosed that he procured the raising of the invoice which was irregular in that Steinhoff at Work was not entitled to a rebate, albeit he was not aware that the income was false at the time,” says the JSE.

It adds that La Grange also acknowledged “that he did not apply more scrutiny to evaluate the transaction and determine that the income was genuine, and that Steinhoff at Work was entitled to bring the income to book”.

Due to these investigation findings, the JSE says it found La Grange to be in breach of the following provisions of the bourse’s Listings Requirements:

  • General Principle – as Mr La Grange failed to exercise the highest standards of care in his direct involvement in the processing and implementation of the Steinhoff at Work Transaction which was subsequently found to be a fictitious transaction; and
  • General Principle – as Mr La Grange ought to have known, that inclusion of the income in respect of the Steinhoff at Work Transaction, which was subsequently found to be fictitious, would in turn inflate the income recorded in Steinhoff’s consolidated financial statements and contributed to the 2016 financial results being incorrect, false and misleading in material respects.

The JSE accordingly decided to impose the following penalties on La Grange:

  • A public censure and a fine of R1m for Steinhoff’s consolidated financial statements for the 2015 and prior financial periods and for the fifteen months ended 30 September 2016 which did not comply with IFRS and was incorrect, false and misleading in material aspects;
  • A public censure and a fine of R1m for Mr La Grange’s breaches of the Listings Requirements in respect of the Steinhoff at Work Transaction; and
  • Immediate disqualification from holding the office of a director or officer of a listed company for a period of 10 years for failing to fulfil his duties and responsibilities as the CFO with the necessary due care and skill.

Constructive co-operation from La Grange

In arriving at its decision, the JSE says that it “considered amongst other factors, Mr La Grange’s constructive and unwavering co-operation with the JSE’s investigation and his full and frank engagement with the JSE where he provided various additional disclosures that assisted the JSE in its investigation against Steinhoff.

Source: moneyweb.co.za