Steinhoff is funding police investigation into its affairs, not the NPA’s

The National Prosecuting Authority (NPA) has confirmed that the South African Police Service (SAPS) and not the NPA will be the recipient of the forensic report into suspected accounting irregularities at Steinhoff.

The report, which will be drawn up by PwC, is being funded by Steinhoff to the tune of R30 million.

Much of PwC’s work for SAPS is expected to involve trawling through the same information used to generate the 3 000-page report the audit firm completed for Steinhoff in 2019.

According to Steinhoff’s annual report it paid PwC €35 million (close to R632 million) for the investigation and for technical accounting support following initial reports of possible accounting irregularities released in December 2017.

It is unclear whether PwC’s assistance will include the drawing up of a charge sheet or whether this will be left to the NPA, which might not have the capacity to sift through a new forensic report from PwC for that purpose.

Criticism

After days of criticism about potential conflicts of interest, on Wednesday the NPA issued a media statement clarifying that it was not the recipient of R30 million worth of funding for the investigation but that SAPS was.

NPA spokesperson Sipho Ngwema said it was accepted practice locally and internationally for complainant companies (Steinhoff in this case) to commission these kinds of forensic exercises.

“The NPA can use the findings appropriately for the purposes of preparing any possible prosecutions,” said Ngwema.

He added that in 2019 Steinhoff granted SAPS and the NPA access to the 3 000-page report, which had taken two years to finalise.

A 12-page summary of the report, which was deemed legally privileged, was all that was made available to the public. It’s not clear whether the new report will be legally privileged.

Accounting vs criminal investigation

Ngwema described the 3 000-page report as “an accounting-driven report and not a report that primarily focuses on criminality and the criminal court process”.

He also noted that although PwC had generated an accounting-driven report, the firm was “in an ideal position to produce a forensic audit report for the purpose of criminal investigation and prosecution with a reasonable time span, notwithstanding what might be perceived as a conflict”.

One lawyer told Moneyweb there is a danger the public might suspect PwC would provide information selectively to SAPS aimed at enhancing any legal action Steinhoff intends taking.

Managing perceptions

A number of measures have been put in place to manage this perceived conflict of interest, including a signed certificate in terms of Section 4 of the Protection of Information Act and findings supported by objective evidence such as bank statements, journals, ledgers, databases, emails, memos and contractual agreements.

In addition, Ngwema said, PwC has given an undertaking that “no evidenced obtained during the criminal investigation will be divulged to Steinhoff, even for the purposes of civil litigation”.

He stressed that the arrangement between Steinhoff and SAPS “is neither irregular nor uncommon”.