Cape-based lawyer and Steinhoff shareholder Jan Lamprecht has intervened in a court action to hold Deloitte accountable for the R200 billion destruction of value brought about by previous management’s dealings. Deloitte was the company’s auditor at the time.
This follows a move by the former owners of Tekkie Town, who say they were fraudulently induced to sell their business to Steinhoff in 2016, to liquidate Steinhoff rather than accept a ‘global settlement’ that will hopefully remove the tsunami of court cases brought by shareholders who lost fortunes based on bogus accounting and false statements by former management members.
As Anne Crotty reports in Moneyweb, the proposed settlement agreement (called a Contingent Payment Undertaking or CPU), brought in terms of Section 155 of the South African Companies Act, includes a ‘no-liability clause’ that would protect Deloitte from subsequent claims by shareholders.
“In addition the CPU provides shelter from legal claims for Steinhoff’s former directors, including Steven Booysen, David Brink, Danie van der Merwe, Heather Sonn, Christo Wiese, Len Konar and Johan van Zyl.”
In his court affidavit, Lamprecht says Deloitte’s offer to contribute R1.2 billion to the settlement sum, “can be interpreted in no other way than an admission of guilt”.
Lamprecht’s intervention in this case could make legal history, and it should. Steinhoff subsequently appointed PwC to investigate the events surrounding the accounting irregularities, and while PwC told Parliament it would investigate Deloitte’s role in the value destruction at Steinhoff, it has subsequently held firm to the position that it was not asked to investigate Deloitte.
As many have remarked, this begins to look like one audit firm protecting another.
Which leads inevitably to the conclusion that the dominance of the Big Four audit firms is, despite all outward appearances, a self-preserving mechanism. It may happen that one day PwC will be investigated by Deloitte and would expect the same kindness to be reciprocated.
What is also curious about this case is the haste with which Steinhoff and its professional advisers are keen to move on and rid themselves of the mounting court cases. This is understandable in one sense. In another, consider that Steinhoff squats as a blight on the SA audit and accounting profession. The majority of auditors and accountants are scrupulously honest and diligent. They, too, are paying a price for this misbehaviour.
But here’s another way to look at it, as Lamprecht makes clear in his court action: he was enticed to purchase R11 million of Steinhoff stock on the basis of 2014 and 2015 financial statements which later turned out to be untrustworthy. And there may be thousands of other people like Lamprecht in similar positions. On that basis, should we be rushing to put the past behind us, or digging up every buried corpse we can find in a quest for truth and fairness.