Shareholders Win Right to Sue Steinhoff in Netherlands

(Bloomberg) -- A shareholder group got a green light to sue Steinhoff International Holdings NV in the Netherlands, kicking off a legal fight to recover some of the billions of dollars investors lost after the South African retailer’s accounting scandal.

In a procedural hearing last month, Netherlands-incorporated Steinhoff had argued against going ahead with the court case filed in Amsterdam by Dutch investor group VEB, saying a legal claim was first filed in Germany. The company moved its primary listing to Frankfurt from Johannesburg in 2015.

The court rejected Steinhoff’s argument Wednesday, saying it “ignores the rule that the jurisdiction of a court is in principle governed by the residence of the defendant.” Steinhoff has to reply to the allegations by Nov. 7.

“A Dutch NV must simply be able to be sued in the Netherlands,” said Geert Koster, a lawyer for VEB, which says it represents some 3 percent of the retailer’s shareholders. Steinhoff has said only 0.25 percent of its shareholders are based in the Netherlands, downplaying the need for a Dutch judge to rule on the case.

Steinhoff is studying the Dutch court’s decision, including whether it provides grounds for appeal, according to a statement Wednesday. It added that the Amsterdam court has granted its request to summons former Chief Executive Officer Markus Jooste in proceedings to weigh his personal liability, within three months.

Since the accounting scandal erupted Dec. 5, Steinhoff has written off the value of its assets by at least 12.4 billion euros ($14.3 billion) and said restatements of its financials may have to go back to at least 2015. The stock has plunged 94 percent. Jooste stepped down, followed by Chief Financial Officer Ben La Grange. Chairman Christo Wiese, who told South African lawmakers in January that the news came as a “bolt from the blue,” also resigned.

Steinhoff shares fell as much as 4.4 percent to 14.2 euro cents in Frankfurt trading.

German Suit

In Germany, law firm TILP filed a claim against Steinhoff on behalf of an investor and is working to expand it into the German version of a class-action suit. Steinhoff has also sought to have German courts declared unauthorized to rule on the case, said Daniella Strik, a lawyer for Steinhoff, during the Dutch court session.

A German ruling would have no legal authority for shareholders who hadn’t opted in to the German collective action, VEB’s Koster said.

Shareholders haven’t had any lost money returned yet. VEB argues that Steinhoff issued inaccurate and misleading information in at least two annual reports and various news releases, and didn’t immediately disclose the information’s inaccuracy.

The Dutch shareholder group, which represents retail and institutional investors, also has a separate claim outstanding against the Dutch office of Deloitte LLP for the damage suffered by the Steinhoff shareholders. VEB said Deloitte failed in its statutory task as auditor when approving the Stellenbosch, South Africa-based company’s annual report in 2016.

VEB has successfully sued Dutch-based companies before. The group got supermarket company Royal Ahold Delhaize NV’s predecessor Ahold to return almost a billion euros to shareholders after an accounting scandal emerged in 2003. This summer, after 15 years of legal fighting, VEB settled with Ahold’s auditor, Deloitte, which brought the retailer’s accounting fraud to light after discovering irregularities.

Steinhoff has appointed PricewaterhouseCoopers to probe its finances, with the final results expected to be published by the end of the year.

--With assistance from Loni Prinsloo.

To contact the reporter on this story: Ellen Proper in Amsterdam at eproper@bloomberg.net

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, John J. Edwards III, John Lauerman

©2018 Bloomberg L.P.