Steinhoff Ex-CEO Jooste Fined $9.9 Million for Insider Deals

Steinhoff International Holdings NV former Chief Executive Officer Markus Jooste has been fined more than 162 million rand ($9.9 million) by a South African regulator for insider trading ahead of the retailer’s near collapse almost three years ago.

Jooste sent a text message to four people warning them to sell their stock in the company in the days before it reported accounting irregularities in December 2017, the Financial Sector Conduct Authority said in a statement Friday. Three of them acted on the advice and have been penalized smaller amounts.

Steinhoff shares went on to lose more than 90% of their value after the then-owner of Pep stores across Africa and Mattress Firm in the U.S. said its auditors wouldn’t sign off on financial statements, leaving the company battling for survival. Jooste quit the same day, and was later accused by the company of being one of eight individuals linked to questionable transactions. He and the retailer are involved in several probes and lawsuits by investors trying to recoup their losses.

“That’s probably the most expensive SMS sent in South Africa’s history,” said Brandon Topham, the FSCA’s divisional executive for investigations and enforcement. “The moral of the story for the public is even if you don’t trade and you just provide information, you can still be liable for a pretty serious administrative penalty.”

Jooste didn’t immediately respond to a call and message to his mobile phone, though the FSCA said he did appear before the regulator and has denied wrongdoing. The ex-CEO’s lawyer, Callie Albertyn, confirmed Jooste received notification from the regulator on Thursday, and that they are considering their response, including a potential appeal.

The recipients of the text messages included Gerhardus Diedericks Burger, a doctor friend of Jooste’s, and former South African rugby player Ockie Oosthuizen, who died in December. Marthinus Swiegelaar, Jooste’s chauffeur at the time, and businessmen Jaap du Toit make up the quartet. Du Toit was not fined after the FSCA found he did not act on the information.

Jooste’s text to friends before the scandal broke were first reported by Bloomberg News in October 2018. He sent them after becoming aware of Steinhoff’s likely implosion on Nov. 30 2017, according to the FSCA. At the time, Steinhoff was in discussions with Deloitte LLP about the viability of its accounts.

Low Profile

The ex-CEO has since kept a low profile, barring one public appearance before South African lawmakers to explain his role in the collapse. He is solely liable for 123 million rand of the fine, though holds joint responsibility for further penalties handed down to beneficiaries of the text messages. He will also be charged for the regulator’s costs and interest.

While the FSCA is “80% done with its insider investigation,” the regulator is still probing at least four other people’s accounts, Topham said. The regulator is likely to also bring criminal charges against Jooste, which the police would then need to decide whether to pursue.

Jooste may face further penalties as the FSCA examines other key directors or officials who were knowingly party to certain transactions, he said. That case should be concluded by April.

Under new CEO Louis du Preez, Steinhoff has been battling to survive. The company, which was fined by the FSCA last year, has renegotiated debt with lenders and sold multiple assets to shore up the balance sheet, but still has to resolve legal action including by its former billionaire Chairman Christo Wiese.

Burger didn’t immediately respond to requests for comment sent to his mobile phone. Oscan, a company that was controlled by Oosthuizen and got the biggest fine after Jooste, did not respond to an emailed request for comment.

©2020 Bloomberg L.P.

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