Does a Dutch court have jurisdiction to rule on the fraud at retailer Steinhoff? That was one of the main topics during a hearing in Amsterdam on Tuesday 21 August 2018. It was the first time European Investors and Steinhoff met in court since the discovery of the comprehensive fraud in December last year.
Last year VEB/European Investors held South African retailer Steinhoff liable because of the damage suffered by shareholders of a billion-dollar fraud discovered in December 2017 at the group. Since the listing in Frankfurt in 2015 Steinhoff has grown even faster than in previous years, mainly because of some very large and expensive acquisitions, mostly financed through debt. Steinhoff reported growing profits year upon year and confirmed their optimistic outlook on a regular basis.
Fraud
The fraud that came to light at Steinhoff in December 2017 shocked investors. From the outset it was clear that the malpractice was deeply rooted in the organisation; the company itself expressed uncertainty over recoverability of assets worth 6 billion euros, withdrew the annual accounts for 2015 and 2016 and pointed out that the irregularities are mainly attributable to business activities outside Africa. The main focus must be on activities in Central and Eastern Europe, Great Britain, and the United States. As a result of the fraud, Steinhoff fell into a deep crisis, it now tries to come out of by negotiating with banks and other creditors.
Losses
Investors have suffered considerable pain caused by years of fraud at Steinhoff. More than 11 billion euros have been wiped from the value of the global retailer. The crowd of duped Steinhoff investors is a very international company. Steinhoffs’ shares have been in South Africa for years. Since the listing on the prominent German stock exchange in 2015, many European investors had also discovered the share.
Justice
All those investors will hope that the group will survive this mega-fraud. Also, they want to see justice done because of the malpractices they are the victims of. Therefore, VEB/European Investors have summoned Steinhoff and accountant Deloitte in the Netherlands. According to VEB/European Investors, this is the right place to seek redress because Steinhoff has its registered office in the Netherlands. Moreover, Dutch process law makes it possible efficiently to resolve a dispute between an entire group of duped investors and a company. By having the objections handled collectively by a Dutch court on behalf of all investors, uncertainty about compensation for damage suffered will not last unneccessarily long for the shareholders and Steinhoff. Other investors have announced legal filings against Steinhoff in Germany and South Africa. Steinhoff tries to block all legal initiatives by stating in all countries that the courts do not have jurisdiction. VEB/European Investors represented to the court on Tuesday there are sufficient arguments to argue that the Dutch lawsuit should be conducted without further delay. In the meantime, Steinhoff continues to advise investors to be very cautious about trading in the share. This uncertainty will certainly last until the end of this year. As and when the PwC investigation is released – the company proclaims this to occur by December 2018 at the latest – it will lay bare the exact nature and extent of the fraud at Steinhoff over the years. The annual accounts for 2015, 2016 and 2017 allegedly will also be published this year. That planning still stands, Steinhoff’s lawyer assured.
Ruling
The court’s ruling follows on 26 September 2018.
Steinhoff
Steinhoff is a German company by origin which moved to South Africa in the nineties. In 2015 Steinhoff moved its head office to Amsterdam and applied for a listing at the Frankfurt stock exchange. In the meantime, the company had grown to the second largest furniture group in the world. Since the listing in Frankfurt in 2015 Steinhoff has grown even faster than in previous years, mainly because of some very large and expensive acquisitions, mostly financed through debt. Steinhoff reported growing profits year upon year and confirmed their optimistic outlook on a regular basis.