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South African billionaire Markus Jooste commits suicide after being fined 475 million rand ($25.2 million)

South African billionaire Markus Jooste
South African billionaire Markus Jooste

Former Steinhoff CEO Markus Jooste has committed suicide, a day after the Financial Sector Conduct Authority (FSCA) handed him a R475 million fine.

Police said an inquest case docket had been registered following the death of a 63-year-old man. They did not name the deceased.

“It is alleged that the victim sustained a gunshot wound at around 1520 (local time) at Kwaaiwater and succumbed to death on his way to hospital,” Western Cape police spokesperson Colonel Andre Traut said in a statement, referring to a suburb of the coastal town of Hermanus near Cape Town.

Traut said police were investigating the circumstances, adding that no foul play was suspected.

South African broadcaster Newzroom Afrika has now cited sources who confirmed Jooste shot himself during an arrest. The Financial Times said Jooste died of a gunshot wound, according to people with knowledge of the matter.

Jooste, who was instrumental in transforming Steinhoff from a small Johannesburg furniture outfit into a multinational retailer, was handed a hefty fine for accounting fraud on Wednesday, March 20.

He was fined 475 million rand ($25.2 million) on Wednesday for publishing false and misleading Steinhoff annual financial statements and annual reports for the 2014 to 2016 years and the 2017 half-year.

Steinhoff revealed holes in its accounts in December 2017, the first sign of an accounting fraud that led to the near-collapse of the retail group, which is the majority owner of South African and European discount retailers Pepkor and Pepco.

However, an investigation revealed that Jooste contravened section 81(1)(a) and (b) of the Financial Markets Act, 19 of 2012 (the FMA). It was stated that he willfully published false information designed to mislead investors in the company’s shares and bankers who loaned Steinhoff hundreds of billions of rand.

For instance, in December 2016, Jooste “created…..transactions which had no economic substance” that inflated Steinhoff Europe’s operating profit by R5.4bn (Euro 271.3m). According to the regulatory body this involved creating profit from thin air, which was “either disguised as receivables that were not recoverable or as cash equivalents that were similarly not recoverable.”

The report lists numerous frauds and the magically created profit line that was never real, which resulted in financial statements that told shareholders and bankers that Steinhoff’s hefty debt was well covered by R57bn in cash (EUR 2.87bn). Once Jooste’s creative accounting was stripped out, however, the true cash holding according to the FSCA was a relatively modest R13.6bn (EUR 684m). So in contrast to its officially published accounts, the corporation was actually drowning in debt long before the December 2017 expose’.

Significantly, this long-time deception escalated towards the end. In June 2017, six months before the group imploded, the FSCA said at the stroke of a pen, Jooste created a net income of R1.6bn “that had no economic substance” at Steinhoff’s recently acquired US subsidiary, Mattress Firm. His fraud transformed that company’s reported bottom line from an actual R1bn loss into a stated profit of R600m.

The FSCA investigation says Steinhoff’s financial reporting was “deceptive in the extreme……..that led to investors, lenders and other creditors having false and misleading information…overvaluing Steinhoff International’s performance and/or the recoverability of their investment or loan.”

The Steinhoff International securities were listed on the Johannesburg Stock Exchange (the JSE) and the Frankfurt Stock Exchange (the FSE) at the time of the incident.

On Wednesday afternoon, Jooste was officially notified to present himself in Pretoria on Friday morning to the Directorate for Priority Crime Investigation, commonly known as the Hawks. He would then appear in the Commercial Crimes Court for a bail hearing.

Jooste had agreed to comply, as he had done throughout an investigation which goes back to 2018. He had handed his passport to his attorney and repeatedly told the authorities he would not leave the country.

He was booked on a flight from Cape Town to Johannesburg on Thursday evening to fulfil the commitment to hand himself over. But instead, at around 4pm, he decided to take his own life on a coastal path near the sea opposite the Hermanus Golf Course. He was pronounced dead at the local hospital.

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