The amaBhungane Centre for Investigative Journalism and the Financial Mail have gone to court to force Steinhoff to disclose the uncomfortable details of South Africa’s largest ever corporate fraud.
AmaBhungane and FM last week launched a joint application in the Western Cape High Court to compel the global furniture retailer to release the full forensic report on accounting failures and fraud that it commissioned from audit firm PWC.
The court application follows two separate requests for the 7 000-page report that FM and amaBhungane filed earlier this year under the Promotion of Access to Information Act (PAIA).
Steinhoff refused both requests on the grounds the report contained “legally privileged” information – it had been commissioned for purposes of obtaining legal advice and for use in litigation.
FM and amaBhungane are challenging these grounds and asking the court to order full disclosure.
The PwC investigation, which has reportedly cost Steinhoff shareholders over half a billion rand and is still ongoing, resulted in the company admitting that its assets and income were falsely inflated by as much as R105-billion.
“We decided it was time to challenge the reasons for keeping the report secret, despite Steinhoff previously undertaking to make it public. This is by far and away the largest corporate fraud ever perpetrated by a South African company. The public, who have collectively lost hundreds of billions of rands as a result of this crime, deserve to know how this occurred and who should be held responsible,” said Rob Rose, FM’s editor.
AmaBhungane managing partner Sam Sole said: “The complexity of this crime means that it is likely to be years before any of the perpetrators face criminal consequences. It’s an outrage that the accused directors are still swanning around, using what appear to be the proceeds of crime.”
Steinhoff has confirmed it will be opposing the application, re-asserting its stance that the report is confidential and subject to legal professional privilege.
“Steinhoff will therefore oppose any application to make this report public,” the company stated.
The FM and amaBhungane previously collaborated on an investigation into the fraud and felt it fitting they combine forces in this instance.
Said Rose: “In the absence of real transparency, who is to say, for example, that Steinhoff aren’t simply trying to hide details it finds awkward to explain? Or complicity of executives and directors that would embarrass it. It’s even more of an insult that the PwC report was paid for with the very funding provided by investors it now chooses to keep in the dark.”
FM and amaBhungane are represented by attorney Dario Milo and his team at Webber Wentzel, and advocate Steven Budlender. Both consider the case to be of enormous public interest.
“This is an important case about the public’s right to know about exactly what went wrong, and how, at Steinhoff. In our view there can be no compelling basis for the secrecy that Steinhoff has employed in refusing to release the entire report to the public,” said Milo.
AmaBhungane and the FM would like this case to set precedent in light of a growing list of companies using legal privilege as an excuse for not making public forensic reports into serious corporate malfeasance
“We are tired of the private sector pointing out all the corruption in government and its corrosive effects on the economy, but when it comes to its own sins, offering a fig leaf to shareholders with the proviso that forensic reports are legally privileged and therefore cannot be published,” said Rose.
Sole said some companies were now deliberately constructing investigations in such a way as to make the findings inaccessible via legal avenues.
“It’s a damning indictment on the morality of some corporates that we have come to learn of how companies instituting forensic investigations are taking advice at the outset on how to preclude the findings from ever being made public. We want to challenge that”.
*For comment please contact Sam Sole on 082 4188944, Karabo Rajuili on 082 3656553 or Warren Thompson on 083 6612236
*Main photo: Western Cape High Court (Ashraf Hendricks/GroundUp)