Who will pay Markus Jooste’s R510 million penalties now?

After former Steinhoff CEO, Markus Jooste, committed suicide on Thursday, the question arises who will be liable to pay the penalties imposed on him by the Financial Sector Conduct Authority (FSCA) and JSE that amounts to R510 million for insider trading and published false financial statements and annual reports?

The FSCA imposed the biggest administrative penalty ever, R475 million, on Jooste for publishing false financial statements and annual reports and contravening the Financial Markets Act.

ALSO READ: Markus Jooste, three others, fined R241 million for Steinhoff insider trading

FSCA already fined Jooste R161 million in 2020, reduced to R20 million

In October 2020, the FSCA imposed an administrative penalty of R161 million on Jooste for breaching sections of the Financial Markets Act that prohibit an insider from disclosing inside information and/or encouraging or discouraging another person to deal in securities related to the inside information. He was liable for R122 million, but this was later reduced to R20 million.

Jooste was fined after an FSCA investigation found that on 30 November 2017, shortly before the much-publicised significant decrease in the market value of Steinhoff shares, Jooste was privy to inside information related to Steinhoff.

He disclosed some of this information in a “warning SMS” to encourage four individuals close to him to dispose of their Steinhoff shares before some of the inside information was disclosed to the rest of the market. Three of the people contacted acted on his disclosure and encouragement and sold their Steinhoff shares.

ALSO READ: JSE bars Steinhoff’s Markus Jooste for 20 years, fines him R15m

Johannesburg Stock Exchange fined Jooste R15 million

In January last year, the Johannesburg Stock Exchange (JSE) barred Jooste from directorships for 20 years and imposed two R7.5 million penalties on him for violating listing rules and submitting false financial statements.

The JSE said Jooste was the highest-ranking executive in the company and had ultimate responsibility for the decisions and actions of management.

Jooste had already started proceedings to take the first FSCA findings and penalty as well as the JSE findings and penalty on review. Alex Pascoe, head of market abuse at the FSCA, said on Wednesday that Jooste can and has reportedly said he will appeal any decision and take it on review to the high court and the Constitutional Court.

ALSO READ: The Ibex era begins: Steinhoff’s quest for redemption?

Claims against Jooste’s estate

Jannie Rossouw, visiting professor at the Wits Business School, says the penalties will become a claim against Jooste’s estate. The estate can also continue with the reviews of the findings and penalties but will have to give reasons for doing so.

He expressed his condolences to Jooste’s wife and children and said it is now, more than ever, important for Steinhoff to release the report prepared by PwC setting out its findings after its investigation initiated at the request of the Supervisory Board in December 2017 on the instructions of Werksmans Attorneys.

According to an overview of the report that Steinhoff released, the PwC findings are the product of a wide ranging review over 14 months’ work when a large team of PwC professionals collected, reviewed and processed an enormous amount of information and data about Steinhoff. The report contains more than 3 000 pages and more than 4 000 documents as annexures.

AmaBhungane and the Financial Mail filed separate requests in terms of the Promotion of Access to Information Act (Paia) for access to the PwC report and the court found in their favour, but Steinhoff appealed the decision. The appeal is due to be heard in the first half of 2024.

In October last year, Steinhoff’s leadership obtained approval to transfer its assets, liabilities and contracts to a newly established holding company named Ibex. Ibex is now in possession of the report.

Rossouw says it is important for the PwC report to be released, as all the other people being investigated will now insist that it was all Jooste’s doing to avoid being penalised.

ALSO READ: Reserve Bank attaches ex-Steinhoff CEO Markus Jooste’s properties

Spotlight on corporate governance – what to watch out for

He says the whole Steinhoff matter and now Jooste’s suicide has put the spotlight on serious issues around corporate governance.

“It shows it is important to live it and not simply do it. It is also important to watch out in future for overbearing CEOs and boards where the directors are overpaid and flown all over the world to make them more reluctant to ask important questions.”

Rossouw says this was not the last big company debacle. “We do not know who will be next, but there will be one.”

He has been very outspoken about the lack of action on government’s side and says he is grateful that something is happening at last despite the tragic result, as nothing was done for years.

The FSCA said in a statement on Friday that Jooste’s passing does not affect its ongoing investigation into Steinhoff.

“The investigation will continue as there are other investigated parties involved. The authority will also continue to assist the Hawks and the National Prosecuting Authority (NPA) with any investigations they may have underway.”

As the penalty on Jooste in his personal capacity was already imposed at the time of his death, his passing does not affect the penalty, the FSCA said.

“The Authority is legally entitled to recover the penalty from the estate of Jooste. Whether the Authority will claim against the estate will be decided at the appropriate time, considering all the relevant circumstances.”