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"Steinhoff accounting fraud":
Recent Developments and How to Proceed as an Investor
Steinhoff International Holdings NV (hereinafter referred to as Steinhoff) informed the capital market on the evening of December 5, 2017, by means of an ad-hoc announcement, of accounting irregularities in the course of the preparation of annual financial statements and of the subsequent resignation of CEO Markus Jooste, resulting in a dramatic decline in the Steinhoff share price. Over the course of the past weeks, additional details have become known to the public.
For example, while Steinhoff continues to work with external auditors to conclude the 2017 financial statements, the 2016 consolidated financial statements of the Company will need to be restated and can no longer be relied upon. Due to the restatements, the 2016 and 2015 financial statements of Steinhoff International Holdings Proprietary Limited can no longer be relied upon.
At this time, the extent of the accounting irregularities can not be quantified in numbers, nevertheless, there is no doubt that the balance sheets contain significant errors. These facts suggest that there might be more to the ongoing investigation being conducted by the prosecutor’s office of Oldenburg (Germany), based on their suspicions that excessive sales revenues have flowed into the balance sheets of the Steinhoff’s subsidiaries.
Auditors are currently examining the facts as well in order to be able to draw a precise picture of the financial situation as soon as possible.
It is our legal conclusion that Steinhoff is liable to investors for damages suffered due to incomplete capital market communication and false financial reporting.
Depending on each financial instrument and time period, there are different legal approaches and recovery opportunities available. The transactional data is the decisive factor when it comes to choosing the path that is right for you. We recommend that investors send us their transaction data for a cost free analysis. Investors, shareholders and bondholders, should then take our analysis and options for action into consideration to carefully decide what to do. We will assess all transactions from July 1, 2014 until present.
Our law firm filed a lawsuit against Steinhoff on December 19, 2017 on behalf of an aggrieved shareholder. We have concurrently filed a petition requesting a lawsuit under the Capital Markets Model Case Act (KapMuG), setting the course early on for Steinhoff to go to trial before the Higher Regional Court of Frankfurt. The KapMuG proceedings offer aggrieved shareholders and bondholders the opportunity to jointly litigate their claims before the Higher Regional Court in one and the same case, and to have that court clarify the crucial factual and legal issues for all of the investors. In this respect, the KapMuG procedure is somewhat comparable to a class action.
Investors can base various claims on several legal grounds pursuant to German as well as Dutch law, both of which provide grounds for relief due to the incorrect financial reports. These are the two major jurisdictions where we will continue to address recovery actions for affected investors, based on individual facts such as the transactional data that is sent to us.
While the legal measures that can be taken depend on a number of variables, such as purchase date and type of financial instrument, we would like to stress that not only investors who purchased on the Frankfurt Stock Exchange (FSE) but also those who purchased on the Johannesburg Stock Exchange (JSE) are encouraged to submit transaction data for analysis.
At the moment, proceedings are directed only towards Steinhoff; however, due to all of the known facts, the accounting firm Deloitte may also face liability for damage, as Deloitte was charged with auditing Steinhoff’s books during the aforementioned time period. Dutch Financial Market Authority (AFM) has already initiated investigations against Deloitte regarding Steinhoff in December 2017. Further information needs to be gathered on this before we can recommend a legal approach against Deloitte, or even before considering asserting claims for damages against the responsible Steinhoff members of management themselves.
TILP can provide you with an individualized damage assessment and recommendation on how to proceed with your claims. In order to do this, we ask that you send us all documentation relevant to your investment purchases.
Once we have assessed your documents, we will provide you with a calculation of your potential damages, along with our recommendation and further available options on what measures can be taken. Of course, we also inform you of what costs are associated with each potential course of action.
On December 5, 2017 at 9:44 p.m. Central European Time Steinhoff International Holdings N.V. (Steinhoff) published an ad-hoc announcement that shook the capital market. According to the announcement, the Steinhoff Supervisory Board received new evidence of accounting irregularities, which would need to be further investigated. Therefore, publication of the balance sheet has been postponed indefinitely. CEO Markus Jooste officially resigned from his position as CEO on Tuesday the 5th of December.
This announcement was met by the capital market with a significant drop in Steinhoff share prices to as low as 80%, causing a loss of billions within only a few days.
Steinhoff has previously faced speculation of balance sheet manipulation and questionable business practices. For example, the second largest European furniture company was said to have left its shareholders in the dark regarding rather large shifts among affiliates. Steinhoff however, has persistently denied these allegations.
In August of this year, Manager Magazin reported that the public prosecutors office in Oldenburg was conducting an investigation into the chairman of the furniture manufacturer as well into other persons of interest on the suspicion of accounting fraud.
Based on this report, Steinhoff published an ad-hoc announcement on August 24, 2017, denying the allegations made in the article by stating that the essential facts in the article were either wrong or misleading.
On September 18, 2017, Steinhoff informed the capital market by means of an ad-hoc announcement, of an action concerning accounting irregularities brought before the Commercial Court of Amsterdam. Steinhoff however, maintained its confidence that the lawsuit would be dismissed. On November 8, 2017 Steinhoff responded once again to a news report, this time from Reuters, stating in a press release that all accounting between GT Branding Holding and Steinhoff is done properly and according to IFRS rules.
Due to this history of denying accounting irregularity allegations, the news of the company’s irregularities in their balance sheets was met with even greater surprise by the capital market.
"In our legal opinion, Steinhoff could be held liable for substantial damages ranging in the billions due to false capital market information," states Marc Schiefer, Managing Director and attorney of the TILP Litigation Rechtsanwaltsgesellschaft mbH.
"If these allegations prove true, the company could also face prospectus liability for errors and omissions in their prospectus, in addition to the violation of ad hoc obligations under Art. 17 MAR,” continued Schiefer.
"In the present case then, we assume that potentially every Steinhoff shareholder can bring claims for damages, at least as of December 2015. Aggrieved investors, shareholders as well as bondholders, have the opportunity to extensively recover damages sustained due to these revelations, “adds TILP Litigation attorney Maximilian Weiss.
Investors from Germany and abroad have already made contact with TILP attorneys regarding their losses. As further evidence supporting the allegations becomes known, TILP recommends the aggrieved investors to take swift legal action against those responsible.
TILP has already been commissioned to examine the factual and legal situation. TILP will address potential claims for damages from private as well as institutional investors that have invested in stocks and other financial instruments of Steinhoff International Holdings N.V.TILP is currently examining the case facts such as published capital market information as well as company’s operating figures.
After completion of a thorough analysis, TILP will be able to contact clients with specific course of action. In order to receive further information from TILP, we ask that you please register your contact information using the form provided below. There is no cost obligation associated with this registration of your contact information.