How to Commit $7.4 Billion in Accounting Fraud

It’s not often that we get to see the details of how companies commit $7.4 billion worth of fraud.

Steinhoff International Holdings, a former empire of retailers and other companies in Europe, Africa, Australasia, and the US – including the now bankrupt Mattress Firm – collapsed in December 2017 when it announced that it had found “accounting irregularities,” without mentioning amounts or methods. It then hired PricewaterhouseCoopers (PwC) to investigate.

Now the company has released an 11-page overview of the PwC report about the forensic investigation. The actual PwC report remains under lock and key. I assume it names executives by name, whereas this summary does not. The amount of the accounting fraud detected so far amounts to €6.5 billion, or $7.4 billion.

But they still don’t know the full extent. According to the overview, “there are still a number of unanswered questions, particularly in relation to the identification of the true nature of the counter-parties or the ultimate beneficiaries to various transactions.”

Nevertheless, it’s not often that we’re given some insights in how to commit $7.4 billion worth of fraud.

Here are key nuggets I distilled from the report:

“A small group of Steinhoff Group former executives and other non-Steinhoff executives, led by a senior management executive, structured and implemented various transactions” from 2009 through 2017 “which had the result of substantially inflating the profit and asset values of the Steinhoff Group over an extended period”

Continue reading the article

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s