Burning the small fry: Steinhoff’s unlikely first South African convict

When you think of the masterminds of South Africa’s largest fraud, a 79-year-old doctor living in Hermanus would be at the bottom of any list. And yet Dr Gerhardus Burger is now Steinhoff’s first South African convict.
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When you picture the first conviction for the grand R106bn Steinhoff fraud in South Africa, you probably wouldn’t have imagined the man up against the wall would be a 79-year-old medical doctor named Gerhardus Burger. To even describe Burger as a bit player in the country’s largest corporate con, in which R230bn went up in smoke within a few days in December 2017, would be to oversell his relevance in the bigger picture.

Yet on Thursday, it was Burger who pleaded guilty to insider trading at the Specialised Commercial Crimes Court in Pretoria, receiving a five-year suspended sentence. This, of course, was the same court in which the mastermind of the scam, Markus Jooste, was ordered to appear to finally face criminal charges in March, but opted to shoot himself on the cliff paths of Hermanus instead. Jooste’s death left a yawning accountability gap – and Burger’s conviction won’t fill it.

So who was the good doctor, and what did he actually do? 

Well, court papers lodged in recent years recount how Burger was a family friend of Jooste’s, going back 31 years. He graduated with a medical degree from the University of Pretoria in 1970, and in later years moved to Hermanus, where Jooste lived. Their wives were friends, his children worked at Steinhoff companies, and his patients included Steinhoff executives. 

As an indicator of how close they were, Burger was one of four people to whom Jooste sent a now-notorious text message on November 30 2017, the others being PSG founder Jaap du Toit, Jooste’s driver Jaco Swiegelaar, and Springbok rugby player Ockie Oosthuizen.

“You always asked my opinion,” the English translation of that message read. “It will take Steinhoff a long time to work through all the bad news and America, so there are better places to invest your money. Take the current price immediately and delete this SMS and don’t mention it to anyone.”

Du Toit didn’t act, but the others did. In Burger’s case, he instructed his broker to sell half the Steinhoff shares in his family’s trusts. Later that day, he evidently thought better of his timidity, and told his brokers to sell the rest. 

This, of course, falls squarely in the ambit of insider trading, in which somebody has information that, “if it were made public, would be likely to have a material effect on the price or value” of any share, and they trade that stock to either make money, or avoid a loss. 

In Burger’s case, this is manifest: he made R1.68m by selling those Steinhoff shares at about R56 a share when he did. Had he waited another week, after Steinhoff announced “material accounting irregularities” and the price plunged to R18 on December 6, he’d have got just R540,000. It wasn’t huge money he saved – R1.2m – but it’s a crystal-clear case of somebody using a tip-off to avoid making a big loss.

Burger wasn’t a sophisticated or nervous investor, the Financial Sector Conduct Authority found in its hearing. He didn’t even know what a stock exchange announcement was, much less how to find one.

“He was not an experienced investor and purchased shares with a long-term investing plan … he would read newspaper articles relating to the companies in which he purchased shares, and a monthly newsletter sent by PSG,” it said.

Perhaps most astoundingly, Burger continued to hold the 15,000 Steinhoff shares which he and his wife had initially bought years before, long after the company collapse. And on that fateful December 6th, when the price tanked and investors ran for the hills, the good doctor remarkably even “instructed PSG to purchase 10,000 Steinhoff shares”, expecting the company to recover.

This, as you would have gathered, is not the face of a scheming corporate swindler. More like collateral damage of Jooste’s machinations.

‘No injustice’

Nonetheless, while it’s not the most optimal outcome (Jooste, as the man who sent the message, would have been first prize), this is an important precedent: the first South African conviction for Steinhoff, and a landmark ruling for insider trading – a crime routinely ignored by our criminal courts. 

“Obviously the main culprit has now departed, and therefore will not be held to account in a court of law. But I don’t think there’s any injustice. This was a very clear transgression of the insider trading rules,” Christo Wiese, Steinhoff’s chair at the time of its collapse, said on 702’s Money Show after Burger’s conviction.

Wiese said Jooste “presumably intended to do them a favour”, but in reality, he set up his four “friends” instead.

“The harm to so many people was so great that there can never be talk of full justice. But I’ve been at pains to point out to people how terribly involved these frauds are that it took the Germans five years before they arrested the first of the culprits,” he said.

Wiese isn’t wrong, but there is a tangible sense of missed opportunity in the fact that it took the better part of seven years for prosecutors to act. 

Nonetheless, while this is the first conviction in South Africa, Burger is now the fourth person to face justice, if you include what happened in Germany, where prosecutors began investigating in 2015 with a raid on Steinhoff’s European headquarters.

The others are: 

  • Dirk Schreiber, Steinhoff’s 53-year-old former European finance chief, who was given a three-and-a-half-year jail sentence in August last year for accounting violations and credit fraud. One year was commuted, while Schreiber co-operated extensively with the investigators, saving himself a longer sentence. 
  • Siegmar Schmidt, the 65-year-old former CEO of Steinhoff Europe, who was first convicted of the same crimes as Schreiber but given a two-year suspended sentence. Then in May this year, Schmidt was given a six-year jail sentence for tax evasion related to this case.
  • George Alan Evans, a former banker who helped Jooste set up various shady companies and trusts in which fictitious deals were constructed, appeared in court in Germany’s city of Oldenburg on criminal charges last August. But he got off lightly, paying a fine of just €30,000 to settle the case against him, after Jooste failed to arrive in that court.

South Africa’s courts are a step behind. Here, Stéhan Grobler, Steinhoff’s former company secretary, was arrested in March for the wider fraud and was due to appear in court on the same day as Jooste. He is out on R150,000 bail, while Steinhoff’s former CFO, Ben la Grange, was latterly added to that charge sheet.

The 75-page indictment handed to court in June framed the case narrowly, focusing on three critical years – 2014 to 2016 – when the labyrinthine fraud was at its most intense, involving R20.5bn.

It is confirmation that while the wheels of justice grind about as fast as evolutionary time, they do grind. Burger’s conviction is a landmark on that journey even if, in the absence of the original sinner, the achievement feels somewhat hollow. 

Top image: Collage. Currency.

Rob Rose

With more than two decades in business journalism and as an author of Steinheist and The Grand Scam, Rob knows his way around a balance sheet. While editor of the Financial Mail for eight years, the title bucked the trend of falling circulation, producing award-winning news.

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