Steinhoff: Reserve Bank manager signed off on billions in alleged unlawful cross-border transactions (Part One)

12 Mar 2024

The SA Reserve Bank has laid a corruption complaint against a former divisional head at its Financial Surveillance department, Raymond Paola, who was between 2012 and 2017 tasked with overseeing Steinhoff’s large cross-border transactions. His co-accused is said to be former CEO Markus Jooste and company risk manager Chris Grové.

Startling details contained in a dusty docket registered to the Hawks’ serious commercial crime unit shine a light on some alleged backroom schmoozing apparently aimed at paving the way for the questionable facilitation of billions of Steinhoff rands out of South Africa — with South African Reserve Bank (Sarb) approval.

Historically, it was clear Sarb had serious suspicions that Steinhoff may have contravened a list of exchange control legislation. This short series of two stories offers new insight into Sarb’s suspicion and the complicity of one of its own.

Sarb’s acutely embarrassing dilemma of divisional head at Sarb’s Financial Surveillance department, Raymond Paola, had been kept airtight for nearly three years. Neither formal nor informal questions posed nor a PAIA application could move Sarb representatives to pull back the blanket from the Paola case. Over time, Scorpio collected a number of documents and background information in an attempt to build the puzzle.

Netted during Sarb investigators’ preliminary probe was Steinhoff’s risk manager, Chris Grové, another former Sarb employee. Documents, including emails, suggest Grové was the point man between Steinhoff and Sarb who worked closely with Paola. Grové is said to have spilled the beans on Paola during an interview with Sarb investigators when he revealed that former company CEO Markus Jooste allegedly fed the bank’s watchman with horse racing tips.

The internal net was cast even wider, causing Sarb investigators to unearth evidence suggesting 16 exchange control applications – in which Steinhoff asked permission to engage in billions of rands in offshore transactions – had in fact contravened a litany of the bank’s rules governing cross-border transactions. Paola is said to have signed off on all 16 flagged applications between 2012 and 2017. This includes the period Steinhoff set up shop in Germany and the Netherlands.

Sarb consequently slapped Paola with internal disciplinary charges. These relate to gross dishonesty, a conflict of interest, the abuse of confidential information, soliciting gifts and the failure to declare those gifts. The 61-year-old Paola, who has worked at Sarb more than half his life, for 33 years, resigned in June 2021 before the disciplinary hearing could be concluded. Sarb allowed him to resign – a point Paola prominently made in his answer to Scorpio.

Paola, through his lawyer, declined to answer detailed questions. He claimed that “many of [Scorpio’s] questions are not in context, are one-sided and do not reflect a proper understanding. [Paola] is also bound by confidentiality in accordance with his terms and conditions of employment”.

Sarb registered the complaint against Paola, Grové and Jooste in 2022 with the Hawks in terms of South Africa’s corruption legislation. The unit’s Specialised Commercial Crime unit is supposedly investigating the matter, Hawks spokesperson Katlego Mogale confirmed. She declined to confirm the suspects listed in the case.

The 66-year-old Grové said he has not been informed of the possible corruption charges against him and authorities have not recently questioned him on this or other Steinhoff matters.

Jooste (63) could not be reached for comment.

The schmoozing

When investigators pulled on the string of wool provided by Grové, they claimed to have found evidence that Paola was wined and dined by Steinhoff on numerous occasions. He even made it on to Jooste’s esteemed Christmas list of wine deliveries.

One particular referenced incident is an email from Piet Ferreira, Steinhoff’s head of mergers and acquisitions, to Jooste, dated 17 May 2013. It referenced an exchange control application Paola had signed the previous day, about which Ferreira allegedly remarked that the approval “basically cost us a breakfast at the White House”. The “White House” is a reference to the former Steinhoff head office in Johannesburg. Paola is said to have been the sole Sarb representative at the breakfast – a big no-go for state representatives who wish to be seen as being of an independent mind.

The application related to Steinhoff International Holdings seeking approval to acquire Austrian-based kika-Leiner. This deal was referenced almost to the day a decade later when Sarb informed Steinhoff’s new management in a letter dated May 2023 that around R5.5-billion in the local company accounts were to be frozen.

Read more in Daily Maverick: Sarb freezes billions in Steinhoff accounts — but you wouldn’t notice in company financial statements

The reason, Sarb told Steinhoff at the time, was because the bank had a strong suspicion that Steinhoff may have contravened a long list of exchange control regulations – the kika-Leiner deal, rubber-stamped by Paola, included.

The 68-year-old Ferreira could not remember the incident, but was nonchalant over the reference when Scorpio asked him about it. He said Steinhoff regularly treated officials at a number of banks and companies to the odd breakfast, lunch or dinner – as “a gesture of goodwill”.

“I cannot tell you that I have knowledge that Raymond had been bribed by Steinhoff … I think it [the reference to the White House] was simply a joke. It was probably breakfast in appreciation of the work done.”

Ferreira declined to comment on the matter further, saying he could not speak about Steinhoff issues. He recently did sign an affidavit solicited by the Hawks in an unrelated Steinhoff case. Ferreira left Steinhoff in 2016. In February 2017, 10 months before Steinhoff spectacularly imploded, Ferreira won an Individual DealMaker of the Year 2016 award for work done relating to Steinhoff and Tekkie Town. The award speeches praised Ferreira for his excellent memory and attention to detail.

Horse racing, golf tours

There were other, more serious incidents too, Sarb complained to the Hawks. Paola is, like Jooste, a horse racing enthusiast. It so happened that Paola attended the 2013 and 2016 Sansui Summer Cup and the 2014 Vodacom Durban July on the invitation of the Jooste-linked company Phumelela Gaming and Leisure, investigators said. The Durban July invitation apparently included flights, accommodation, vehicle renting and entertainment during the event for Paola and his wife.

Betting is a substantial part of the fun linked to these events, and Jooste seemingly wanted Paola to have a good time. In 2015, 2016 and 2017, Jooste is found to have sent Paola horse racing tips for the Durban July – twice through Grové and once through Jooste’s personal assistant. These were emailed to Paola, Sarb claims.

Paola is apparently a golfing aficionado, too, and Steinhoff was again said to have been supportive of this leisurely endeavour. In 2014, 2015 and 2016, Paola is said to have solicited gifts for his personal golf tours to Durban, East London and Cape Town from a number of people and companies Sarb had a business relationship with. Steinhoff, with Grové as the contact person, booked a vehicle at a discounted rate for Paola’s use. Sarb says the same thing happened when Paola visited George with his wife in 2015.

When Grové first surfaced the story about Paola in 2021, the subsequent investigative process naturally led to his suspension from Sarb in mid-2021. The basis was that Paola had created a conflict of interest, was grossly dishonest and failed to comply with Sarb policies and rules – all of which are viewed as “serious misconduct”.

Paola allegedly confirmed that he did receive these gifts and benefits during an interview with Sarb investigators.

Details contained in internal disciplinary charges drafted, but not included in the criminal charges submitted to the Hawks, suggest Paola was further asked to answer to allegations of soliciting and receiving gifts in contravention of Sarb policies from at least two commercial banks. The preliminary documents are not clear on what exactly these gifts were, but stated they related to Paola’s personal golf tours, too.

Another event that Sarb suggested was grossly dishonest is when Paola allegedly advised a subordinate at the Financial Surveillance department not to declare a gift and to lie about it when she was questioned about any failure to declare.

Last, Paola was accused of abusing his access to confidential information by having tipped off a family member with at least two pieces of investment advice, one of which related to Steinhoff.

Conflict of interest

A consistent theme in the planned disciplinary hearing was that Paola failed to avoid a situation which might have involved a conflict of interest between his personal needs and those of Sarb, that he failed to act in the best interest of Sarb and solicited and received unacceptable personal advantage.

We have no version from Paola on what happened because he never fought the disciplinary charges and repeatedly declined to answer questions about it.

To his supporters, Paola paints himself as “the fall guy”, the one designated to shoulder Sarb’s embarrassment. He may have made some mistakes and he may have been duped into believing the Steinhoff boys, Paola allegedly claimed, but if he did, everyone else at the Sarb did, too. In any case, how was he to know the whole Steinhoff thing was a scam?

Paola may well have a point. Known facts, however, suggest some scepticism about his version would be prudent.

To start off with, Paola almost exclusively worked with and oversaw the Steinhoff business. He was a senior manager at the Financial Surveillance department tasked with regulatory oversight of cross-border transactions. Paola worked at Sarb for 33 years and six months before his resignation in June 2021.

In other words, he probably had a wealth of experience and had witnessed and stopped a number of scams in his lifetime. In addition, the evidence allegedly suggests that Steinhoff in some cases belatedly asked “permission” for transactions they actually had already pushed through – a transgression that should have raised Paola’s hackles. In other instances it seems that Paola may have advised the Steinhoff managers on how to structure their requests.

And then there are the gifts.

If the complaints against Paola are proven to be correct, this may well be an important example of how bribes and corruption need not involve the staggering amounts punch-drunk South Africans have become used to over the past decade.

Influence peddling and being included on a sought-after Christmas gift list can have equally devastating consequences. DM

Part Two will focus on the deals linked to the 16 exchange control applications Paola is said to have signed off on.

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Business Maverick

The schmoozing

Horse racing, golf tours

Conflict of interest