Representing client interests at settlement negotiation table

Challenge: Widespread accounting fraud leads to plummeting stock price and billions in shareholder losses

In December 2017, the board of global furniture distributor Steinhoff International Holdings NV announced the resignation of their long-time CEO after the company’s auditors Deloitte identified pervasive accounting irregularities and refused to sign off on Steinhoff’s financial statements. Over the next few months, $20 billion of Steinhoff’s market capitalization evaporated after an independent investigation concluded that the Company had recorded $7.4 billion in fictious transactions between 2009 and 2017.  
 
This decline in Steinhoff’s share price caused billions in investor losses, and the investors’ only means of recovery was to pursue a claim against the company and other responsible parties

Solution: Settlement negotiation support and documentation collection 

Burford provided funding to a group of U.S. and European asset management firms, including several of Steinhoff’s largest institutional investors that collectively held over 5% of the company’s shares. Burford’s funding allowed our clients to engage Dutch legal counsel and damages experts to pursue a recovery without putting their funds’ assets at further risk. The investors also delegated authority to Burford to represent their interests in a complex global settlement process that included Steinhoff, Deloitte, Steinhoff’s D&O insurance carriers, Steinhoff’s financial creditors, and multiple other shareholder groups.

Although Burford’s clients chose not to file litigation against Steinhoff because of concerns that doing so could force the company into bankruptcy, Burford was able to negotiate a resolution of their claims that ensured its clients would receive the same settlement terms as other shareholder groups that had initiated litigation. Once the parties agreed on settlement terms, Burford worked with its clients to collect the voluminous supporting documentation needed to validate their claims with the settlement administrator. 
 
On February 15, 2022, a €1.4 billion settlement of securities fraud claims against Steinhoff became effective. The settlement, the largest against a European issuer accused of securities fraud, was the culmination of three years of complex, contentious negotiations between Steinhoff, its financial creditors, six separately represented shareholder groups and various other parties. 
 
Ultimately, 100% of the Burford claimant group’s claims were validated by the administrator, ensuring that each of Burford’s clients recovered their rightful share of the settlement proceeds. In contrast, the administrator rejected a significant number of claims submitted by other shareholder groups because of evidentiary deficiencies or other issues.

Impact: Infusion of capital allowed for strong, validated claims

Burford’s role in the Steinhoff settlement demonstrates that legal finance providers can add value beyond their financial support for securities litigation by helping clients develop and execute litigation and settlement strategies that align with their unique interests and investment objectives. When financial fraud threatens institutional investors, partnering with a legal financier with the capacity to fund large-scale claims and the expertise to navigate complex cross-border proceedings makes the difference in achieving a favorable resolution.