Recently-published documents have stated that the accounting black hole affecting troubled café' chain Patisserie Valerie is now at least £94M – more than double the previous estimate.
The scale of the alleged fraud at the collapsed company has been revealed in a report by KPMG, the administrator to Patisserie Holdings.
When Patisserie Valerie went into administration in January, the cafe chain was said to have overstated its cash position by £30m and failed to disclose overdrafts of nearly £10m. But in its report, KPMG states that Patisserie Valerie incorrectly claimed to have £54 million in cash. It also says that the company overstated its assets by £23 million. According to KPMG, this is a stark contrast with accounts produced for Patisserie's management last August which showed net assets of £108 million.
At this stage, it is difficult to say with any degree of certainty what the fate of Patisserie Valerie will be. In February, a deal was done that saw its management team secure backing from an investment firm to buy it out of administration, save nearly 2,000 jobs and see 96 Patisserie Valerie shops taken over.
It remains to be seen how the legal investigation proceeds. The Serious Fraud Office (SFO) is carrying out a criminal investigation into Patisserie Valerie, whose former finance director was arrested and released on bail after having been suspended by the company.
While the company is still in existence there is the possibility that it could face prosecution. Alternatively, the SFO may take the view that it makes more sense to prosecute individuals.
What the SFO will want to avoid is the type of situation that developed when the huge accounting scandal was discovered at Tesco. That ended with Tesco admitting wrongdoing, paying a £129M fine under a deferred prosecution agreement – thus avoiding prosecution – and the SFO then seeing its prosecution of three of the company's directors collapse. As a result, neither the company nor any individuals were convicted for the wrongdoing.
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