A Guide To AML Regulations in 2024
by Rory Traynor
At the height of its success on the high street, Patisserie Valerie was a much-loved UK institution with a great heritage. The chain specialised in extravagant cakes and delicious pastries, and built up a good reputation because of its continental breakfasts, lunches teas and coffees. Yet despite this popular standing within the general public, in late 2018 the company closed its doors, reopening many years later with an online-only offering.
In September 2023, the UK Government’s Serious Fraud Office brought significant charges against four key members of the senior finance team, including the former CFO and director, a financial controller and a financial consultant.
Public interest in the case was reignited when four suspects were subsequently charged with conspiring to inflate the cash in Patisserie Holdings’ balance sheet and annual reports from 2015 to 2018.
The rise of Patisserie Valerie
Patisserie Valerie was first opened in 1926 on the corner of Dean Street and Old Compton Street in Soho, London by Esther van Gyseghem and her husband Theophile Vermeirsch.
The company grew in popularity amongst customers for its baked goods and was worth £450 million at the peak of its success (making it also extremely popular with its investors).
Patisserie Valerie’s high street presence advanced significantly, moving from eight stores in 2006 to around 200 in 2018. They were very well liked, and were even awarded IPO of the year at the prestigious Grant Thornton Quoted Company Awards in January 2015.
Unravelling the fraud scandal
So, when the news came that Patisserie Valerie were to shut their doors seemingly overnight, it came as a shock to many. More than 900 jobs were lost when the chain collapsed in early 2019. But not everyone was as surprised by this news as the general public. In fact, according to a report in the Financial Times, the business had overstated its monetary position by £94m in total, and it was only a matter of time before the UK Government stepped in to investigate.
2014 – 2017
Patisserie Holdings experienced a period of rapid expansion, acquiring various bakery brands and expanding its chain of cafes across the UK. It gained popularity and a large customer base, with hundreds of staff situated across the country.
August 2018
The first sign of trouble emerged as the company announced the discovery of a significant accounting irregularity. This led to the immediate suspension of the company's finance director, Chris Marsh, pending further investigation.
October 2018
The situation took a critical turn when Patisserie Holdings issued a warning about its cash flow crisis. It became clear that an emergency cash injection was urgently needed to keep the company afloat, causing share prices to plummet.
Investigations into the accounting discrepancies revealed a staggering £40 million shortfall in the company's accounts. It's uncovered that false invoices and inflated cash balances were used to conceal financial problems.
January 2019
Patisserie Valerie, one of the group’s flagship brands, collapses into administration. This resulted in the closure of numerous cafes and bakeries, leading to job losses for many employees.
March 2019
The Serious Fraud Office (SFO) launched an official investigation into the accounting irregularities to determine the extent of fraudulent activities within the company.
July 2019
Chris Marsh, the former finance director, was formally charged with fraud by the SFO. This marked a significant development in the legal proceedings related to the case.
September 2019
Luke Johnson, the former chairman of Patisserie Holdings, who had provided significant loans to the company to prevent its collapse, made the decision to write off his debt. This move resulted in substantial personal financial losses for Johnson.
September 2020
Chris Marsh was acquitted of all charges related to the fraud, raising questions about the handling of the case and the complexities surrounding it.
September 2023
The SFO charged the chain’s former director and CFO Chris Marsh, his wife/accountant Louise Marsh, financial controller Pritesh Mistry, and financial consultant Nileshkumar.
All four suspects were charged with conspiring to inflate the cash in the balance sheets and annual reports of the chain’s owners Patisserie Holdings between 2015 and 2018. The SFO said this included providing false documentation to the company’s auditors.
The four defendants have been summoned to appear at Westminster Magistrates Court on 10th October 2023 to hear the charges against them.
The immediate impact
In the aftermath of the Patisserie Valerie fraud scandal, the immediate repercussions were acutely felt by the company. The most significant of these consequences was the suspension of trading in the company's shares, eroding investor confidence.
As the news of the fraudulent activities unfolded, the financial implications began to manifest. The company witnessed a rapid loss of market value, leading to a severe dent in its financial stability. The looming threat of potential insolvency cast a dark shadow over Patisserie Valerie's prospects, further compounding its woes.
The Serious Fraud Office (SFO) played a pivotal role, initiating fraud charges against four individuals, including a former director who had a central role in the financial mismanagement that led to the downfall of this chain of nearly 200 high street bakeries.
The SFO's investigation aptly codenamed "Operation Venom," commenced in October 2018, just two days after the abrupt suspension of trading by Patisserie Valerie. The charges brought against all four suspects revolve around a conspiracy to inflate the cash reported in Patisserie Holdings' balance sheets and annual reports from 2015 to 2018. This was achieved through the provision of false documentation to the company's auditors. Shockingly, during this period, the company had reported holding £28 million in accounts, all while concealing a staggering £10 million in debts from its investors and creditors.
The future?
Lisa Osofsky, Director of the SFO said:
“Patisserie Valerie’s abrupt collapse rocked our high streets – leaving boarded-up shops, devastating job losses and significant investor losses in its wake. Today is a step forward in getting to the bottom of this scandal.”
Whether Patisserie Valerie has a future, albeit online-only or not, is still uncertain. While there are a few physical Patisserie Valerie shops in the UK, a lot of their products are also for sale in Sainsbury's and other UK supermarkets.
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