Patisserie Valerie £40m black hole but wins court case

Patisserie Valerie £40m black hole but wins court case

Patisserie Holdings Plc (LON:CAKE) has today won its court case, with the firm surviving a winding-up petition served by HMRC.

The petition came amid claims that the company’s subsidiary, Stonebeach, had an unpaid tax bill of £1.14 million. To the relief of the company’s board and investors, the petition was dismissed by the High Court of Justice, Business and Property Courts.

In a less fortunate turn of events, the company are still in the midst of a fraud scandal and audit failure, which has left a £40 million hole in the firm’s accounts. While Patisserie should be £28 million to the good, the firm’s owner Luke Johnson has had to invest as much as £20 million of his own money just to keep the company afloat.

On the brink of insolvency, the company brought in forensic accountants from PricewaterhouseCoopers to trawl through its accounts and uncover the fraudulent activity that left it close to collapse. As part of the financial black hole is the mishandling and distribution of shares to company board members, which represents a serious failure by the auditing services of Grant Thornton.

Similarly, the ongoing investigation remains in its “preliminary” stages, but has uncovered severe and repeated malpractice by company board members amongst others, as the Serious Fraud Office have opened a case against an indiviudal – and finance director Chris Marsh was arrested and then released without bail.

In an official statement, Directors of Patisserie Valerie launched an investigation into “significant, potentially fraudulent accounting irregularities” on October 10.

However, a source close to major shareholder, Invesco, said, “Shareholders are concerned the board has given itself supervision of the investigation into [its] own conduct and potential incompetence.”

Luke Johnson has said “determined to understand the full details of what has happened” and the board would conduct a “full investigation with its legal and professional advisers into its true financial position”.