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Patisserie Valerie... needs an accountant
Fraud charges have now been brought over a £94m overstatement in the cafe chain’s accounts
rimarily known for its cakes and coffees, upmarket cafe chain Patisserie Valerie has endured a torrid few years after it announced in October 2018 that its board had been notified of potentially fraudulent accounting irregularities.
What followed ultimately led to four people being charged in September 2023 with fraud, including former director and chief financial officer Christopher Marsh and his wife, accountant Louise Marsh, financial controller Pritesh Mistry, along with financial consultant Nileshkumar Lad.
All four suspects have been charged with conspiring to inflate the cash in the balance sheets and annual reports of the chain’s owner Patisserie Holdings between 2015 and 2018. The Serious Fraud Office (SFO) said this included providing false documentation to the company’s auditors. A pre-trial hearing in November 2023 set a trial date of 2 March 2026.
The chain’s sudden collapse into administration in 2019 meant the abrupt closure of 70 stores led to the loss of 900 jobs. At the time, the SFO opened a full investigation into the conduct, which it codenamed Operation Venom.
A huge black hole in the company’s accounts was eventually valued by administrators at £94m. After it went into administration, the cafe chain was found to have overstated its cash position by £30m and failed to disclose overdrafts of nearly £10m.
What would an AAT member do?
- Put in place controls and processes in order to prevent fraudulent activities and transactions
- If necessary, blow the whistle to raise the alarm over instances of potential fraud
Before flagging up the financial irregularities, Patisserie Valerie had been valued at £450m and was listed on the stock market, but its administration wiped out its shareholders.
After the bakery chain’s collapse, Grant Thornton, the auditor of its parent company, Patisserie Holdings, was fined £2.3m and accused of a “serious lack of competence” over its role in the scandal.
Grant Thornton accepted there were failures in its audit work, including statements on revenue, cash statements and the company’s fixed assets.
Patisserie Valerie was saved in 2019 by a management buyout backed by Irish private equity firm Causeway Capital Partners.
One lesson from this is the importance of robust controls and whistleblowing policies. The company’s directors should have spotted this fraud. The auditors should have noticed irregularities. As for whistleblowing – fear of being found out would have had a major chilling effect.
