The Serious Fraud Office has brought fraud charges against four individuals in the bakery chain’s finance team, including the former chief financial officer of Patisserie Valerie
The charges relate to the financial failure of the chain of almost 200 high street bakeries. In 2018 Patisserie Valerie collapsed after reporting accounting and financial misreporting related to an estimated £40m of accounting errors over a three-year period, primarily involving reporting of revenues and invoice irregularities.
The Serious Fraud Office (SFO) has charged former director and chief financial officer of Patisserie Holdings plc, Christopher Marsh, and his wife, accountant Louise Marsh, as well as financial controller Pritesh Mistry and financial consultant Nileshkumar Lad. All four suspects were served with charges at their homes.
The SFO opened a full investigation into the conduct, codenamed Operation Venom, in October 2018. This came two days after the company abruptly suspended trading, closing 70 stores and causing the loss of over 900 jobs across the country when its debts were revealed.
The SFO has charged all four suspects with conspiring to inflate the cash in Patisserie Holdings’ balance sheets and annual reports from 2015 to 2018, including by providing false documentation to the company’s auditors, Grant Thornton. During this time, the company also reported holding £28 million in accounts, yet concealed £10 million in debts from its investors and creditors.
The defendants have been summoned to appear at Westminster Magistrates’ Court on 10 October 2023 to hear the charges against them.
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.’
Grant Thornton was statutory auditor for AIM listed Patisserie Holdings since 2007 and signed off clean audit opinions for the financial statements in each of the FY15, FY16 and FY17 audits.
A Financial Reporting Council (FRC) investigation into Grant Thornton’s audit of Patisserie Valerie was launched in 2018 and found multiple failures concerning the audits over the three-year period.
The investigation identified widespread failures in the quality of the audit, covering assessment of revenue, cash, journals and fixed asset additions.
The breaches of the audit requirements were ‘pervasive and extensive throughout numerous important areas of the audits, and across several legal entities in the group’. In addition, there were systemic failures over a three-year period, ‘evidencing a serious lack of competence in conducting the audits’.
In 2021, Grant Thornton was fined £2.34m, reduced from £4m, for the misconduct while audit engagement partner David Newstead was given a £150,000 penalty, reduced to £87,750 for compliance with FRC investigators.
At the time, Claudia Mortimore, deputy executive counsel to the FRC, said: ‘This decision notice sets out numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work.
‘The audit of Patisserie Holdings plc’s revenue and cash in particular involved missed red flags, a failure to obtain sufficient audit evidence and a failure to stand back and question information provided by management.’