Patisserie Valerie’s parent company, Patisserie Holdings, has fallen into administration as a direct result of a significant accounting fraud discovered in October 2018.
KPMG, which had originally been brought in to help assess its options in order for it to recover, has been appointed as administrators and has already shut down about 70 of its stores in the UK, according to various media sources.
Luke Johnson, a major shareholder of the company, had been working to extend a standstill agreement with the company’s banking facilities but failed to have these renewed. As a result, the company does not have sufficient funding to meet its liabilities.
When the fraud was discovered in October, the accounting shortfalls were said to be in the region of £20m ($25.97m). At the time, the company’s directors acknowledged the company would be unable to operate in its current form without an immediate injection of capital.
This was then supplied by Johnson. However, in a statement made last week to the London Stock Exchange, the company said that the short falls were more extensive than initially thought. As well as other manipulations, the company discovered that thousands of false entries were made into the company’s ledgers.
Johnson has since provided an interest free loan of £3m to ‘help ensure that the January wages are paid to all staff working in the ongoing business’.
At the time of the initial discovery the company’s CFO Chris Marsh was arrested for fraud. Since then the company has seen wide ranging changes to its leadership including the appointment of a new CEO, an interim CFO, a non-executive director, a production director, as well as other management changes.
RSM has been acting as the company’s auditor, replacing Grant Thornton who was the company’s auditors at the time of the initial discovery in October.