Realist, not conformist analysis of the latest financial, business and political news

Patisserie Valerie Fraud Report – Who Should Be Able To See It?

When there’s been a fraud running for any length of time – or when it’s of any size – there’s obviously the most almighty catfight to try to pin the blame for not having caught it. Not so much to pin the blame on any specific person or grouping, but to make sure that it’s stuck to someone else, some grouping that the sticker is not a part of. As part and parcel of this process it is information which is obviously enough vital. Who was doing what and when exactly? Thus we can work out who should have spotted it.

So it is with Patisserie Valerie. It’s quite clearly the most gloriously complicated mess. In detail that is, it’s complicated. This sort of thing shouldn’t happen and should be caught by the usual and regular checks. Even if not by the auditors – fraud isn’t, contrary to general expectations, something that’s specifically set up to catch. But internal management accounting most certainly should. And it obviously didn’t.

In more general terms the Patisserie Valerie game was rather simple from the information we have so far. Invoices were being kited. Stick the bills into a different accounting period, maybe down the back of the sofa, and there we are. But to work it all out in detail information is vital. And we’re getting to the subsidiary catfight over that. Who should have the information?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Patisserie Valerie shareholders are threatening to take the collapsed chain’s administrators KPMG to court to get hold of a devastating report alleged to show how the company’s cash balances were artificially inflated. Produced by forensic accountants at PwC, the document is alleged to detail a suspected fraud running to tens of millions of pounds. It is claimed to reveal how suppliers provided fake invoices and multi-million pound cheques were submitted to bolster the company’s finances. Discovery of a black hole in Patisserie Valerie’s accounts – which is now put at £94m – led to its collapse into administration in January… [/perfectpullquote]

As we’ve pointed out before this is all of such a size that it’s not obvious that Patisserie Valerie ever made a profit at all:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] All of which raised the interesting question we’ve mentioned before. Did Patisserie Valerie ever in fact make a profit? We’re getting ever closer to the evidence that it didn’t. Not sure yet, certainly not, but it’s something to properly consider. Effectively, Patisserie Valerie was kiting the accounts payable, those invoices from suppliers, and when that got too tough it was fiddling loans from the banks. It’s possible that the amount and extent of this was greater than all their reported profits over time, meaning that they never did make a profit at all. Reported profits peaked at £11 million last year, it’s been running as a proper chain for about a decade, there’s a getting on for £100 million hole. Back of the envelope does indeed say that there’s a good possibility no profit ever was made. [/perfectpullquote]

Obviously enough, all would love to see that forensic accounting report to try to work it out. Was there ever a profit there?

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