{"id":17055,"date":"2019-01-24T15:35:18","date_gmt":"2019-01-24T15:35:18","guid":{"rendered":"http:\/\/unitelive.org\/?p=17055"},"modified":"2020-11-12T12:57:46","modified_gmt":"2020-11-12T12:57:46","slug":"bandit-capitalism-strikes-patisserie-valerie","status":"publish","type":"post","link":"https:\/\/unitelive.test.igniteamt.com\/?p=17055","title":{"rendered":"‘Bandit capitalism’ strikes again"},"content":{"rendered":"
<\/div>\n

What Unite has dubbed \u00e2\u20ac\u0098bandit capitalism\u00e2\u20ac\u2122 has struck again this week, when on Tuesday (January 22) the caf\u0102\u00a9 chain Patisserie Valerie collapsed into administration, precipitated by potentially fraudulent \u00e2\u20ac\u015baccounting irregularities\u00e2\u20ac\u0165.<\/p>\n

 <\/p>\n

After Patisserie Valerie failed to reach a rescue deal with banks, more than a third of the chain\u00e2\u20ac\u2122s 200 stores were immediately shut this week, with about 900 people, some of whom were Unite members, losing their jobs. A total of 3,000 jobs are at risk.<\/p>\n

 <\/p>\n

More than \u00c2\u01414m is owed to suppliers and \u00c2\u0141222,000 owed to HMRC for PAYE and national insurance contributions \u00e2\u20ac\u201c little of which is likely to be paid out if the company, which is now trying to find a new buyer, goes bankrupt.<\/p>\n

 <\/p>\n

Patisserie Valerie\u00e2\u20ac\u2122s financial woes first came to light in October, when a \u00c2\u014140m black hole was found in its accounts. The chain\u00e2\u20ac\u2122s finance director Chris Marsh was arrested on suspicion of fraud but later released on bail without charge and he subsequently resigned.<\/p>\n

 <\/p>\n

The Financial Reporting Council has launched an investigation into both Marsh and Patisserie Valerie\u00e2\u20ac\u2122s auditor Grant Thornton, which has come under fire for giving the green light to the accounts of a company that was later found to be financially insolvent — much like accountancy firm KPMG which oversaw Carillion\u00e2\u20ac\u2122s accounts.<\/p>\n

 <\/p>\n

Cashing out<\/strong><\/em><\/p>\n

It has now been revealed that multimillionaire Patisserie Valerie chairman Luke Johnson extracted \u00c2\u014140m from the company over the last five years when the company was first floated on the stock market in 2014. It is not thought that Johnson has been involved in fraudulent activity.<\/p>\n

 <\/p>\n

After revelations of the company\u00e2\u20ac\u2122s serious financial problems came to light last year, Johnson loaned the chain \u00c2\u014113m over the last several months, which he is now unlikely to get back.<\/p>\n

 <\/p>\n

Former chief executive Paul May cashed in on about \u00c2\u014111m in share sales, pay and dividends, including more than \u00c2\u01412m on share options last year, while former finance director Marsh has walked away with \u00c2\u01414.4m, including \u00c2\u01412m in share options last year as well.<\/p>\n

 <\/p>\n

‘Broken auditing sector’<\/strong><\/em><\/p>\n

A statement from the company issued on Tuesday (January 22) read, \u00e2\u20ac\u015bas a direct result of the significant fraud \u00e2\u20ac\u00a6 it has been unable to renew its bank facilities, and therefore regrettably the business does not have sufficient funding to meet its liabilities as they fall due\u00e2\u20ac\u0165.<\/p>\n

 <\/p>\n

Just a week before on January 16, the company said that its own fraud investigation \u00e2\u20ac\u015brevealed that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts. Among other manipulations, this involved thousands of false entries into the Company\u00e2\u20ac\u2122s ledgers\u00e2\u20ac\u0165.<\/p>\n

 <\/p>\n

Critics such as accounting professor Prem Sikka said Patisserie Valerie is yet another example of what he called \u00e2\u20ac\u0098a broken auditing sector\u00e2\u20ac\u2122.<\/p>\n

 <\/p>\n

Sikka argued in a Left Foot Forward blog post this week<\/a> that the \u00e2\u20ac\u015binternal controls\u00e2\u20ac\u0165 via Patisserie Valerie\u00e2\u20ac\u2122s auditing committee failed, \u00e2\u20ac\u015bas evidenced by the acknowledgement of fraud\u00e2\u20ac\u0165.<\/p>\n

 <\/p>\n

\u00e2\u20ac\u015bIt is worth noting that Carillion, BHS and all distressed banks rescued during the 2007-2008 crash boasted audit committees populated by part-time non-executive directors too to manage risks, and they all failed,\u00e2\u20ac\u0165 he wrote.<\/p>\n

 <\/p>\n

He added that Patisserie Valerie\u00e2\u20ac\u2122s external auditors Grant Thornton had also spectacularly failed.<\/p>\n

 <\/p>\n

\u00e2\u20ac\u015bAn application of fairly standard auditing procedures should have enabled the auditor to detect false accounting entries and manipulations of cash flow, profits and balance sheet of the company,\u00e2\u20ac\u0165 Sikka noted.<\/p>\n

 <\/p>\n

Unite report<\/strong><\/em><\/p>\n

Unite has long been a critic of failed auditing practices and lax financial regulations that allow such practices to flourish, especially since Carillion\u00e2\u20ac\u2122s collapse last year.<\/p>\n

 <\/p>\n

Unite assistant general secretary Gail Cartmail said that it was \u00e2\u20ac\u015bworkers at Patisserie Valerie who are the innocent victims of bandit capitalism\u00e2\u20ac\u0165.<\/p>\n

 <\/p>\n

\u00e2\u20ac\u015bThey have been failed by the government which has failed to take action to end these practices,\u00e2\u20ac\u0165 she added. \u00e2\u20ac\u015bThis latest corporate collapse demonstrates why the financial regulators are not fit for purpose — they need to be able to take action before a company collapses, rather than after jobs are lost.\u00e2\u20ac\u0165<\/p>\n

 <\/p>\n

Unite last month published a comprehensive report into Carillion\u00e2\u20ac\u2122s failure<\/a> and outlined a series of recommendations to stop the \u00e2\u20ac\u0098bandit capitalism\u00e2\u20ac\u2122 that\u00e2\u20ac\u2122s become increasingly common in the corporate world.<\/p>\n

 <\/p>\n

Among these recommendations is a call to break up the big four accountants with auditing being spun off into separate specific companies.<\/p>\n

 <\/p>\n

Unite also wants the creation of additional rules to ensure that auditors have a duty of care to employees, rather than as it is now, where auditors only have a duty of care to the company \u00e2\u20ac\u201c a legally distinct entity from workers.<\/p>\n

 <\/p>\n

Unite has moreover recommended that the regulatory system governing the entire financial sector be radically reformed. \u00c2\u00a0Possible reforms include reducing the number of regulators and clarifying their roles, as well as giving regulators real enforcement powers so that they can intervene before companies collapse.<\/p>\n

 <\/p>\n

\u00e2\u20ac\u015bIf companies do collapse the regulator must have the ability to undertake quick inquiries to identify if laws and regulations had been broken or manipulated,\u00e2\u20ac\u0165 Unite\u00e2\u20ac\u2122s report read. \u00e2\u20ac\u015bThe belated launching of never completed inquiries must be eradicated.\u00e2\u20ac\u0165<\/p>\n

 <\/p>\n

Cartmail urged the government to heed Unite\u00e2\u20ac\u2122s warnings.<\/p>\n

 <\/p>\n

\u00e2\u20ac\u015bSince Carillion\u00e2\u20ac\u2122s collapse the government has continued as though it is business as normal and has ignored all suggestions to initiate vitally needed reforms,\u00e2\u20ac\u0165 she said. \u00e2\u20ac\u015bIf the government does not take swift action then inevitably there will be further innocent victims of bandit capitalism in the future.\u00e2\u20ac\u0165<\/p>\n

 <\/p>\n

Pic: Tony Monblat<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

What Unite has dubbed \u00e2\u20ac\u0098bandit capitalism\u00e2\u20ac\u2122 has struck again this week, when on Tuesday (January 22) the caf\u0102\u00a9 chain Patisserie Valerie collapsed into administration, precipitated by potentially fraudulent \u00e2\u20ac\u015baccounting irregularities\u00e2\u20ac\u0165.   After Patisserie Valerie failed to reach a rescue deal with banks, more than a third of the chain\u00e2\u20ac\u2122s 200 stores were immediately shut this […]<\/p>\n","protected":false},"author":2,"featured_media":17056,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[17],"tags":[1088,996,855,1087],"wps_subtitle":"Unite reiterates call for reform following Patisserie Valerie's collapse","_links":{"self":[{"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/posts\/17055"}],"collection":[{"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17055"}],"version-history":[{"count":2,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/posts\/17055\/revisions"}],"predecessor-version":[{"id":25606,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/posts\/17055\/revisions\/25606"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=\/wp\/v2\/media\/17056"}],"wp:attachment":[{"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/unitelive.test.igniteamt.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}