Writing in the Sunday Times yesterday, Luke Johnson said that the AIM-listed company had deliberately appointed the firm because, even though Patisserie Valerie was still a small business, “having a top-six firm seemed to me a worthwhile investment – even if the fees were higher”.
In the run-up to the collapse, he had felt confident that the numbers were proving the resilience of the business, even though competition, conditions and costs in the hospitality industry were getting tougher.
“I received solid weekly numbers, comprehensive monthly management accounts, and of course annual accounts that were given a clean bill of health by our auditors. If ever there were queries, I got satisfactory answers.”
But then came 9 October last year, when he went to work as usual and found himself “walking into what felt like a nightmare parallel universe”. Patisserie Valerie CEO Paul May told him the bank accounts had been frozen and what they thought had been £28.8m of cash in the bank was in fact nearly £10m of debt, with £9.7m drawn down on two secret bank overdrafts.
Johnson, a successful entrepreneur and the majority shareholder in the business, admits that the news left him in a state of profound shock. “In business, as in life, there are certain documents and facts you rely on. They might be audited accounts, bank balances, a passport or a qualification. If these are fake, you wonder what is real and what is not.”
As far as Grant Thornton is concerned, he comments, “One of the most astonishing aspects of the entire episode is the way in which it seems such an eminent firm had the wool pulled very comprehensively over its eyes. They never raised any material issues about the quality of our accounts.”
The Financial Reporting Council is currently investigating Grant Thornton’s audits along with the role played by Chris Marsh, Patisserie Valerie’s former finance director, in the company’s downfall.
Johnson had worked with Marsh at a previous investment, Cash a Cheque, which was sold on and was responsible for bringing him in to head up the finance team at Patisserie Valerie.
Marsh was suspended on 9 October and was arrested by the Serious Fraud Office two days later. He resigned shortly afterwards.
Johnson says that the speed at which Patisserie Valerie collapsed left him reeling with shock, unable to sleep and struggling to concentrate. “If I was arrogant at times before, my ego has taken quite a battering since. A very public disaster such as this shatters your self-belief. You think you are constructing a reasonably well-ordered life, and then in a matter of a couple of days it all starts to unravel.”
He admits to feeling betrayed by those around him and reveals that for six months after the collapse, he could think of nothing else, dwelling in particular on the times when he had been told “untrue things by people I trusted”.
“In business, we rely on honesty from those around us and systems designed to prevent misbehaviour. Yet serious frauds still happen…
“All entrepreneurs who’ve built substantial companies realise it takes skill and luck to do well; such individuals take big risks, very often lose money and occasionally go bankrupt.
“But as long as these failures are honest, then the entrepreneurs involved should not be shunned. If you don’t have risk-takers innovating – and sometimes failing – then wealth generation and job creation will disappear.
“My heart goes out to people like Jamie Oliver. Without them we would ossify as a society.”
Since Patisserie Valerie’s collapse, Johnson has considered suing Grant Thornton or, at the very least, putting pressure on the administrators, KPMG, to issuing court proceedings.
Grant Thornton declined to comment.