Moment of truth for cafe boss
Furious investors will demand answers over Patisserie Valerie crisis
PATISSERIE Valerie boss Luke Johnson will today face angry shareholders in the wake of an accounting scandal that has rocked the cafe chain.
Johnson and the firm’s directors will be questioned by investors who will want to know how a £40m black hole appeared in the company’s accounts.
They will demand answers about two secret overdrafts that were discovered as the scandal deepened. Bosses will also be quizzed about extra bonus payments to executives without the approval of shareholders.
The meeting has been called by parent company Patisserie Holdings to seek shareholder approval for a £15.7m rescue deal. investors are expected to vote in favour but want answers.
Shareholder advisory group Glass Lewis has already called on executive chairman Johnson, 56, to step down as head of the audit committee, saying he has a conflict of interest.
Johnson is chairman of the group’s remuneration and audit committees and its largest shareholder, with a 37pc stake. He is also listed as having more than 40 director roles at other companies. as chairman of the audit committee he is overseeing an investigation being carried out into suspected fraud. Glass Lewis said: ‘ Should Johnson continue to serve on the audit committee, we will continue to recommend against his re-election on that basis.’
Campaign group Share action urged shareholders to ask tough questions. Spokesman Beau o’Sullivan said: ‘ They should absolutely be asking how nearly £40m goes missing from a balance sheet in a matter of months, who is responsible, and why no one picked up on such a gross oversight. Was the oversight to do with the fact that Johnson was too close to the issue?
‘Shareholders should quiz him on the flagrant conflict of interest of being a 37pc shareholder at the same time as serving on the audit committee.’
But Tim Ward, chief executive of the Quoted Companies alliance, said investors should have raised questions regarding Johnson’s governance long before the alleged fraud came to light.
Ward said: ‘Codes can give guidance and point people in the right direction but it’s the investors that should be testing whether the board can justify the way they’re going about things.
‘it’s for the board to answer the question “Why did you constitute your audit committee in that way?” But it’s equally a question as to why the investors weren’t asking these things beforehand.’
The company earlier this month revealed it had discovered ‘significant, and potentially fraudulent, accounting irregularities’.
The former finance director, Chris marsh, was arrested on suspicion of fraud and released on bail after the black hole was discovered. He has since resigned.
Stock market filings also revealed marsh and chief executive Paul may received twice as many share options as expected, allowing them to cash in a combined £4.6m. Yesterday, restaurateur David Scott denied reports he was looking to make a swoop for the troubled firm.
The 68-year- old used to run Druckers Vienna Patisserie before it was bought by Patisserie Valerie 11 years ago. Scott said: ‘i have not appointed nor do i intend to appoint a company to liaise with shareholders on my behalf and i have no interest in making an offer for or acquiring shares in Patisserie Valerie or any related companies.’