Settlement struck between Grant Thornton and Patisserie Valerie creditors

30 June 2022 2 min. read
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Four years after the uncovering of accounting anomalies that would lead to the collapse of Patisserie Valerie, former auditor Grant Thornton has struck a multi-million-pound settlement for the resulting court case. Ex-Patisserie Valerie Chair Luke Johnson is expected to receive a large pay-out due to the agreement.

It is understood that Johnson was one of the top creditors with the doomed pastry chain at the time of its downfall. As such, he is in line to benefit from the major settlement of a legal case which was levelled at Grant Thornton. The professional services firm held the contract of auditor for Patisserie Valerie for 12 years, before an “accounting black hole” was uncovered in late 2018.

The breaking of the news saw Patisserie Holdings give a statement to the London Stock Exchange, in which it declared a misstatement of its accounts that involved thousands of false entries into the company's ledgers. According to a following forensic investigation, the cash flow and profitability of the business had been overstated in the past, and it was “materially below that announced in the trading update on 12 October 2018, which was based on limited work carried out over a 48-hour period."

Settlement struck between Grant Thornton and Patisserie Valerie creditors

Grant Thornton subsequently lost its role as auditor, with RSM taking up the position instead. However, the firm was unable to avoid collapse, and soon after appointed administrators.

Following this, Grant Thornton was sued by liquidators, who alleged that Patisserie Valerie fell apart in 2019 as “a direct result of a significant fraud”. Shareholders previously considered bringing legal action against the board of directors, including Johnson. However, Johnson asserted that he was tricked by other executive directors, who gave a fake picture of the company’s finances – and in the end, the administrators from FRP Advisory hired lawyers at Mishcon de Reya, asking for damages of around £200 million from Grant Thornton instead.

While the settlement is not as large as that figure, reports in the press suggest it does represent the lion’s share of Grant Thornton’s annual claims provision of £28 million – which it stated within its own most recent accounts. It comes at a difficult time for the auditor, with Grant Thornton having also been stung with a fine of £2.3 million by the Financial Reporting Council last year, due to failures in audits between 2015 and 2017. Meanwhile, a criminal investigation into the business and accounting practices of individuals associated with Patisserie Holdings by the Serious Fraud Office is ongoing.