The chief financial officer of U.K. café chain Patisserie Valerie has been arrested after the company revealed “significant, and potentially fraudulent, accounting irregularities,” according to BBC reports on Friday (Oct. 12).
Patisserie Holdings, the owner of Patisserie Valerie, has requested an “immediate injection of capital” after revealing the accounting irregularities. On Friday, the company said Chris Marsh, its finance director, was arrested during the night and has been released on bail.
Marsh had been suspended by the company after the irregularities were discovered, reports said, when the company revealed “a material shortfall between the reported financial status and the current financial status of the business.” May figures released from the company said cash reserves stood at about $37.9 million. Now, the company confirms it is more than $13 million in debt.
Hertfordshire police confirmed “a 44-year-old man from St. Albans has been arrested on suspicion of fraud by false representation,” according to reports. “He has been released under investigation.” The authorities did not name Marsh in that statement, however.
Meanwhile, the nation’s Serious Fraud Office (SFO) confirmed it has “opened a criminal investigation into an individual” but did not disclose who that individual is and did not release further details on the case.
According to the BBC, the company is in talks to secure financing “in an attempt to save the business.” Trading for the company was suspended last week, and the chain has since closed two locations as of Friday, with one landlord confirming to reporters that it had repossessed the storefront.
Reports in The Guardian on Saturday (Oct. 13) said chairman Luke Johnson has created a rescue plan, raising $19.7 million from investors.
The company went public in 2014. Prior to its suspension, it had been valued at $578.7 million.
News of the irregularities and potential accounting fraud is likely to stir up further criticism of the nation’s accounting and auditing industry. The U.K. Financial Reporting Council said it is “looking into this matter carefully and will give full consideration to further action as more facts become available.” Reports said PwC has been hired to examine Patisserie Valerie’s accounts audited by Grant Thornton.
Criticism over auditors and accounting giants swelled following the collapse of a major government contractor, Carillion, earlier this year, as experts question how analysts failed to see the warning signs.