KPMG criticised over conflict of interest over Patisserie Valerie

Patisserie Valerie’s creditors and shareholders have criticised  KPMG, for taking on the role of the failed bakery chain’s administrator despite a significant conflict of interest. The Big Four firm said last month that a second administrator would be required to pursue legal claims against Grant Thornton, which was auditor to the chain and also vets KPMG’s accounts.

One creditor said “ For KPMG to take on the work pay themselves handsomely, then say they need a second administrator to pursue Grant Thornton, is outrageous. The main asset is a lawsuit against Grant Thornton, and it is a bloody outrage that KPMG had taken this role when it was already fully aware of the conflict.”

Grant Thornton is being investigated by the UK accounting watchdog for its work on the chain, which it had audited since 2006. KPMG was appointed as the chain’s auditor in January 2019, months after the discovery of a huge accounting fraud.

The creditor also said: “ The sale of the operating assets only raised a small number of millions which is now being spent on professional fees. There will not be a lot left for anyone else. It’s clear that this need someone who will genuinely pursue all avenues to recover money, rather than wringing their hands a bit and presenting a bill.” KPMG is estimated to have earned £1.5m from the Patisserie Valerie administration. The group said the chain’s directors were aware before it was appointed that a further administrator would later be required to investigate potential claims against Grant Thornton due to the conflict.

KPMG  said last month that the chain had overstated its total financial position by £94m – far worse than initial estimates when accounting irregularities were first discovered last October.