Striking conceptual similarities between the Patisserie Valerie scandal and Enron
There are striking similarities between the Patisserie Valerie scandal and Enron because they both have entailed the concealment of debt away from the firm’s balance sheet.
In each case the finance director has initially been vilified but a striking similarity is the cashing in of equity-related personal benefits by senior connected players in both events. In 2001 Geoffrey Skilling, the Enron chief executive resigned his position and sold somewhere in the area of $60 million worth of stock. Both the PV finance director and chief executive, Chris Marsh and Paul May respectively cashed in options in February this year on the quoted equity of the firm for a total amount of about £2.9 million pre tax. Smaller beer but the comparison is clear.
Neither transaction would have been possible had the public information about either firm been the truth. Both transactions were based on verified public but misleading information that formed material basis for equity value of the respective firms.
Where transactions have taken place to enrich those that have made or authorised untruthful statements there must be a strong case for accusations of fraud. I have no doubt that regulators will pull the firm limb from limb as well as conducting very close scrutiny on the relationship with the auditors, Grant Thornton who will have to be able to demonstrate that they too were misled and that they were throuough enough in their dealings with the firm. The FCA is inclined to concentrate on insider trading and market abuse which is right but surely far more emphasis needs to be deployed in the area of misleading the market and investors in this way where the consequences are the failure of an entire firm.