Ongoing investigations into the £40 million (nearly $52.4 million USD) fraud that felled Patisserie Valerie have found that fake invoices were involved. Elsewhere in the world, misuse of procurement cards has stirred investigations at several U.S. universities. Wirecard also slumped on the heels of fraud reports involving allegedly bogus contracts and “round trip” transactions.
The payments and fraud saga surrounding failed café chain Patisserie Valerie in the United Kingdom has trained a spotlight on fake invoices. This past week, the Financial Times (FT) reported that the £40 million (nearly $52.4 million USD) accounting fraud — which led to emergency cash infusions and, ultimately, bankruptcy — involved finance staff and suppliers who helped offer fake invoices to the company.
Those findings were tied to a report by PwC that had been commissioned by the café chain’s board. The report found that a supplier submitted fake invoices for refurbishment work. There also existed email discussions between members of the company’s finance staff that centered on fake ledgers and worry over how to pay executives. As FT reported, “the reality of the accounts was so much worse than the fiction.”
According to the reports, the Serious Fraud Office in the U.K. is investigating the collapse of the company.
An unidentified source told the financial publication that there is “no evidence” that funds were being used for personal gain. The source said, “They were just making it sound like a better business than it was. People get caught up in a lie. They got deeper and deeper into it,” as checks were issued prior to year-end that would inflate the company’s cash position.
In the wake of the accounting scandal and bankruptcy, there has been the closure of more than 70 stores in the chain, and the loss of hundreds of jobs. Roughly 30 shareholders are signed up in legal action against the company.
Procurement Card Controversy
Separately, in the United States, a number of audits conducted — by the auditor general — at Illinois universities have spurred some calls from the state Board of Education for controls over procurement cards. In one case, Illinois News Network reported, for the University of Illinois, audits showed tens of thousands of dollars spent improperly on procurement cards. More than $23,000 was spent on items such as furniture and pharmaceuticals. In other cases, transactions were “split” to sidestep spending limits — to the tune of $52,000.
In terms of individual company news, the FT reported that a Wirecard senior executive, Edo Kurniawan, who is part of the FinTech’s accounting group based in the Asia-Pacific, has been suspected since last year of using forged contracts to mask fraudulent money flow. An internal report, said the publication, found that roughly £37 million has been moved through and among Wirecard subsidiaries and external businesses, amid suspicious transactions. Some of those transactions seem to be “round trip” transactions that moved across businesses as far-flung as India and Singapore.
As news of the report spread this week, shares in the payments FinTech were down 25 percent in intraday trading. Bloomberg reported a statement issued by Wirecard, claiming the FT article was “false, inaccurate, misleading and defamatory.” The firm bought Citigroup’s prepaid card business three years ago, and its banking arm is an issuer of Visa– and Mastercard-branded cards.