Patisserie Valerie executives Luke Johnson and Paul May are facing fresh questions after failing to disclose they were also landlords to the stricken bakery chain.
The duo, the chairman and former chief executive respectively, own Patisserie Valerie’s Tunbridge Wells site, a fact that was not disclosed as a “related party” in the accounts of operating company Stonebeach.
A spokesman for Mr Johnson said the company’s board had been made aware of the relationship, but decided it was below the threshold – called a “materiality level” – at which details needed to be disclosed.
Materiality. Sure, all sorts of thing happen, which are important and which are not? That depends upon the relative size of the happening to the whole.
Landlord of one shop out of 160? Sure, not material. Own 50% of the freeholds and renting them at top notch rates to the company? Material. In between, well, look up Sorites.
Are there people fiddling their tax bills by paying in cash? Sure are – do we abolish cash to deal with it? Nope. Suspend civil liberties? Nope.
Is it material, germane to the subject under discussion?
This will surely go down in business history as the finest ever example of having your cake and eating it.
Landlord of one shop out of 160? Sure, not material.
Materiality doesn’t work like that. Related parties are a lot more sensitive to (non-)disclosure. Does disclosure of one lease mean the same as no disclosure at all? No. So you must disclose one lease in the related party transactions note.
Do you think they are not abolishing cash? By the back door, of course, not overtly.
Daft decision not to admit to the potential conflict of interest: Caesar’s wife.
It makes you wonder about both the calibre of the board audit committee and the auditors. As with Carillion, questions need to be asked of the Finance Director and CEO
Everything is material if the press hates you.
The FD is being formally questioned over the fraud already…..
Dear Mr Worstall
Are there people fiddling their tax bills by paying in cash? Sure are – do we abolish cash to deal with it? Nope. But our beloved government would like to. Suspend civil liberties? Nope. But our beloved government would like to.
@Tim Worstall February 1, 2019 at 2:39 pm
“The FD is being formally questioned over the fraud already…..”
Shouldn’t there be an alleged in there somewhere?
DP
Shouldn’t there be an alleged in there somewhere?
I suppose it couldn’t hurt. But there’s very little doubt that there has been a fraud, an awful lot of money seems to have disappeared (or, perhaps, never existed). Who was responsible is what the criminal courts will be investigating.
Director transactions are material by nature i.e. there is no monetary threshold for this. If a director transacted with the business it must be disclosed.
The reasons for this are simple… if someone with the level of power of a director has their snout in the trough.. the members have a damn good right to know about it even it is a fwe hundred quI’d
Lee is right. Suppose that the nominal CEO, whom I guess would be Luke Johnson, were to pay the rent on his property rather than some other property? Fraudulent preference could only be claimed if the related party transaction were known about and in the open
@ Lee and Diogenes
Luke Johnson was a major investor, not an executive
He was the largest single loser from the fraud.
“Material” is accountancy jargon and while Lee is, probably, right about material that does not mean the same as “material”.
Yeah, I have moaned about this in the past, albeit not on this website.
As usual J77, you have to be corrected:
“Johnson is the Executive Chairman, Chairman of the Remuneration Committee, and a 37% shareholder of Patisserie Holdings.”
“Executive Chairman” is a title not a job description. Luke Johnson is a director of five or six different companies and four or five non-business operations but his main activity is running Risk Capital Partners. He is also a part-time journalist
Most non-execs spends more time on each directorship than he does on his “executive” roles.