Luke Johnson, the multimillionaire chairman of collapsed cafe chain Patisserie Valerie, has extracted more than £40m from the business since the cafe group floated on the stock market less than five years ago.
Other shareholders are considering legal action after their investments in Patisserie Holdings, the parent company of brands including Patisserie Valerie, Druckers Vienna Patisserie and Philpotts, were wiped out when the business went into administration on Tuesday.
More than 900 staff have already lost their jobs as the administrator, KPMG, announced on Wednesday that 71 outlets had closed immediately, including the original Patisserie Valerie outlet, which has been trading on Old Compton Street in central London since the 1940s.
The company has been in crisis since October, when a £40m black hole in its finances was blamed on “potentially fraudulent” accounting irregularities. Earlier this week the company said it had been unable to renew its bank facilities as a “direct result of the significant fraud”.
In November it secured £15m in new cash from shareholders in a bid to keep trading.
Johnson, who bought Patisserie Valerie in 2006, sold nearly £23m of shares when the company floated in 2014 and nearly £13m a year later and has also collected dividends and a £60,000 a year salary. There is no suggestion that the entrepreneur was involved in any fraudulent activity.
He has loaned the company a net £13m in recent months, most of which is unlikely to be paid back.
Former chief executive Paul May took out nearly £11m in share sales, pay and dividends, including more than £2.6m in profits on sales of share options last year, according to Guardian research. Former finance director Chris Marsh took out more than £4.4m including profits of £2m on share options in 2018.
Marsh was arrested by Hertfordshire police and bailed in October. He resigned that month.
The Unite union blamed government inaction over financial regulation for putting jobs at risk
Unite assistant general secretary Gail Cartmail said: “Workers at Patisserie Valerie are the innocent victims of bandit capitalism, they have been failed by the government which has failed to take action to end these practices.
“This latest corporate collapse demonstrates why the financial regulators are not fit for purpose, they need to be able to take action before a company collapses, rather than after jobs are lost.
“Since Carillion’s collapse the government has continued as though it is business as normal and has ignored all suggestions to initiate vitally needed reforms.”
The administrators running the collapsed cafe group said they are “hopeful of a positive outcome” for the remains of the business even though more than a third of its outlets have already closed with the loss of 920 jobs.
Patisserie Valerie on Old Compton Street closed on Tuesday night, along with 51 of the chain’s other outlets including concessions in Debenhams and Next. The entire 19-strong Druckers cafe chain has also closed.
David Costley-Wood, a partner at KPMG and joint administrator, said the group’s remaining 122 outlets would continue to trade while the administrators seek a buyer for the business.
“Since our appointment less than 24 hours ago, we have been pleased with the level of interest we have received in the business,” he said.
“In the meantime, we can reassure customers that across the remaining 122 stores, it is all but business as usual.”
The chief executive of Patisserie Holdings, Steve Francis, who stepped in to try and turn the company around after the potential fraud emerged, said the administration was a “genuinely positive development”.
“I would rather have 2,000 fully employed staff than 3,000 with no future,” he told The Grocer trade journal.
He said the “cloak of uncertainty” surrounding the details of the group’s accounts including its profitability meant that “no half sensible banker was going to back that situation”.
The Guardian visited a number of central London stores where staff claimed they had not been briefed on their future yet. “We haven’t been told anything,” said one. “We are working as normal.”
In another of its cafes, a waitress said she did not know where she would go if she lost her job, adding: “For the moment, we are open.”