Polly pech scandal

Features of Polly pech

Business type

Public Bankrupt & broken up 1940 Bankrupt 1990 London, UK Asil Nadir, (CEO) Textile 17,220

Fate

Founded Defunct Headquarters Key people Industry Employees

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History of the company

Foundation:
The Company was founded by Raymond Zelker and his wife Sybil in 1940 as a small fashion house operating in London.

Humble beginning
It all started back in 1941 in Lafka, Cyprus, with the birth of the boy who was to soon acquire an entrepreneurial bent through his first job, at the age of six, selling newspapers. Later, after failing to complete a university degree, he joined his father in the UK, where he got his first taste of the rag trade. After the Turkish invasion of Northern Cyprus, Nadir returned to his homeland and took control of a clothing company whose previous Greek owners had been forced

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out. From this beginning the Polly Peck story took off after Nadir bought into the company.

The new Chief Executive

Early in 1980 Restro Investments, a company controlled by Asil Nadir, a Turkish Cypriot, bought 58% of the Company for 270,000. Nadir took over as Chief Executive on 7 July 1980.

Sky height of Polly peck

On 8 July 1980 Polly Peck launched a rights issue to raise 1.5m of new capital for investments abroad. In 1982 Nadir began the early ventures. These included Uni-Pac Packaging Industries Ltd, Voyager Kibris Ltd, and Sunzest Trading Ltd, three companies incorporated in the Turkish Republic of Northern Cyprus. In September 1982 Nadir acquired a major stake of 57% in a textile trader. In 1983, Nadir also began expanding PPI's textile business by purchasing a 76 percent stake in Santana Inc. in the United States, and a majority stake in InterCity PLC in the UK. In April 1984, PPI also diversified into the electronics business by acquiring 82 percent ownership of Vestel Electronics In 1987 PPI acquired a majority interest in Palmon (UAE) Ltd., a manufacturer of casual shirts. By 1989 Polly Peck had become an international player by acquiring a 51% majority stake in Sansui (a Japanese electronics company on hard times). Polly Peck and its subsidiaries was the largest employer in Northern Cyprus (after the state) with 7,500 employees there.

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Attempt to take the Company private
In August 1990 Nadir came to the view that the Company was undervalued and then announced that he was taking it private. Almost as suddenly later that month he announced that he had changed his mind.

Downfall of Polly peck

Apparently not too keen on public scrutiny, and stung by criticism of lack of transparency concerning the group's earnings. News of the planned buyout sent the highly priced shares even higher. Unfortunately, the company was highly leveraged at the time, owing over 1b to more than 100 banks spread over a complex debt structure. Attempts to restructure this debt failed, and the banking support needed for the takeover did not materialize. The share price began to fall again.

Fraud
During this time, control of Polly Peck's cash appears to have been virtually nonexistent, and Nadir had been transferring vast sums into secret private accounts in Northern Cyprus and Turkey. Investigations subsequently discovered that, in the two years leading up to Polly Peck's collapse, Nadir had been bleeding the company dry. In 1988 Polly Peck transferred 58m to Turkish and Cypriot subsidiaries, and in 1989 a sum of 141m was paid out in 60 separate transactions. Many of the company's assets, again in Northern Cyprus and valued at 25m, had also been secretly registered in Nadir's name. Administrators failed to save the company, and Polly Peck was no more. Nadir was charged with 70 counts of false accounting and theft, and released on 3.5m bail. He skipped the UK (as the story has it, when detectives watching him were off duty on a bank holiday to save overtime pay), and to date has not returned.

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Collapse
On 20 September 1990, the Serious Fraud Office (SFO) raided South Audley Management, the company that controlled the Nadir family interests. The raid triggered a run on Polly Peck shares with the price practically in free fall. Ultimately the company collapsed.

Scrutiny against Nadir:

Trading in the companys shares was suspended on 20 September 1990. PPIs problems became apparent from the structure of the groups debts. The company had over 100 million in short-term revolving lines of credit. Even more debt consisted of long term loans for which Nadir had offered Polly Pecks shares as collateral. On 25 September 1990 the Company was placed in administration. An independent investigation by the Accountants' Joint Disciplinary found that during 1988 Polly Peck made 24 separate payments to its subsidiaries in Turkey and northern Cyprus, totaling some 58m. The following year Polly Peck paid out 141m in 64 different deals. The report said that "Mr Nadir was able to initiate transfers of funds out of [Polly Peck's] London bank accounts without question or challenge. Further ... he was able to conceal his actions until such time as the cumulative cash outflow became so great that the group was unable to meet its obligations to its bankers." In 1990, Polly Peck's board became so worried about the money transferred into Northern Cyprus that it confronted Mr Nadir and asked him to return it. He refused. The accounting regulators found that the Inland Revenue had been investigating transactions by a Swiss nominee company, Fax Investments, in shares in Polly Peck and another company run by Mr Nadir's son, Birol. It found a trail of transactions which indicated that money had come from Polly Peck businesses in northern Cyprus to Fax.

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Nadir leaving the UK
Nadir left the UK just after his 3.5 million bail had lapsed, while the detectives who were watching him were off duty to save overtime pay on a holiday. He remains a fugitive in Northern Cyprus, which has no diplomatic relations. Peter Dimond, the pilot who flew him out of Britain, was convicted of aiding a fugitive, but the conviction was quashed once it was determined that the bail had lapsed. Nadir was imprisoned for 10 years for his fraud, theft and misleading the investors and other stakeholders.

Auditors during 3 years of Nadirs fraud:

Auditor of the polley pech was stoy Hayward. He all knows about the theft of Nadir. Auditor and many other employees are with Nadir in his fraud.

Acquiring of Polley pech

In 1991, Polly Peck Group transferred all of its Vestel Electronics shares to one of its subsidiaries, Collar Holding BV, which was based in the Netherlands. In the same year, following the collapse of the Polly Peck Group, PPI was placed in administration. In November 1994, Ahmet Nazif Zorlu acquired PPI from the administrator by buying the entire share capital of Collar Holding BV, which at the time held 82% of the Polly Peck's issued share capital

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References
http://www.fool.co.uk/news/investing/2009/06/22/famous-scams-polly-peck.aspx http://en.wikipedia.org/wiki/Polly_Peck 1. ^ Increased stake in Sansui Electric 2. ^ Stoys faces fine and lessons over Polly Peck 3. ^ Asil Nadir hires top criminal barrister for defense 4. ^ Zorlu Holding acquires Collar Holding 5. ^ 'Angry' Asil Nadir pilot freed ^ How Asil reached his Nadir

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