Once a leading star of the FTSE 100, Polly Peck collapsed under the weight of debts after being fraudulently milked of cash.
The tale of Asil Nadir and Polly Peck was literally one of rag trade to riches. In the 1980s, Nadir seemed to have the golden touch, with booming success wherever he turned his hand, making some pretty pennies for many of his early investors.
But when the Polly Peck empire collapsed in 1991, Nadir ended up on the run from the Fraud Office. In 1993 he fled to Turkish Northern Cyprus, which has no extradition treaty with the UK, to escape trial on charges of systematic fraud. He is still there to this day.
Humble beginnings…
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 out. From this beginning the Polly Peck story took off after Nadir bought into the company. Polly Peck shares floated on the stock market at just 5p, after Nadir took over as Chief Executive, and he immediately launched a rights issue, which raised £1.5m to expand overseas.
Mighty empire
Over the next few years Polly Peck shares soared from that 5p start to reach the dizzying heights of £35, and a number of acquisitions and rights issues followed, with the company diversifying into all manner of business, from fruit and foods to electronics. At one time it took a 51% stake in ailing Japanese electronics company Sansui, and later ending up taking control of the former Del Monte fresh fruits division to become one of the world's major players in the fruit business.
In less than 10 years, by a strategy of growth by acquisition, Polly Peck had gone from a relative nobody in the fashion business to a global player with more than 200 worldwide subsidiaries under its control.
With more than 17,000 employees and a market capitalisation of £1.7b, Polly Peck proudly entered the FTSE 100 in 1989.
Downfall
Apparently not too keen on public scrutiny, and stung by criticism of lack of transparency concerning the group's earnings, Nadir attempted to take the company private in August 1990. 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 materialise. The share price began to fall again.
On 20 Sep 1990 the Serious Fraud Office raided the Nadir family's management company, causing a further run on the shares.
As the share price declined and various short term debts became due, liquidity problems started to emerge. Much of Polly Peck's long-term debt was backed by company shares as collateral, but when the value of those shares fell to around a quarter of the debt figure, the Stock Exchange stepped in and the shares were suspended. Administration soon followed.
Fraud
During this time, control of Polly Peck's cash appears to have been virtually non-existent, 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.
Aftermath
Unlike most of the other fraudsters we've looked at in this series, Nadir has so far not had his comeuppance. Today he runs Kibris Media Group in North Cyprus, which publishes a couple of newspapers and operates TV and radio stations. He is, apparently, accompanied by a retinue of bodyguards wherever he goes, which is probably a wise move.
Previous Scam Articles:
