Polly Peck
| Company type | Public |
|---|---|
| Industry | Textile, Conglomerate |
| Founded | 1940 |
| Founder | Raymond and Sybil Zelker |
| Defunct | 1991 |
| Fate | Entered administration and collapsed amid scandal |
| Headquarters | United Kingdom |
Key people | Asil Nadir (CEO) |
| Products | Textiles, electronics, housewares, fresh fruit division (Del Monte) |
Number of employees | 17,227 (late 1980s) |
Polly Peck International (PPI) was a UK-based textile firm that experienced swift expansion throughout the 1980s, eventually becoming part of the FTSE 100 Index before its downfall in 1991, burdened by debts amounting to £1.3 billion. Its chief executive officer, Asil Nadir, escaped to Northern Cyprus in 1993. The company's failure triggered a significant corporate controversy that influenced changes to UK company law, including the early development of the UK Corporate Governance Code.
In 2010, Nadir returned to Britain to face charges alleging the misappropriation of over £150 million from Polly Peck. He was found guilty on ten counts of theft involving £29 million and received a ten-year prison sentence in 2012.
Origins
Established in 1940 by Raymond and Sybil Zelker as a modest fashion enterprise, Polly Peck initially concentrated on designing and retailing clothing.
Period of rapid growth
During the late 1970s, Polly Peck encountered financial difficulties. In early 1980, Restro Investments, led by Asil Nadir, purchased a 58% controlling interest for £270,000, with Nadir assuming the role of CEO on 7 July 1980. The company issued new shares, raising £1.5 million to support international investments.
By 1982, Nadir launched several ventures including Uni-Pac Packaging Industries Ltd, Voyager Kibris Ltd, and Sunzest Trading Ltd based in Northern Cyprus. Uni-Pac utilized excess citrus fruit to generate packaging profits, while Voyager Kibris acquired the Sheraton Voyager Hotel in Turkey and developed resort properties.
In September 1982, Nadir secured a 57% holding in textile distributor Cornell, raising £2.76 million through a rights issue. Combined with £6 million from Polly Peck itself, this capital financed the 'Niksar' mineral water bottling facility in Turkey, which reportedly sold around 100 million bottles across Middle Eastern markets.
Between 1983 and 1987, PPI broadened its textile operations globally by acquiring interests in Santana Inc. (United States), InterCity PLC (United Kingdom), Impact Textile Group and Shuihing Ltd (Far East), along with Palmon (UAE) Ltd., a manufacturer specializing in casual shirts.
The group's diversification into electronics began in April 1984 with an 82% acquisition of Vestel Electronics, a leading Turkish maker of consumer electronics and appliances. Collaborations with licensors such as Akai strengthened Vestel’s market position. Polly Peck also expanded into housewares by acquiring Russell Hobbs.
By 1989, Polly Peck had obtained a majority stake (51%) in Japanese electronics company Sansui and purchased Del Monte's fresh fruit division for $875 million from RJR Nabisco. That same year, its inclusion in the FTSE 100 underscored its status as a prominent British conglomerate.
Driven by Nadir’s acquisition-focused approach, PPI’s market value surged from £300,000 to £1.7 billion within ten years. The conglomerate encompassed more than 200 subsidiaries worldwide, reporting pre-tax earnings of £161.4 million, net assets totaling £845 million, and employing roughly 17,227 people. Polly Peck was Northern Cyprus’s largest private employer with a workforce of 7,500.
Plan for privatization
In August 1990, Nadir claimed the company was undervalued and revealed intentions to take it private. Nevertheless, he abandoned this plan later that same month.
Collapse
An independent inquiry uncovered that in 1988 Polly Peck made 24 payments amounting to £58 million to its subsidiaries located in Turkey and northern Cyprus, followed by 64 transactions totaling £141 million in 1989. The investigation revealed that Nadir had the ability to move funds from Polly Peck’s London accounts without any supervision and concealed these transfers until the resulting cash shortages severely impaired the group’s capacity to fulfill its banking commitments. In 1990, the board confronted Nadir regarding funds shifted to Northern Cyprus; he declined to return the money.
Regulatory authorities discovered that the Inland Revenue was probing transactions connected to Fax Investments, a Swiss nominee company associated with Nadir’s son. It appeared that money was being transferred from Polly Peck’s northern Cyprus operations to Fax. Nadir informed auditors Stoy Hayward that one Northern Cyprus entity provided "personal banking services" to local clients—a practice auditors considered "highly imprudent." Furthermore, certain Polly Peck assets in Northern Cyprus, valued at £25.5 million in 1989, were covertly registered under Nadir’s name. The Didima Hotel project (£15.5 million) and other properties (£6.7 million) lacked formal ownership registration; Nadir asserted these assets were held "in trust" for the group.
On 20 September 1990, the Serious Fraud Office conducted a raid on South Audley Management, which controlled the Nadir family’s interests. This event triggered a sell-off of Polly Peck shares and led to trading being suspended.
Examination of Polly Peck’s debt revealed over £100 million in short-term revolving credit facilities alongside substantial long-term loans secured against Polly Peck shares pledged by Nadir.
By late October 1990, following an application by National Bank of Canada’s London branch, the High Court in London issued an ex-parte provisional liquidation order. Subsequently, Polly Peck’s directors initiated voluntary administration.
Antiques recorded on the company’s books at approximately £6 million were discovered at the Berkeley Square headquarters but were independently valued between £2.5 and £3 million.
Ultimately, the company failed, and Nadir faced 70 charges related to false accounting and theft, all of which he denied.
In 1991, Polly Peck transferred all Vestel Electronics shares to its subsidiary Collar Holding BV in the Netherlands. Following Polly Peck’s collapse and entry into administration, Ahmet Nazif Zorlu acquired PPI in November 1994 by purchasing Collar Holding BV, which owned 82% of Polly Peck’s issued shares.
Leaving the UK and returning
Shortly after his £3.5 million bail expired, Nadir departed the UK, initially flying to France before relocating to Turkish Cyprus—a jurisdiction without an extradition treaty with Britain. He remained a fugitive in northern Cyprus until 26 August 2010, recognized only by Turkey. The pilot who transported him was first convicted of assisting a fugitive but was later acquitted after confirmation that Nadir’s bail had lapsed. In 1996, Elizabeth Forsyth, an aide to Nadir, was convicted of laundering £400,000 stolen from Polly Peck but was released on appeal ten months afterward.
In 1993, government minister Michael Mates resigned amid controversy over his close association with Nadir and his opposition to the Serious Fraud Office’s inquiry. Throughout, Nadir has consistently denied allegations of embezzling over £30 million from Polly Peck, claiming that the SFO abused its powers and compromised his right to a fair trial. In 2002, auditing firm Stoy Hayward was fined £75,000 for its role as group auditor for Polly Peck. Additionally, Erdal & Co., an accounting firm based in northern Cyprus, was penalized for auditing Polly Peck’s subsidiaries.
By 2010, Nadir’s business interests had greatly diminished: his hotels were sold in 1994 to settle tax liabilities; his bank Endustri was taken over by the Central Bank of Northern Cyprus in 2009; leaving only Kibris newspaper and related media holdings.
On 29 July 2010, Nadir applied for bail with intentions to return to the UK and face charges of theft totaling 66 counts. After agreeing to electronic monitoring and surrendering his passport, he returned on 26 August 2010. From 3 September 2010 onwards, he was subjected to curfew and electronic tagging. His trial commenced on 23 January 2012 on selected charges of theft and false accounting.
On 22 August 2012, Nadir was convicted on ten counts involving nearly £29 million stolen from Polly Peck; he was acquitted on three others. The total alleged theft amounted to approximately £146 million. He received a ten-year prison sentence.
See also
References
- R Zelker, The Polly Peck Story: A Memoir (Strathearn 2001)
- R Wearing, Cases in Corporate Governance (Sage Publications 2005)
External links
- EWCA Civ 3, 1992 4 All ER 769 – Polly Peck v Nadir 1992. Case related to insolvency.
- EWCA Civ 789, 1998 3 All ER 812 – Polly Peck International Plc v The Marangos Hotel Company Ltd (No 2). Insolvency case.
- Corporate crime
- Corporate scandals
- British companies disestablished in 1991
- Clothing companies established in 1940
- Companies formerly listed on the London Stock Exchange
- Conglomerate companies of the United Kingdom
- Clothing companies of the United Kingdom
- 1940 establishments in England
- 1991 disestablishments in England
- Holding companies disestablished in 1991
- Conglomerate companies disestablished in 1991
- British companies established in 1940