Grenke, a finance firm threatening hundreds of convenience store owners with court action, has been accused of “widespread fraud and predatory practices” related to its contract with store owners.
The allegations were strongly denied by Grenke, which said it would “initiate [legal action] accordingly”.
The lender had been repeatedly accused by small shop owners of failing in its due diligence. The retailers claimed they were duped into third-party leasing agreements by collapsed digital screen advertising companies Rhino Media and Viewble Media UK.
The claims have been strongly denied previously by the advertising firms and the lenders.
Under the agreements, stores were promised ad payments would offset the cost of the screen leases. However, the revenue disappeared when the firms collapsed, leaving stores up to £10,000 in debt to Grenke for screens allegedly valued at just £500.
Viceroy Research specialises in investigating publicly listed firms, betting against their share value and then exposing alleged malpractice.
A 64-page Viceroy Research investigation into Grenke released on 15 September torpedoed the firm’s share price in less than a day, wiping more than €1.2bn off the total value of the company’s shares as they fell from €55 to around €28 by 16 September.
Founder Wolfgang Grenke suspended his role within the supervisory board on 21 September pending the outcome of a KPMG special report commissioned by the board.
The report made repeated references to Better Retailing’s own investigations into the agreements and described Viewble Media and Rhino Media as “Ponzi schemes” enabled by Grenke’s lease financing. It said this amounted to the finance firm being part of “a larger conspiracy to defraud” small shop owners.
Viceroy said this included sending sub agreements to retailers after an earlier screen provider began defaulting on their advertising payments to stores.
Rather than ceasing to provide leases, Viceroy alleged Grenke instead added clauses that insulated the firm from liability in the event that Rhino Media also defaulted on advertising payments, which it did.
As first reported by Better Retailing, Viceroy confirmed that the Financial Conduct Authority is investigating Grenke for its involvement in the agreements.
The claims by Viceroy about Grenke in relation to Rhino and Viewble Media make up just a small part of its investigation, which also alleged the finance firm committed false accounting and facilitated money laundering.
A statement from Grenke said the firm “strongly rejects” the claims. It said Viceroy’s “central accusation” around false accounting was “demonstrably false”.
The company said it was a victim of “systematic fraud” by Viewble Media and had implemented greater due diligence including on-site shop inspections, checking the market value of the goods against the value of the lease and reviewing the relationship between reseller and lease.
The statement did not explain why these measures failed to prevent the same circumstances repeating through Rhino Media Group.
Alan Collingwood, owner of Mace Aghalee in County Armagh, helped to organise more than 200 small shop owners affected by the scandal.
Speaking to Better Retailing, he said the Viceroy report would be invaluable to the defences of dozens of store owners from across the UK facing court summons by Grenke over its refusal to continue paying for the leases.
Discussing the report, he said: “Never in our wildest dreams did we think we’d see something like this. We’re delighted.
“Grenke had stepped up its efforts to get people to settle in the last few weeks, but now I think they’ll struggle to see the end of the week. They thought they were dealing with a bunch of idiots.
“They didn’t know how determined people were to fight this, and they underestimated the humble small retailer.”
While Grenke provided leases on most digital screen agreements, an estimated 10% were provided by other companies.
Anil Kumar Gade’s contract was with finance company UCFS. The Cherry Hinton Indian Stores & Post Office in Cambridge owner said he was happy for those with Grenke and hopeful for his own case. “We were contacted by their solicitors, but then never received anything further. Hopefully, this will make them think twice,” he said.
Mudassar Butt, owner of The Lake Shop in Littleborough, Greater Manchester, said: “Hopefully, it will resolve this, but it still leaves us hanging. Even if Grenke goes, the debt could be bought by another party – the only way we will get closure is for one of us to put what they’ve done in front of a judge.”
Another retailer affected said Grenke was pursuing their family for £26,000. The retailer is awaiting a court date after receiving a summons and described the Viceroy report, stating: “It’s fantastic. It exposes that there’s a much bigger play going on at Grenke.
“The allegations about their accounting standards and practice are encouraging because it shows that it’s not just us.”
The retailer thanked Collingwood for his determination, stating: “I don’t know where we would have been without the support of Alan and the other organisers. A lot of shops owe him their gratitude.”