PARIS — European eyewear giant EssilorLuxottica said on Monday it had uncovered fraudulent financial activities in one of its plants in Thailand that will have an estimated impact of up to 190 million euros on its full-year operating result.
The group, born from the merger between France’s Essilor and Italy’s Luxottica that was finalized in October 2018 to create the world leader in its domain, said its subsidiary Essilor International has filed complaints in Thailand and other jurisdictions and mobilized all available resources to put an end to the fraud.
“It is also carrying out comprehensive investigations and is taking all possible actions to seek to recover the misappropriated funds in order to mitigate the impact on the group. The employees known to date to be associated with these fraudulent activities have been terminated,” EssilorLuxottica said in a statement.
The group has strengthened its security processes worldwide as a result of the incident. The financial impact has been calculated before insurance, pending legal actions and anticipated recovery of further funds currently frozen on various bank accounts, and will be treated as an adjusted item, it said.
Luca Solca, managing director, luxury goods at Bernstein, said in a research note that, according to EssilorLuxottica’s management, the fraud was organized by Essilor’s local management via cash payments to fictitious suppliers in a relatively short amount of time.
“In our memory, this is one of the most egregious cases of financial malpractice in our sector. We expect that the news is likely going to elicit further investor pressure for a quick post-merger integration,” he wrote, adding that Essilor and Luxottica currently maintain two separate chief financial officers and organizations.
“The sooner this is tightly integrated under one roof, the better,” Solca concluded.