‘DIRTY BUSINESS’ AT TESCO: FORMER EXECS PRESSURED STAFF ‘TO COOK THE BOOKS’, COURT TOLD
LONDON – Three former executives of Britain’s biggest retailer Tesco abused their positions of trust to encourage the manipulation of profit figures, lied to auditors and misled the stock market, prosecutors told a London court on Friday.
The senior executives were “cooking the books” to support Tesco’s share price and secure huge compensation packages, and “bullied and coerced” subordinates into compliance, lead prosecutor Sasha Wass told London’s Southwark Crown Court.
Christopher Bush, 51, who was managing director of Tesco UK; Carl Rogberg, 50, who was UK finance director; and John Scouler, 49, who was UK food commercial director, all deny charges of fraud and false accounting.
The charges follow Tesco’s announcement in 2014 that its profit forecast had been overstated – a statement that saw its shares tumble and plunged the company into the worst crisis in its near 100-year history. The company suspended eight senior members of staff, including Bush, Rogberg and Scouler.
Wass told the jury the case centred on two statements made by Tesco to the stock market in 2014.
In the first, the firm published a trading update on Aug. 29 in which it downgraded its financial guidance.
In the second, on Sept. 22, Tesco said it had found a 250 million pound ($335 million) over-statement of its expected profit, mainly due to booking commercial deals with suppliers too early.
Wass said the three defendants encouraged the manipulation of profit figures and “pressured others working under their control to conduct themselves in such a way that the stock market was ultimately misled”.
“The three defendants on trial are not the foot soldiers,” she told the jury. “The defendants in this case are the generals in a position of trust and had huge compensation packages to safeguard the financial health of Tesco.”
Tesco’s auditors PwC were “misled and lied to,” Wass added.
She told the jury a key witness at the trial would be Amit Soni, who worked in Tesco’s finance department and reported to Rogberg. Soni exposed the size of the hole in Tesco’s accounts, prompting an emergency review by new group Chief Executive Dave Lewis and the second statement to the stock exchange, Wass said.
The estimated profit over-statement, identified three weeks after Lewis took over as CEO from Phil Clarke, was later raised to 263 million pounds. Clarke had been fired due to the company’s poor performance.
No charges have been brought against Clarke.
The trial is expected to last until Christmas.
– Reuters
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