The Serious Fraud Office (SFO) is now able to share in full the terms of a Deferred Prosecution Agreement reached with Tesco Stores Limited after reporting restrictions were lifted. Between February and September 2014, instead of working to safeguard the financial interests of the company and its shareholders, a culture existed at Tesco that encouraged illegal practices to meet accounting targets, including improperly recognised income in the UK accounts, by ‘pulling forward’ income from subsequent reporting periods.
Speaking about the case, Lisa Osofsky (director of the SFO) said: “Tesco Stores Limited dishonestly created a false account of its financial position by overstating its profits. The Deferred Prosecution Agreement clearly outlines the extent of this criminal conduct for which the company has accepted full responsibility.”
Under the Deferred Prosecution Agreement, Tesco agreed to pay a £129 million fine and £3 million to cover investigation costs. The company will also undertake and implement an ongoing compliance programme during the three-year term of the Deferred Prosecution Agreement.
After discovering issues in its financial statements, Tesco referred itself to the enforcement authorities after revealing that revenues had been incorrectly recorded as profit and made an announcement to the market.
The SFO first began investigating this case back in October 2014. Carl Rogberg, John Scouler and Christopher Bush, former Tesco employees who held senior management roles in the Tesco UK business, were charged over allegations of fraud and false accounting on 9 September 2016.
Scouler and Bush were subsequently acquitted of all charges after Sir John Royce ruled that they had no case to answer at trial. This decision was upheld in the Court of Appeal on 5 December last year. Rogberg was severed from the trial. The SFO offered no evidence at a hearing on 23 January this year and Rogberg was acquitted of all charges.
Tesco Stores Limited’s Deferred Prosecution Agreement with the SFO was approved by the President of the Queen’s Bench Division, the Right Honourable Sir Brian Leveson, at Southwark Crown Court on 10 April 2017. Interestingly, the Deferred Prosecution Agreement with Tesco Stores Limited was the fourth ever agreed in the UK.
Tesco plc has agreed to a separate £85 million statutory compensation scheme for shareholders and bondholders with the Financial Conduct Authority under the Market Abuse Regulations.