Tesco Investor Group Hires Lawyer and Readies U.K. Legal Action

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Retail Operations Inside A Tesco Plc Supermarket Grocery Store
A Tesco-branded plastic shopping bag sits on a check-out desk inside a Tesco supermarket, operated by Tesco Plc, in London, U.K., on Monday, April 20, 2015. Tesco's April 22 results will serve as a reminder of the scale of the task still facing new Chief Executive Officer Dave Lewis after his decision to close dozens of stores, cancel some openings, consolidate head offices and cut prices on hundreds of branded goods. Photographer: Jason Alden/Bloomberg

Tesco Plc is facing the threat of a shareholder damages claim in the U.K. over the 263 million-pound ($404 million) profit overstatement that plunged Britain’s biggest retailer into crisis last year.

A vehicle set up by U.S. law firm Scott & Scott to explore legal action in the U.K. and Europe said in a statement Thursday that it expects to issue a claim later this year. The group, Tesco Shareholder Claims Ltd, has hired a senior British lawyer, Philip Marshall, to provide advice.

“The case against Tesco is strong, and will involve a substantial claim,” the group said. It has signed up “various institutional investors” to join the compensation claim, though did not name them in the statement. Tesco declined to comment.

A British law firm, Stewarts Law, which has filed a number of cases against U.K. banks, began recruiting shareholders last November to join a possible suit against the retailer. In the U.S., the Texas-based Irving Firemen’s Relief and Retirement Fund filed a lawsuit against Tesco in October.

Last year’s profit overstatement prompted a wave of inquiries, including by Britain's Serious Fraud Office. The company’s chief executive officer, Dave Lewis, who took over after the mis-reporting scandal, has since set out a radical plan to restore its fortunes after a series of profit warnings.

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