Tesco Probe Said to Move Quickly, Suggesting Possible SFO Deal

Prosecutors are pushing ahead with their probe of Tesco Plc’s accounting faster than expected, suggesting that the company may be in line to take advantage of new settlement procedures.

The Serious Fraud Office is planning to complete interviews with Tesco employees and other witnesses by the end of July, only nine months after starting the investigation, said two people with knowledge of the situation, who asked not to be identified because the case is private. The agency typically takes four to six years to complete a case.

The SFO started investigating Tesco in October after the grocer said it had overstated profits by 263 million pounds ($413 million). Nine senior managers were put on leave, at least six of whom have since been dismissed or left. The SFO can offer a deferred prosecution agreement, which can include fines, if it’s deemed in the public interest and a company cooperates.

“The speed with which the SFO is progressing its investigation of Tesco and the cooperation it seems to be receiving may suggest that Tesco could be an early candidate for a DPA,” said Jason Mansell, a U.K. trial lawyer who represents defendants in SFO investigations.

Spokesmen for Tesco and the SFO declined to comment. A DPA for the company doesn’t protect individuals, who could still face prosecution.

Tesco has already shown it’s willing to cooperate by conducting exit interviews with executives involved in the scandal by mail rather than in person, including firings in some cases, people with knowledge of the process said last month. The company declined requests for face-to-face meetings, citing SFO guidance, the people said. That step may have left the retailer vulnerable to civil lawsuits.

Tesco is also facing shareholder suits in the U.S., with similar actions threatened in the U.K. 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.

“There are significant uncertainties as to the outcome of the existing investigation and proceedings,” Tesco said in its annual report last week. “There is the possibility of fines, or other consequences.”

DPAs, which are common in the U.S., were introduced in the U.K. last year, but none have been issued. Ben Morgan, the SFO’s joint head of bribery and corruption, said in a speech last week that the agency has handed out its first invitation letters for companies to enter into DPA negotiations. SFO director David Green will probably try to secure a DPA before his term ends in April, according to lawyers.

If Tesco is able to settle on a DPA deal with prosecutors, “such an outcome would provide a significant boost” to the SFO’s reputation, Mansell said.

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