business

Tesco Jury Prepares for Verdict as Accounting Trial Nears End

  • Three former executives accused of fraud and false accounting
  • Case relates to 250 million-pound profit blackhole at grocer

The four-month trial of three former Tesco Plc U.K. executives accused of fraud and false accounting over a 250 million-pound ($341 million) profit black hole at the grocer is nearly at an end.

Summing up the case Friday, Judge Deborah Taylor recounted the evidence for the London jury, going over the events of a September 2014 weekend when Tesco executives scrambled to get to grips with an internal report claiming the retailer had misstated its accounts. The report, known as the “legacy paper” and compiled by Tesco accountant Amit Soni, is at the heart of the allegations against former U.K. Finance Director Carl Rogberg, ex-U.K. chief Chris Bush and former British commercial director John Scouler.

Judge Taylor outlined for the jury disputes between the prosecution and defense over Soni’s status as a whistle-blower. Both Bush and Scouler claim they commissioned Soni to write the report, something Soni disagreed with in his evidence. But when the report was escalated to Tesco’s general counsel, and consequently Chief Executive Officer Dave Lewis, Soni was described by one internal lawyer as very upset and “shaken up” that it was escalating so quickly without him having informed Rogberg and Scouler.

One of the key issues has been the use of a technique known as “pulling forward” -- recognizing income in an accounting period different from the one it was booked -- something the prosecution has highlighted as key to the allegations but the defense claims is a legitimate practice in many instances.

In September 2014, Tesco said it had overstated profits by about 250 million pounds after Soni compiled the report drawing attention to potentially questionable bookkeeping practices. The revelation wiped about 2 billion pounds from Tesco’s market value. The U.K. Serious Fraud Office opened an investigation and charged Rogberg, Bush and Scouler in 2016 with fraud by abuse of position and false accounting between February and September 2014.

Taylor reminded the jury of evidence the court has heard about the commercial struggles Tesco faced in 2013 and 2014 as it grappled with competition from Aldi Stores Ltd. and other rivals, and that “for the first time in 20 years sales were falling over a sustained period.” As a result, then-Tesco Chairman Richard Broadbent decided the grocer needed to go in a new direction and CEO Philip Clarke stepped down in July 2014 and was replaced by Lewis.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE