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Financial Conduct Authority

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Tesco executives trial adjourned

Three former Tesco executives charged with fraud by abuse of position and false accounting have had their trial adjourned until September 25th.

The trio – UK managing director Christopher Bush, ex-finance director Carl Rogberg and ex-commercial director John Scouler – were charged by the Serious Fraud Office (SFO) in September 2016, pleading not guilty in a hearing in August.

The trial is expected to last 10-12 weeks, with a possible prison sentence of seven to 10 years if found guilty. Lawyers acting for Bush, Rogberg and Scouler have  entered a plea of not guilty.

The scandal was the result of Tesco revealing that it had overstated profits by £263 million in its half-year results, with the trio among eight senior Tesco staff members suspended after the false accounting emerged.

The subsequent scandal following the false accounting had a negative effect on Tesco’s share price and sparked a series of lawsuits from investors who claimed they had lost millions after buying shares based on the original account information.

The supermarket giant was hit by a £129m fine and ordered to pay compensation to its shareholders by the Financial Conduct Authority.

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Tesco to settle accounting scandal for £235 million

UK retail giant Tesco has confirmed it will pay out £235 million to settle separate investigations by the Serious Fraud Office (SFO) and the Financial Conduct Authority (FCA) concerning its 2014 accounting scandal.

Here’s how it breaks down, according to carious reports – The firm will will pay a fine of £129 million as part of a deferred prosecution agreement with the SFO, although this deal requires court approval.

It will then separately pay the FCA something in the region of £85m in compensation to investors relating to the trading statement from August 2014 in which it overstated profits.

Tesco will also pay legal costs associated with the agreements, with thee total exceptional charge’ expected to be £235 million.

To recap, the SFO began its investigations back in October 2014 after a shortfall had been found in the retailers accounts relating to payments from suppliers of £326 million.

Three former executives, including ex-Tesco boss Chris Bush, former finance director Carl Rogberg and former commercial director John Scouler, were charged last year with offences including false accounting and fraud by abuse of position. All three are due to stand trial next year.

Tesco is accused of bringing forward payments to flatter its financial results as sales by the retailer fell.

It had been suggested that Tesco could be facing a substantially higher fine – In a January 2017 interview with The Guardian, Mike Dennis, analyst at Cantor Fitzgerald said that the SFO could fine Tesco more than £350m and force it to repay hundreds of millions of pounds to suppliers that it claimed in what has been called “arbitrary unjustified cash payments”.

 

Tesco also received lawsuits from shareholders relating to the scandal, although it is believed that some of these have been settled amicably.