Following investigations started by the Serious Fraud Office and Financial Conduct Authority in 2014 into the Tesco accounting scandal, the UK’s largest retailer has been ordered to pay £235m to settle the enquiry.
Requiring final court approval, a fine of £129m has also been issued as part of a deferred prosecution agreement (DPA). A trading statement by the retailer on 29 August 2014 had resulted in the loss of around £85m to investors, a figure which Tesco have agreed to pay back in a deal struck with the FCA. The remaining amount encompasses the legal costs associated with the various settlements.
The £85m pay-out will be shared by approximately 10,000 Tesco investors. This marks the first time the FCA has used the full scope of its powers to force a listed company to pay compensation. Those eligible would have purchased Tesco shares or bonds between 29 August 2014 and 19 September 2014.
In 2014 Tesco had inflated its profits by £326m, which was linked to how payments were booked from suppliers. The new agreements are not an admittance that a criminal offence was committed by the company or any of its employees.
In what has been a damaging period for the company, Tesco admit they have undertaken an “extensive programme of change” after cooperating fully with the SFO and FCA investigations. The legal seal of approval for these DPA agreements is due to be heard on 10 April, and if agreed to, prosecution will remain suspended in return for the penalties issued paid out by the retailer.
However, not all of the legal challenges have been completed. Although there is no progress at this stage, possible lawsuits by European-based investors may be on the horizon.
Following the announcement of the proposed agreements, Chief executive of Tesco, David Lewis, said:
“I want to apologise to all those affected. What happened is a huge source of regret to us all at Tesco, but we are a different business now,” he said the company was “committed to doing everything we can to continue to restore trust in our business and brand”.
Tesco Fined Over Accounting Scandal
