Tesco fined by Serious Fraud Office for overstating profits
To avoid prosecution for overstating its profits by £326million, Tesco has agreed to pay a £129million fine, the Serious Fraud Office revealed today.
Tesco PLC has announced that its subsidiary, Tesco Stores Limited, has in principle reached a Deferred Prosecution Agreement (DPA) with the UK Serious Fraud Office (SFO) regarding historic accounting practices.
The proposed DPA was the subject of a preliminary court ruling, and the SFO and Tesco Stores Limited will now seek final judicial approval to the DPA from the court on 10th April 2017.
The DPA relates to false accounting by Tesco PLC’s subsidiary, Tesco Stores Limited, between February 2014 and September 2014. The DPA is a voluntary agreement under which Tesco Stores Limited will not be prosecuted provided the business fulfils certain requirements, including paying a financial penalty of £129m.
In a statement, Tesco says: “Over the last two and a half years, Tesco PLC has fully cooperated with the investigation and undertaken an extensive programme of change, which the SFO has recognised in offering the DPA. This programme includes extensive changes to leadership, structures, financial controls, partnerships with suppliers, and the way the business buys and sells.”
Tesco also states that the FCA has expressly stated that it is not suggesting that the Tesco board of directors “knew, or could reasonably be expected to have known, that the information contained in that trading statement was false or misleading”.
Subject to approval by the court and compliance with the terms of the DPA, this concludes the SFO’s investigation into Tesco. It also concludes the FCA’s proceedings in relation to this matter in respect of Tesco. The Group expects to take an exceptional charge of £235m in respect of the penalty, compensation scheme and related costs. This will be booked as an adjusting post balance sheet event in 16/17.
Dave Lewis, Tesco Group chief executive, said: “We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand.”
Tesco will report full year 16/17 results on 12th April 2017.
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