SFO publishes terms of deferred prosecution agreement with Tesco after reporting restrictions lifted
The Serious Fraud Office (SFO) has published the full terms of the Deferred Prosecution Agreement (DPA) it agreed with Tesco following the 2014 accounting scandal.
Reporting restrictions around the DPA – a voluntary agreement which allows companies to forego prosecution by fulfilling certain requirements – were lifted when former Tesco director Carl Rogberg was acquitted today.
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Former UK managing director Chris Bush and former UK food commercial director John Scouler were acquitted before Christmas after the judge said the prosecution's case was “so weak it should not be left for a jury’s consideration”, in a blow to the SFO.
The SFO charged the three defendants in 2016 with one count of fraud by abuse of position and one count of false accounting. They denied the charges.
The scandal arose in 2014 when Tesco admitted that it had overstated profits by £250m, which was later revised up to £326m. Around £2bn was wiped off the retail giant's share price.
The SFO today said that between February and September 2014, Tesco "encouraged illegal practices to meet accounting targets", by including improperly recognised income in UK accounts, which it did by "pulling forward" supplier income from subsequent reporting periods.
Under the DPA, Tesco agreed to pay a £129m fine and £3m investigation costs. It also agreed to undertake and implement an ongoing compliance programme during the three-year term of the DPA.
SFO director Lisa Osofsky said: “Tesco Stores Limited dishonestly created a false account of its financial position by overstating its profits.
“The DPA clearly outlines the extent of this criminal conduct for which the company has accepted full responsibility.”
A spokesperson for Tesco said: "Tesco PLC notes the court’s decision to publish later today the Deferred Prosecution Agreement between its subsidiary, Tesco Stores Limited, and the UK Serious Fraud Office.
"In September 2014 Tesco announced an overstatement of expected profit at Tesco Stores Limited, which was independently investigated and verified by Deloitte. Following an investigation which lasted over two years and concluded in April 2017, Tesco entered into a DPA with the SFO. This DPA was also separately approved by a senior High Court Judge, LJ Leveson, as being in the interests of justice.
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"Since 2014, we have fundamentally transformed our business, and Tesco today is a very different company. We have introduced a new model for the way we buy and sell products; we have made wide ranging changes to our leadership; we have improved accountability, and we have developed stronger partnerships with our suppliers. Our business is stronger as a result of these changes."