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29 Oct 2014 03:41pm

SFO opens Tesco criminal investigation

The Serious Fraud Office has opened a criminal investigation into the accounting practices at Tesco

It is the latest twist for the embattled supermarket giant since it announced last month that it had overstated its profits by £250m.

The Financial Conduct Authority has announced it will discontinue its investigation in light of the SFO probe.

An internal investigation carried out by Deloitte revealed its accounting irregularities were worse than first feared. It found that Tesco has overstated its profits by £263m for at least two years, not six months as was previously thought, and by £13m more than the initial estimate. 



The accounting practices resulted in profits being overstated by £118m in the first half of this year, by £70m in the 2013-2014 financial year and by £75m before that, which could pose questions for current auditors PwC.



The issue concerns when payments received from suppliers who pay to run in-store promotions on their behalf are booked.

The Financial Reporting Council has previously stated it is watching events at Tesco “closely”.

So far eight executives have been suspended since the accounting scandal broke last month and chairman Sir Richard Broadbent has resigned.

Last week recently installed chief executive Dave Lewis said that the Deloitte investigation did not reveal any suggestion of fraud or personal gain.

 

TESCO TIMELINE

07 April 2014: Tesco CFO Laurie McIleew announces his decision to stand down, ahead of Tesco’s full year results, which are expected to drop 10%. Tesco assures investors McIleew will oversee the handover with the replacement CFO.

16 April 2014: Tesco announces a 6% profit drop, making 2014 the second year in a row that profits had fallen.

10 July 2014: Marks & Spencer confirms its CFO, Alan Stewart, will join Tesco after a period of garden leave.

21 July 2014: Philip Clarke is sacked after three years as CEO, following a failure to halt slides in sales, profits, and customer defections. Dave Lewis of Unilever is announced as his replacement.

29 August 2014: Lewis’ start as CEO is brought forward one month as Tesco issues a shock profit warning and an interim dividend cut.

22 September 2014: Tesco admits profits were overstated by £250m and calls on Big Four firm Deloitte to investigate the matter. Four executives, including UK managing director Chris Bush, are suspended.

23 September 2014: Tesco announces that Stewart is to start immediately after an effective plea to M&S to waive its garden leave requirement.

24 September 2014: The Financial Reporting Council (FRC) – the accounting watchdog – reveals that it is watching events at Tesco “closely”.

25 September 2014: Tesco admits that McIleew has not made any decisions for five months, leaving the supermarket to address financial woes without a CFO. It emerges that Lewis had set up a separate finance team for the interim period.

1 October 2014: The Financial Conduct Authority (FCA) launches its own investigation into accounting standards at Tesco.

7 October 2014: Kevin Grace, Tesco’s group commercial director, is asked to step down.

14 October 2014: Three more executives are asked to step down.

23 October 2014: Tesco confirms profit hole is actually £263m. The beleaguered supermarket’s chairman, Sir Richard Broadbent, announces he will step down. The store admits a 92% fall in profits, with like-for-like sales down 4.6% for the 26 weeks to 23 August.

29 October 2014: SFO opens criminal investigation into accounting practices.

Raymond Doherty

 

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