LONDON, October 30 2014:Â Britain’s Serious Fraud Office (SFO) has launched a formal criminal investigation into accounting errors at Tesco, adding to the intense scrutiny of the country’s biggest grocer.
Tesco was already being investigated by the Financial Conduct Authority (FCA) after the group revealed the discovery of a 263 million pound ($424 million) hole in its accounts, adding to a string of recent profit warnings and management departures to nearly halve the company’s market value this year.
“The SFO confirmed today that the director has opened a criminal investigation into accounting practices at Tesco plc,” the independent government department said in a statement.
Tesco said it has been cooperating fully with the SFO and would continue to do.
When the SFO launches a full criminal investigation against a company or individuals – which can take months or even years in some cases – it has to be satisfied that there are reasonable grounds to believe that conduct might involve serious or complex fraud or bribery.
The agency will then take months sifting through vast quantities of digital data and other evidence, while seeking to identify and trace witnesses. In many cases it also has to obtain evidence from other jurisdictions.
Some investigations might qualify for a so-called Deferred Prosecution Agreement (DPA). This is effectively a suspended corporate sentence and a new string to the SFO’s bow that has yet to be tested.
BIG DISTRACTION
But DPAs, the SFO has said, will only happen where it can persuade a judge that it is in the interests of justice and where a company cooperates fully and can show that it has put any misdemeanour behind it and removed offending personnel.
Confirmation of a fraud investigation will prove another big distraction for new Tesco boss Dave Lewis, who faces the task of leading the company out of the biggest crisis in its 95-year history.
With sales and profit on the slide as the firm is squeezed from all sides by upmarket grocers and discount chains, Tesco has also been rocked by the accounting scandal, caused by booking deals with suppliers too early.
Tesco has already concluded an internal investigation and the matter was being examined by the the FCA. The FCA will now drop its investigation in light of the SFO’s involvement. Britain’s accounting watchdog, the Financial Reporting Council, is also examining how the error came about.
Eight senior members of staff have been suspended, representing a serious blow to a retailer gearing up for the Christmas trading period.
Shares in Tesco, which had been up about 2 percent all day, fell initially on the news by half a percent before recovering to a 2.8 percent gain at 174.55 pence by 1439 GMT (10.39 a.m. EDT).
Source: Reuters
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