Three former Tesco executives are accused of “cooking the books” in a scandal which wiped £2 billion (A$3.4 billion) off the supermarket’s total share value and sent “shockwaves” through the British stock market.
Carl Rogberg, 50, Chris Bush, 51, and John Scouler, 49, are alleged to have been involved in a “white-collar crime” in which they failed to correct inaccurately recorded income figures which were published to auditors, other employees and the wider market.
The supermarket’s former finance chief, managing director and food commercial head, who are charged with fraud by abuse of position and false accounting between February and September 2014, were investigated after Tesco was found to have inflated its profits.
The supermarket made a public announcement to the stock market on September 22 2014 which stated that it had previously over-estimated its profits by approximately £250 million, Southwark Crown Court in London heard.
Sasha Wass QC told the jury: “The prosecution case is that the second statement, which corrected the first statement, was the true one and, as you will hear, the second statement caused shockwaves to run through the stock market.
“Not only did Tesco shares fall by nearly 12 per cent, wiping over GBP2 billion off the total share value, but the credibility of Tesco itself and indeed the credibility of the stock market had been undermined.”
She said the prosecution case in a nutshell was that all three defendants were aware that income was being wrongly included in the financial records of the company, which were used to inform the stock market.
Rogberg, Bush and Scouler all deny the charges.
Wass said employees in “relatively subordinate positions” had been involved in presenting the false figures in order to meet the “aggressively high” profit targets set by Tesco, and were “bullied or coerced into carrying on” if they objected to the practice.
She said figures were “window-dressed” to make it look as if targets were being met.
The court heard that Rogberg, who was “directly responsible” for authorising the falsified figures, received a remuneration package of more than £1 million in 2014.
Bush, who was in charge of the performance and “integrity” of Tesco at the time, received nearly £3 million that year, and Scouler, who allegedly directed those beneath him to falsify income figures, received around £1.5 million.
Wass said the defendants had a “very personal interest” in keeping the share value of the company high because their remuneration package included shares, and failure “was not looked on kindly” within the company.
The jury heard about the practice of “pulling forward”, which she said was “Tesco shorthand” for bringing forward income from the future to artificially inflate the figures of the present.
She said Tesco had a name to conceal the failure of pulling forward, referring to it as “the legacy”, and added that some employees “felt so compromised” by what they were being asked to do that they resigned.
The fraud came to light due to the contents of an “explosive” document called “the legacy paper”, which was put together “almost secretly” by two employees who worked under Rogberg, the court heard.
The court heard the paper, which explained there was a GBP246 million hole in the accounts, was “like a hand grenade” thrown into the first statement made by Tesco, exposing it as false.
* This story first appeared on sister site, Inside Retail Australia.
