Tesco to pay €247m to settle probe into scandal

TESCO, Britain’s biggest retailer, has agreed to pay £214m (€247m) in fines and compensation for investors to settle a probe over a 2014 accounting fraud that sparked the biggest crisis in its near 100-year history.

The £85m (€98m) in compensation earmarked for investors is the first time that Britain’s Financial Conduct Authority (FCA) has enforced such a payout for market abuse.

Tesco will also pay a £129m (€149m) fine after an agreement with Britain’s Serious Fraud Office (SFO).

“What happened is a huge source of regret to all of us at Tesco but we are a different business now,” said Tesco chief executive Dave Lewis, who had to deal with the scandal after taking charge in September 2014.

Tesco – which has been rebuilding since the crisis and a price war that hammered the supermarket sector as a whole – said it would take a one-off charge of £235m (€271m) in its 2016-17 results, due on April 12.

Shares in Tesco were down 0.1pc at 190.2 pence in early trading yesterday, also influenced by news on Monday that two big shareholders oppose its proposed £3.7bn (€4.2bn) takeover of wholesaler Booker.

“The overall exceptional charge of £235m (€271m) is worth 2.9 pence to the share price,” said Bernstein analyst Bruno Monteyne, who rates Tesco “outperform”.

The deferred prosecution agreement (DPA) between the SFO and Tesco’s UK subsidiary Tesco Stores Limited enables the firm to avoid a criminal conviction provided it meets certain conditions and pays the fine.

The DPA relates to false accounting by Tesco’s UK business between February 2014 and September 2014.

In a parallel deal with the FCA, Tesco agreed to a finding of market abuse in relation to a trading update published on August 29, 2014 which overstated expected first-half profits by £250m (€288m), mainly because it booked commercial deals with suppliers too early.

No penalty is being levied by the FCA directly on Tesco.

The DPA does not address whether liability of any sort attaches to Tesco or any employee of Tesco Plc or Tesco Stores Limited.

The profit overstatement, identified three weeks after Lewis took over as CEO, was later raised to £263m. (Reuters)