Tesco executives ‘cooked books in £250m scandal’
TESCO bosses pocketed huge salaries while bullying staff into ‘grossly inflating’ profits in a fraud that wiped £2billion off the retailer’s value, a court heard yesterday.
Three ‘generals’ at the supermarket giant, who all earned seven figures, pressured ‘foot soldiers’ into ‘cooking the books’ by £250million, it was alleged.
When the huge hole in the budget was found, it was like a ‘hand grenade’ being thrown into the company and sent ‘shockwaves’ through the stock exchange, Southwark Crown Court heard.
Tesco’s share price plunged 12 per cent in a morning ‘undermining’ the company’s credibility and that of the entire stock market.
Christopher Bush, Tesco UK managing director, Carl Rogberg, UK finance director, and John Scouler, UK commercial director, started their ‘white collar crime’ after the once ‘great British success story’ reported its first loss for 20 years in 2013, the jury heard.
After their profit targets were set ‘unrealistically high’ the executives began ‘window dressing’ figures to ‘camouflage’ their failure to hit them. Money not yet earned or which ‘did not exist at all’ was recorded as profit, the court heard.
At the time, Bush earned £3million, Scouler £1.5million and Rogberg more than £1million. But Tesco would change senior personnel who failed to hit targets, giving the men a ‘very personal interest’ in overstating the position, the jury heard.
Prosecuting, Sasha Wass QC, said the case amounted to ‘cooking the books or what lawyers call false accounting’. She said: ‘The three defendants are not the foot soldiers who misconducted themselves.
‘The defendants in this case are the generals – those who are in positions of trust and who were paid huge compensation packages in order to safeguard the financial health of Tesco.
‘These defendants encouraged the manipulation of profits and indeed pressurised others working under their control to misconduct themselves in such a way that the stock market was ultimately misled.
‘It is not merely the fact that the defendants were aware that this was going on. Each of these three defendants used their managerial authority and actively encouraged those working beneath them to falsify the figures and, when those subordinate employees objected, the subordinate employees were bullied or coerced into carrying on with this practice.’ The executives used ‘complex, clever and disguised methods’ to conceal the ‘colossal fraud’, the court heard.
‘The defendants connived and manipulated the evidence to maintain their salaries and bonuses,’ Miss Wass said.
‘By the end of August 2014, those who knew about what was going on at Tesco had completely lost control of the size of the hole.
‘Many people who were working under the direction of the defendants were aware that income was being recorded incorrectly but no one was able to identify the exact figure of the overstatement because it was difficult to see which figures were real.’ Some staff even quit their ‘prestigious jobs’ rather than continuing with the deception, she said.
But the fraud ‘spiralled out of control’ leading to an increasingly large hole in the budget until it was eventually discovered in 2014, the QC said.
‘On September 12, 2014, Tesco plc made a public announcement to the stock market and the announcement said that Tesco has previously overestimated its profits by £250million,’ the QC said.
The retailer had been forced to make this correction because a statement of expected profits made three weeks before had ‘grossly inflated Tesco’s expected profits’.
‘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 £2billion off the total share value, but the credibility of Tesco’s itself and indeed the credibility of the stock market had been undermined.’
Rogberg, 50, of Chiselhampton, Oxfordshire, Bush, 51, of High Wycombe, Buckinghamshire, and Scouler, 49, of St Albans, Hertfordshire, all deny a charge of fraud by abuse of position and false accounting from February to September 2014.
The trial continues.
‘Connived and manipulated’