Tesco ‘regret’ as deal done over accounting scandal

Retail: Giant set for £235m hit as watchdog probe closes

Supermarket giant Tesco will take a £235 million hit after reaching an agreement with authorities over a major accounting scandal .

The UK’s biggest supermarket said its subsidiary, Tesco Stores, had entered a Deferred Prosecution Agreement (DPA) with the Serious Fraud Office (SFO), which could see it escape prosecution but pay a £129m fine and costs.

The agreement, which will face court approval on April 10, came as Britain’s financial watchdog concluded Tesco had committed market abuse when it inflated profits by £263m in a trading update on August 29 2014.

In an unprecedented move, the Financial Conduct Authority (FCA) said the supermarket chain would pay £85m in compensation to investors who bought shares and bonds on, or after, August 29 and held stock when the statement was corrected on September 22.

Tesco suspended eight directors, and the SFO charged three former executives with fraud, after the black hole was found in the firm’s accounts.

The scale of the problem was later revised from £263m to £326m, helping drag Tesco to a £6.4 billion loss in 2015, one of the largest in corporate history.

CEO Dave Lewis said the firm was doing everything it could to “restore trust” after the scandal.

He said: “What happened was a huge source of regret to all of us at Tesco, but we are a different business now.

“The decisions over the last years are evident to all and the job now is to keep this momentum.”

If the DPA is sanctioned next month, Tesco will join Rolls Royce and BAE Systems who both reached multimillion-pound settlements with the SFO following high-profile investigations.

However, the SFO said the agreement with Tesco Stores “does not address whether liability of any sort attaches to Tesco, or any employee, or agent of Tesco or Tesco Stores”.

Focusing on compensation, the FCA said Tesco’s share price was inflated when the firm reported inaccurate financial results, meaning some investors paid a higher price.

FCA chief executive Andrew Bailey said: “Dissemination of information that gives a false or misleading impression as to traded securities harms the integrity of our markets.

“Tesco and its board are doing the right thing here, taking appropriate responsibility and agreeing to rectify the consequences of the misconduct.”