- Three former Tesco executives on trial for fraud over supermarket’s £250 million accounting hole. The whistleblower told court there was an environment of ‘anxiety’ and ‘tension’ in the company at the time. The whistleblower said he was ‘relieved’ when former CEO Philip Clarke, who is not implicated in the case, left.
LONDON – Senior Tesco directors feared being jailed and worked in an environment of “anxiety” and “tension” in the weeks before the retailer announced a £250 million ($331 million) black hole in its accounts in 2014, a court heard on Wednesday.
Three former Tesco executives are standing trial for fraud for their alleged involvement in overstating the firm’s profits. All three deny guilt.
Amit Soni, a senior member of Tesco’s finance team who allegedly acted as a whistleblower in the case, gave evidence on the fourth day of the trial at Southwark Crown Court in London on Wednesday.
He said defendant Chris Bush, former Tesco UK managing director, arranged meetings with Tesco’s commercial directors in August 2014 – the month before the company restated its profits – at which the directors voiced concerns about the practice of “pulling forward” income from future accounting periods and booking it ahead of time.
One of the commercial directors, George Wright, told Bush that he was uncomfortable with conversations with suppliers relating to “pull-forward” and said he felt uncomfortable with using the practice to plug gaps in accounts.
Wright is said to have told Bush: “I don’t want to go to jail for this.”
Soni said that his team had prepared a document for the meetings, which suggested Tesco’s budget could fall £240 million short of the overall target for the first half of Tesco’s financial year. Soni said the gap began “looking insurmountable.”
He said Chris Bush’s told commercial directors who were worried about the figure “to go back and make plans to hit the numbers rather than come out with gaps.”
Philip Clarke leaving was ‘a relief’
Soni also told the court that he was relieved to learn that former Tesco CEO Philip Clarke was leaving in 2014 because he felt he was responsible for the company’s faltering strategy.
- Reuters/Darren Staples
Clarke is not charged with any wrongdoing, nor implicated in the case. He was interviewed by the Serious Fraud Office who decided not to press any charges.
Soni said Tesco UK was under financial pressure when he joined in 2013, both because of external factors, such as competition from discounters Lidl and Aldi, and because of internal pressures to meet targets.
“There was a sense that there was a lot of hard work that was going on internally but it was not showing anywhere in the results,” he told the jury.
Soni said that it was a “relief” when the departure of former Tesco CEO Philip Clarke was announced.
“I felt, personally, that the pressures in the business were due to in part the strategy that Clarke had for the company,” Soni said.
Former Tesco UK managing director Christopher Bush, former UK finance director Carl Rogberg, and former food commercial director John Scouler are all charged with fraud by false accounting and of fraud by abuse of position.
The trio were formally charged by the Senior Fraud Office last year. Lawyers acting for the trio have already pleaded not guilty.
The trial continues.