- Reuters / Hannah McKay
- Three former Tesco executives on trial for fraud over £250 million accounting black hole in 2014. Jury hears that two staff members resigned over what they saw as dishonest accounting practices at the time. The defendants have pleaded not guilty. The case is expected to run for 10 to 12 weeks.
LONDON – The toxic environment at the top of Tesco during 2014’s accounting scandal led to “compromised” staff, nervous breakdowns, and resignations, a court heard on Tuesday.
Opening the prosecution’s case for a third day, Sasha Wass QC told a jury at Southwark Crown Court that two staff in Tesco’s commercial finance team “felt so compromised by the misrecording of profits that they did resign rather than engage in what they considered to be practices that were unlawful.”
Wass said that Richard Parsons, formerly a member of Tesco’s commercial finance team, emailed his line manager in August 2014 – days before the scandal broke.
The current environment has broken me
In the message, which was read out in court, he wrote: “I’m afraid I won’t be in the office today. The stress and worry has got to me […] Please pass on my apologies. Urgent personal matters is the public reason I’d prefer to give at this point.”
He added: “The current environment has broken me.”
Wass said Parsons “felt so compromised that he didn’t feel able to actually share what he was going through with his own wife.”
Three former Tesco executives are standing trial for fraud by false accounting and fraud by abuse of position. They were charged last year after Tesco was found to have inflated its profits by nearly £250 million ($331 million) in 2014.
‘This was the biggest kept secret in Tesco’
The jury heard on Tuesday that Parsons arranged a meeting with Tesco’s human resources team to share his concerns about the improper recording of accounts. At the meeting, Parsons said other employees were “too scared to speak out because they’re worried about losing their jobs and paying their mortgages.”
The HR representative reported that Parsons said: “This was the biggest kept secret in Tesco, and if this was to get out it wouldn’t be good for Tesco,” according to Wass. Parsons resigned in August 2014, shortly before the scandal broke.
Wass said another Tesco employee at the time, Aysen Nadiri, also resigned shortly before the scandal broke over concerns relating to “illegitimate” accounting practices.
Nadiri became aware that the term “pull-forward” was being used to refer to income being registered early, which she perceived as an “illegitimate interpretation” of the accounting practice.
The court heard that Nadiri “became increasingly concerned about the message from senior management,” as they refused to accept that targets couldn’t be met and “had a disregard for proper accounting principles.”
On August 26, shortly before the scandal broke, the court heard that Nadiri resigned, feeling “nervous about things going wrong” and “compromised” as a financial professional.
Wass claimed that defendant Carl Rogberg was made aware of staff departures. “His reaction was: ‘Fine. Go and hire more people’,” Wass told the jury.
Former Tesco UK managing director Christopher Bush, former UK finance director Carl Rogberg, and former food commercial director John Scouler are each standing trial for 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. Bush, Rogberg, and Scouler were part of the so-called “Cheshunt Eight,” a group of senior Tesco employees who all left the company following the 2014 scandal.
The trial is expected to last between 10 and 12 weeks.