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Serious Fraud Office Deferred Prosecution Agreement with Tesco approved

The Serious Fraud Office (SFO) have entered into a Deferred Prosecution Agreement (DPA) with Tesco Stores Ltd in relation to the overstating of profits in their 2014 accounts.  This DPA follows similar agreements between the SFO and Standard Bank and Rolls-Royce Plc.  The agreement was approved by the High Court on 10 April 2017 and makes provision for Tesco Stores Ltd to account for its conduct and compensate shareholders without facing the full extent of a criminal prosecution.

Following a probe by the Financial Conduct Authority (FCA), Tesco Stores Ltd (a subsidiary of Tesco Plc) were found to have overstated profits by £326 million in their trading statement of 29 August 2014.  Although specific details of the DPA are subject to a reporting restriction (pending the prosecution of three individual employees) Tesco have previously stated that the deficit was in relation to accounting early for income from retailers.  The SFO have commented that the DPA only relates to Tesco Stores Ltd and does not attribute any responsibility to Tesco Plc (the umbrella corporation) or any current or former employee or agent of the Stores or Plc.

The agreement was formally approved by Sir Brian Leveson, President of the Queen’s Bench Division, sitting at Southwark Crown Court.  Although specific details are still unknown, Tesco will pay a financial penalty in the region of £129 million, around £85 million in compensation to shareholders and the legal costs of the SFO.  Tesco had set aside circa £235 million in expectation of the penalties.

The compensation to shareholders represents 24.5p per share for those who purchased shares between 29 August 2014 and 19 September 2014.  Tesco are still facing a civil class action law suit for £100 million by 125 investors, although the provision for compensation for the shareholders understandably may put the continuation of the claim under question.

Dave Lewis, the Chief Executive of Tesco Stores Ltd, commented that "...these issues are historic" and that the company is doing "...everything [it] can to continue to restore trust in the business and brand".

As the fourth DPA is approved, the future of these agreements is perhaps becoming clearer.  The SFO have made it clear that DPAs will only be utilised where companies have been fully co-operative, stating that a DPA in other circumstances would be contrary to the interests of justice.  David Green, the SFO’s director has saiid that DPAs should not be considered ‘the new normal’ and that they will continue to prosecute companies where necessary and appropriate.

Brett Wilson LLP are experienced in dealing with investigations and prosecutions lead by the Financial Conduct Authority and the Serious Fraud Office.  Click here to see how our firm can assist you.


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Articles are intended as an introduction to the topic and do not constitute legal advice.