UK launches fraud investigation into Tesco accounts

Britain's Serious Fraud Office (SFO) has launched a formal criminal investigation into accounting errors at Tesco, adding to the intense scrutiny of the country's biggest grocer.

Tesco was already being investigated by the Financial Conduct Authority (FCA) after the group revealed the discovery of a £263 million hole in its accounts, adding to a string of recent profit warnings and management departures to nearly halve the company’s market value this year.

“The SFO confirmed today that the director has opened a criminal investigation into accounting practices at Tesco,” the independent government department said in a statement.

Tesco said it has been cooperating fully with the SFO and would continue to do.

When the SFO launches a full criminal investigation against a company or individuals - which can take months or even years in some cases - it has to be satisfied that there are reasonable grounds to believe that conduct might involve serious or complex fraud or bribery.

The agency will then take months sifting through vast quantities of digital data and other evidence, while seeking to identify and trace witnesses. In many cases it also has to obtain evidence from other jurisdictions.

Some investigations might qualify for a so-called Deferred Prosecution Agreement. This is effectively a suspended corporate sentence and a new string to the SFO’s bow that has yet to be tested.

Confirmation of a fraud investigation will prove another big distraction for new Tesco boss Dave Lewis, who faces the task of leading the company out of the biggest crisis in its 95-year history.

With sales and profit on the slide as the firm is squeezed from all sides by upmarket grocers and discount chains, Tesco has also been rocked by the accounting scandal, caused by booking deals with suppliers too early.

Tesco has already concluded an internal investigation and the matter was being examined by the the FCA. The FCA will now drop its investigation in light of the SFO’s involvement. Britain’s accounting watchdog, the Financial Reporting Council, is also examining how the error came about.

Eight senior members of staff have been suspended, representing a serious blow to a retailer gearing up for the Christmas trading period.

Reuters