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Former Tesco executive avoids charges

Member: Nifa

The former Commercial Director of Tesco, Kevin Grace, has been told this week that he will not face charges from the Serious Fraud Office (SFO) as it continues its investigation into a £326m hole in the supermarket giant’s accounts. The announcement comes two weeks after Tesco’s former Chief Executive, Philip Clarke, was told he would not face charges either and it is thought that the moves signal the prosecutor is nearing a decision on whether or not to prosecute the retailer itself.

The SFO could bring charges against the company under a US-style “deferred prosecution agreement” (DPA), which requires High Court approval and which could bring a ‘sizeable fine’. However, in order for the retailer to be prosecuted under English law, the SFO must be able to show that a senior executive, defined as the “directing mind” at the company, was involved in the alleged behaviour.

The SFO has charged three other former senior Tesco executives with fraud by abuse of position and false accounting and they will stand trial next September. Since these men were all employees of Tesco UK, any DPA would be brought against that company rather than Tesco plc.

The SFO launched a criminal investigation into accounting practices at Tesco in October 2014 after the company admitted it had overstated profits. Forensic accountants established that Tesco had artificially inflated an estimate of first-half profits given to the City in August 2014 and found that similar practices had been in place in previous reporting periods. 

A forensic investigation has been key to unearthing evidence pointing to false accounting and no doubt the three men charged will have teams of forensic accountants going through every piece of disclosed evidence to rebut the charges brought against them. 

Author: Roger Isaacs, 16 Decmeber 2016

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