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Two acquitted over tax fraud

Member: Nifa

Two former Directors of supermarket giant Tesco have been acquitted of a £250 million fraud and false accounting charge. The two men had been accused of being aware that income was being wrongly included in the company’s financial records to meet targets and to make Tesco look financially ‘healthier’ than it actually was. However, the trial collapsed due to a “weak” prosecution case that the judge said should not be brought before a jury.

When the allegations were first made in 2014, they sparked a scandal that wiped £1.5 billion off the value of Tesco shares in one day. The accusations were made after a new Chief Executive called in forensic accountants to scrutinise the supermarket’s books. This was because a whistle-blower had claimed that payments from suppliers were being manipulated to make the chain’s finances look healthier than they really were.

However, after the charges were laid, the defence brought in its own team of forensic accountants to prove that the two men were not aware that the payments should not have been used in this way. Both sides produced thousands of pages of “complex internal documents”, as this was a very complex case. By the time it came to trial, the judge found the prosecution’s evidence too weak to continue.

It is not widely known that forensic accountants are brought in as much to defend accused employees as to help prosecute them. However, it is only logical that if individuals are accused of fraudulent activity, they need to prove that they have done nothing wrong, and bringing in these experts is the perfect solution. The activity on each side involves the same painstaking search for evidence and the laying out of the evidence for a court of law, should the case reach the stage of a trial.

Roger Isaacs, Partner at Milsted Langdon, said: “This case demonstrates how difficult it can be to achieve a successful prosecution in a complex fraud case.

“Having a forensic accountant on your side to help set out the evidence in a manner that a jury can understand easily can be invaluable.  However some argue that fraud cases would be better tried by a judge alone without a jury because of their length and complexity.”

As long ago as 2005, the Attorney General at the time, Lord Goldsmith, brought forward legislation to allow complex fraud trials to be held without juries.  However, it was defeated in the Lords two years later with peers arguing that trial by jury was a bedrock of the criminal justice system.

Cases like Tesco, are bound to reignite the debate.

Author: Roger Isaacs 7 December 2018

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