Tesco fined £129m for overstating profits

By Jo Gilbert

Published: 28 March, 2017

Tesco has finally reached an agreement with the Serious Fraud Office (SFO) and will pay £129m fine following 2014's damaging accounting scandal.

As well as the fine, the UK's biggest supermarket will pay investors £85m in compensation to account for the impact of a 2014 trading statement which vastly overstated the company's profits.

The scheme will compensate net cash purchasers of Tesco shares and net purchasers of certain Tesco listed bonds between 29 August and 19 September 2014.

Tesco is also facing around £235m in legal costs following an in-depth investigation carried out by the SFO and the Financial Conduct Authority (FCA).

Pending court approval on April 10, the £129m fine will act as a deferred prosecution agreement (DPA), saving the company from facing prosecution and effectively concluding the investigation into Tesco.

The SFO has however instituted criminal proceedings against individuals working at Tesco when the false accounting practices were taking place.

Today, the retailer said Tesco PLC has "fully cooperated" with the investigation since the scandal broke two and a half years ago, with Dave Lewis, Tesco Group chief executive, adding: "We have fully cooperated with this investigation into historic accounting practices, while at the same time fundamentally transforming our business. We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand."

Hannah Maundrell, personal finance expert and editor in chief of money.co.uk, had this advice for those intending to apply for compensation.

"Anyone affected will get compensation to the tune of 24.9p per Tesco share they bought between 29 August and 19 September 2014 plus 4% interest; that's the amount they'd have overpaid. The compensation scheme opens on 31st August so make a note in your diary and double check if you think there's any chance at all you bought Tesco shares or bonds during that time."

During negotiations, the FCA has stated that it is not suggesting that the Tesco PLC Board of Directors knew, or could reasonably be expected to have known, that the information contained in that trading statement was false or misleading.

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