Tesco has agreed to pay the Serious Fraud Office (SFO) £129m in fines relating to a 2014 profit misstatement, avoiding prosecution after a two-year investigation.
If approved by the Crown Court on 10 April 2017, Tesco will pay the £129m financial penalty in addition to the SFO’s full costs. As a Deferred Prosecution Agreement (DPA), Tesco does not admit any liability in relation to the scandal.
The hearing will be before Sir Brian Leveson QC, President of the Queen’s Bench Division, sitting at the Royal Courts of Justice.
The scandal relates to an accounting discrepancy in September 2014 that saw the retailer post incorrect profits by a margin of £326m. As a result, Tesco reported a £6.3bn loss in 2015, one of the biggest in British retail history.
In October 2014, it was revealed that Freshfields Bruckhaus Deringer was advising on the criminal investigation by the SFO, with disputes partners Andrew Austin, Ian Taylor and Ali Sallaway providing counsel. The retailer also enlisted Kingsley Napley, which advised with a team led by Stephen Parkinson, head of criminal litigation.
Quinn Emanuel Urquhart & Sullivan partner Robert Amaee said: ‘The steady onward march of DPAs in the UK, shows that equipping the right prosecutor with the right tools can make a real difference. From Tesco’s perspective, while the investigation into individuals continues, the company will undoubtedly be pleased to bring this matter to a close.
He added: ‘DPAs have so far netted the UK fines and disgorgement in excess of £650 million, and that’s after just four of them with others waiting in the wings. We may well see a significant growth in the use of DPAs, if the government’s recent consultation on corporate criminal liability for serious economic crimes does, as is expected, lead to a widening of the law.’
WilmerHale white collar counsel Alison Geary said: ‘DPAs are attractive to publicly-listed companies, they allow the board to deal with the issue and move on.’
‘The DPA is not in place yet, in theory the deal could still fall apart if the agreement was not approved by the judge at the final hearing. However, Tesco has taken the decision that it needs to make an announcement to the market at this stage.’
Introduced in 2014, DPAs offer an alternative for prosecutors that struggle to charge corporate entities due to the cost and complexity of cross-border investigations.
Following the announcement of the SFO probe, Stewarts Law launched legal proceedings on behalf of the retailers shareholders. Partner Sean Upson secured third party funding from Bentham Ventures and said he would file a claim for shareholders’ losses.
tom.baker@legalease.co.uk
