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28 March 2017

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Tesco has reached a deferred prosecution agreement (DPA) with the Serious Fraud Office (SFO) that will see it pay £129M for misreporting profits.

The penalties have been imposed because Tesco overstated its profits by an estimated £326M between February and September 2014

Tesco's current chief executive, Dave Lewis, said: "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."

The SFO has emphasised that the DPA, which is expected to be ratified at Crown Court on April 10, in no way addresses the liability of three former Tesco executives who have been charged with fraud by abuse of position and false accounting.

What will be interesting to find out on April 10 will be the precise terms of the DPA regarding any compliance obligations imposed on Tesco.

In light of the recent Rolls-Royce DPA, an explanation of how this figure of £129M was reached could prove illuminating; especially if we learn more about the extent of Tesco’s cooperation with the SFO and any discount this might have earned the supermarket giant.

The Tesco case illustrates why executives must take every precaution to prevent wrongdoing: a point we emphasised in a recent article.

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