Tesco faces
a criminal investigation over an accounting scandal that saw the
company's profits artificially inflated by a phantom £263million, it was
revealed today.
The
Serious Fraud Office will probe the giant black hole in the
supermarket's profits for the first half of the year and find out if
the distortion went on for years.
The
SFO announced its investigation after it emerged that Tesco's
accounting error was even worse than predicted - £263million instead of
£250million.
The
organisation, which can prosecute companies and individuals, has
already brought recent cases against Barclays, GlaxoSmithKline and
Rolls-Royce.
Tesco
is already reeling from the suspension of eight senior executives over
the scandal and faces the biggest crisis in its 95-year history.
Criminal probe: The Serious Fraud
Office (SFO) will launch a formal criminal probe into Tesco following
the supermarket's discovery of a £263m black hole in its profits
Change of
culture: New boss Dave Lewis, left, is said to be seeking to unwind some
of the largess of former boss Philip Clarke, right, who was sacked over
the summer as Tesco sales hit the rocks
These
are managing director Chris Bush, head of impulse purchases William
Linnane, group wine director Dan Jago, director of convenience foods
Sean McCurley, commercial director Kevin Grace, finance director Carl
Rogberg, and food directors John Scouler and Matt Simister.
Last
week Britain's biggest retailer revealed that its latest half-year
profits slumped by 91.9 per cent, from £1.39billion last year to just
£112million
In a
statement, the group said: 'Tesco confirms that it has been notified by
the Serious Fraud Office that it has commenced an investigation into
accounting practices at the company.
'Tesco has been co-operating fully with the SFO and will continue to do so.
'Tesco
has been notified by the Financial Conduct Authority that, in light of
the SFO investigation, its investigation will be discontinued.'
The SFO confirmed that its director David Green QC 'has opened a criminal investigation into accounting practices at Tesco plc'.
Like-for-like sales were down 4.6 per cent as families switch to budget rivals such as Aldi and Lidl.
The slew of bad news sent its shares plunging below £1.70 for the first time since 2003.
They
dropped to a rock-bottom £1.65, but a year ago they were worth £3.70,
meaning Tesco has had £4billion wiped off its stock market value in just
12 months.
Millions
of customers have switched to budget rivals like Aldi and Lidl or
high-end Waitrose and Marks and Spencer because Tesco has failed to
deliver on price, service or quality.
The
Financial Conduct Authority (FCA) was already investigating the profits
scandal and pay-offs totalling around £2 million to departed chief
executive Philip Clarke and former finance director Laurie McIlwee have
been suspended pending the inquiry.
Accounting
watchdog the Financial Reporting Council has also said it is 'giving
careful consideration' to whether it should take regulatory action.
High life: This
seven-year-old Gulfstream G550 flew up to 14 Tesco executives around the
world but is now up for sale for £23million as the supermarket makes
drastic cutbacks
Running for cover: Departing Tesco
chairman Sir Richard Broadbent raced out of a press briefing last week
having quit over poor results
Stark: Tesco was considered untouchable but its profit fall in the past year has been unprecedented
Mr
Lewis has refused to reveal a plan to win back customers but has
promised austerity, including selling off the supermarket's four private
jets and dumping his own chauffeur-driven limo.
Extraordinary: Tesco's share price was at just under £4 18 months ago but now it is around £1.70
The
former boss of consumer goods giant Unilever also said he wanted all
staff to examine whether a cost was absolutely necessary and something
customers would think felt right.
Top
executives at Tesco have been forced to shop and cook like housewives
as part of a plan to put them back in touch with their customers.
The
bosses were sent food shopping at Tesco and at all its main rivals then
whisked away to a small, remote holiday cottage in Norfolk.
But
Philip Clarke still retains the use of a company chauffeur despite
having not set foot in the firm's head office since August.
Ferrari-driving
Clarke is still entitled to all the trappings of his previous position
as chief executive despite having stepped down in August ahead of the
financial scandal.
This
includes a driver, membership to clubs, security, health insurance and
even a staff discount. He gets this on top of a £1.1m salary which
continues to be paid until January.
The
perks, sanctioned by chairman Sir Richard Broadbent will anger
investors who have seen Tesco shares lose 53pc of their value over the
past year.
Broadbent
quit after the Tesco's disastrous results were revealed on Thursday and
fled a news briefing to avoid answering questions.
TIMELINE: HOW THE PROFITS CRISIS THAT ROCKED TESCO HAS UNFOLDED
September 22:
Four executives at Tesco suspended after the supermarket giant admitted
it overstated its profits guidance to the City by £250million.
Shares dived to their lowest level in 11 years as the revelation triggered its third profits warning in as many months.
September 23: Firm plunged into further crisis as it emerged the chain's sales had fallen at their fastest rate in more than 20 years.
Figures
showed total spending by shoppers over the past 12 weeks was down 4.5
per cent year on year - the worst trading fall seen by the retailer in
more than two decades.
October 1: Britain's
financial watchdog, the Financial Conduct Authority, started a full
investigation into the company in the wake of the accounting scandal
October 2: Billionaire investor Warren Buffett conceded that his investment in Tesco was a 'huge mistake'
October 7: Tesco asks a fifth senior executive, commercial director Kevin Grace, to step aside
October 14: Firm makes three more suspensions - taking total to eight
October 23:
Supermarket reveals profits scandal is worse than expected -
£250million instead of £263milllion - as well as a drastic slump in
profits.
Chairman Sir Richard Broadbent quit that morning because ‘the issues that have come to light are a matter of profound regret.’
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