Three former Tesco executives were “fully aware” they were damaging the business by “conniving and manipulating” the figures in a scandal which wiped £2 billion off the supermarket’s stock market value, a court heard yesterday.
Carl Rogberg, 50, Chris Bush, 51, and John Scouler, 49 – finance chief, managing director and food commercial head respectively – are alleged to have failed to correct inaccurately recorded income figures that were published to auditors and the wider market.
The trio, who are charged with fraud by abuse of position and false accounting between February and September 2014, were investigated after Britain’s biggest food retailer was found to have inflated its profits.
An announcement by Tesco on 22 September 2014, which stated that it had previously over-estimated its profits by approximately £250 million, sent “shockwaves” through the stock market, Southwark Crown Court in London was told yesterday.
The jury was told the practice of bringing forward income from the future to artificially inflate current figures “was contrary to proper accounting standards and principles”.
Continuing the prosecution opening yesterday, Sasha Wass QC said: “Terms such as ‘pull forward’ and ‘legacy challenge’ were Tesco’s internal jargon, used by those in the know, to describe the falsification of figures and the problems this created.”
The court heard that by July 2014 Tesco employees had made several attempts to highlight “unrealistic targets”, which were kept in place despite the fact the hole in the accounts was “spiralling out of control”.
Ms Wass said: “Attempts to persuade them to lower the targets had been unsuccessful and the defendants carried on conniving and manipulating the figures by incorrectly encouraging others to pull forward income, and these defendants must have been fully aware of the damaging effect this practice was having on the financial health of the company and, more particularly, its shareholders.”
The prosecuting counsel said employees described the run-up to the posting of Tesco’s half-year results, known every year as “diving for the line”, as “frenetic” in August 2014.
She likened the defendants to “hamsters running around a wheel” as they tried to plug the hole in the accounts.
The prosecution alleged Rogberg was reduced to telling “bare-faced lies” to deny a shortfall, “fronting the matter out” when challenged.
The trial continues.