5 Tesco, HBOS and Autonomy
The three cases we discuss in this chapter have a current impact or are currently ongoing.The Tesco case is under a re-trial by the SFO. Now the case has been ruled and the SFO lost its case. No Tesco director was found guilty. The judge raised doubts about the SFO investigation so much so that the SFO withdraw other cases inclining one dealing with RollsRoyce. HBOS, despite its global crisis origins, is still a case that is cited in evidence of FRC bias. Autonomy is still in the US and UK courts.
The Tesco scandal The facts of the Tesco case
In September 2014, the Tesco management announced that it had discovered that profits for the previous two years had been overstated by approximately £250 million,1 later revised to £326 million.This announcement caused an immediate fall in the market value of Tesco’s shares and bonds – the fall in value was £2.1 billion at one point.The FRC, the SFO and the FCA started investigations and Tesco itself appointed Deloitte to examine the matter. PwC were the auditors at the time and had been in post since 1983. Over the next three years, more information became available, notably on the following matters: •
The amount of the overstatement is now estimated to be £284 million, being £76 million for the six months from March to August 2014, £53 million for the year to 22 February 2014, and £155 million for previous years.2 Finally the profit overstatement, identified three weeks after Dave Lewis took over as CEO from the outgoing Philip Clarke, was later raised to £263 million. Hence Tesco’s assets had been overstated for at least two years. • In September 2016, the SFO charged three former Tesco executives with the criminal offences of fraud and false accounting. Their trial
