Three former Tesco executives are accused of “cooking the books” in a scandal which wiped £2bn off the supermarket’s total share value and sent “shockwaves” through the stock market.
Carl Rogberg, 50, Chris Bush, 51, and John Scouler, 49, are alleged to have been involved in a “white-collar crime“ plot in which they failed to correct inaccurately recorded income figures, which were then published to auditors, other employees and the wider market.
The supermarket’s former finance chief, managing director and food commercial head, who are charged with fraud by abuse of position and false accounting between February and September 2014, were investigated after Tesco was found to have inflated its profits.
The supermarket made a public announcement to the stock market on 22 September, 2014 which stated that it had previously overestimated its profits by £250m, Southwark Crown Court in London heard.
Sasha Wass QC told the jury: “The prosecution case is that the second statement, which corrected the first statement, was the true one and, as you will hear, the second statement caused shockwaves to run through the stock market.
“Not only did Tesco shares fall by nearly 12 per cent, wiping over £2bn off the total share value, but the credibility of Tesco itself and indeed the credibility of the stock market had been undermined.”
She went on: “The prosecution case in a nutshell is that all three defendants were aware that income was being wrongly included in the financial records of the company, which were used to inform the stock market.
“Each of the defendants was aware that this would lead to the company looking financially healthier than it actually was and it would result in Tesco’s trading profits being overstated.
“This, say the prosecution, was clearly dishonest.”
Mr Rogberg (of Mr Oxfordshire), Bush (of High Wycombe and Buckinghamshire), and Mr Scouler (Hertfordshire), all deny the charges.
Ms Wass said the case, “boiled down in its essence”, amounted to “cooking the books – or what lawyers call false accounting”.
She said employees in “relatively subordinate positions” had been involved in presenting the false figures in order to meet the profit targets set by Tesco.
But she added: “The three defendants who are on trial in this case are not the foot soldiers who misconducted themselves. The defendants in this case are the generals – those who are in positions of trust, and who were paid huge compensation packages in order to safeguard the financial health of Tesco.
“These defendants encouraged the manipulation of profits and indeed pressurised others working under their control to misconduct themselves in such a way that the stock market was ultimately misled.”
Ms Wass said those who objected to the practice within the organisation were bullied and forced to continue.
“It is not merely the fact that the defendants were aware that this was going on,” she said. “Each of these three defendants used their managerial authority and actively encouraged those working beneath them to falsify the figures; when those subordinate employees objected, the subordinate employees were bullied or coerced into carrying on with this practice.”
The court heard that Rogberg, who was “directly responsible” for authorising the falsified figures, received a remuneration package of more than £1m in 2014.
Bush, who was in charge of the performance and “integrity” of Tesco at the time, received nearly £3m that year, and Scouler, who allegedly directed those beneath him to falsify income figures, received around £1.5m.
Ms Wass said Tesco was operating in “challenging trading conditions” and “failure was not looked on kindly”.
“Each defendant would have had a very personal interest in keeping the share value of the company high, because a lot of their remuneration package included shares,” she said.
“And of course, any failure to meet targets could have resulted in not only the share prices going down, but indeed the credit rating of the company being downgraded.”
Ms Wass said figures were “window-dressed” to make it look as if targets were being met.
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She told the jury about the practice of “pulling forward”, which she said was “Tesco shorthand” for bringing forward income from the future to artificially inflate the figures of the present.
“It really should have been obvious to anybody, let alone a highly responsible and highly paid executive, that if income is not guaranteed and it hasn’t been earned, it shouldn’t be included in the current year…