LONDON (Reuters) - Two members of Tesco’s (TSCO.L) financial team resigned in 2014 because they were concerned that their professional integrity was being compromised by what they were being asked to do by their bosses, a court heard on Tuesday.
The case follows Tesco’s announcement in September 2014 that its profit forecast had been overstated by 250 million pounds ($332 million) — a disclosure that saw its shares tumble and plunged the company into the worst crisis in its near 100-year history.
Christopher Bush, 51, who was managing director of Tesco UK, Carl Rogberg, 50, who was UK finance director, and John Scouler, 49, who was UK food commercial director, all deny charges of fraud and false accounting.
On the third day of the trial, lead prosecutor Sasha Wass told the jury that Richard Parsons, a finance project manager, and Aysen Nadiri, an accountant, both quit their jobs with Tesco over concerns that the supermarket group was allowing commercial income to be improperly recognised.
“Two persons felt so compromised by the mis-recording of profit they did resign rather than engage in what they considered to be practices that were unlawful,” Wass told London’s Southwark Crown Court.
She said Parsons raised concerns with Tesco’s human resources department that finance staff feared losing their accountancy qualifications.
Wass said Nadiri felt senior managers “had a disregard for proper accounting principles.”
The prosecution told the court on Friday that the three defendants had abused their positions of trust by encouraging the manipulation of profit figures, lying to auditors and misleading the stock market.
The case centres on two statements made by Tesco to the stock market in 2014.
In the first, published on Aug. 29, Tesco downgraded its financial guidance. In the second, on Sept. 22, Tesco said it had found a 250-million-pound over-statement of its expected profit, mainly due to booking commercial deals with suppliers too early, which is known as “pulling forward”.
Wass told the court that Amit Soni, a member of Tesco’s UK finance team, had exposed the size of the hole in Tesco’s accounts, prompting an emergency review by the supermarket group’s new group Chief Executive Dave Lewis and the second statement to the stock exchange.
Soni, who is due to give evidence on Wednesday, believed the hole at the end of the second half of the 2014-15 year could be as large as 600 million pounds if nothing changed, Wass said.
Exasperated by the defendants’ failure to deal with the issue, Soni compiled a report detailing the scale of the problem, Wass said.
She said Soni confided in colleagues with an e-mail saying: “the whistle is about to blow...The fight starts now. It’s a fight I have to have if Tesco is to become better.”
Reporting by James Davey; Editing by Keith Weir and Alexander Smith