Tesco chief executive Dave Lewis has told a court about his surprise and shock when he learned the retailer’s profits had been misstated by £326 million.
Lewis told the trial of three men accused of failing to correct inaccurately recorded income figures which were published to the market, that once he was made aware of the issue he thought it was “very important” the matter was investigated quickly.
The trial, which began at the end of September, relates to a £263 million back hole that was revealed in Tesco‘s trading update on August 29, 2014. This was later revised to £326 million.
The grocer‘s former UK boss Chris Bush, former finance director Carl Rogberg and former commercial director John Scouler were charged last year with offences including false accounting between February and September 2014 and fraud by abuse of position.
The trio have all pleaded not guilty.
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Lewis – who moved into the chief executive role just three weeks before the scandal erupted – told jurors yesterday at Southwark Crown Court that although he started his position on September 1, despite meetings with Bush and Scouler, he had not been told of the issue until September 19.
He recalled a meeting with Tesco chief counsel Adrian Morris at around lunch time that day in which he was presented with the Legacy Paper.
The court has previously heard that the Legacy Paper explained there was a £246 million hole in the accounts.
When asked by prosecutor Sasha Wass QC about his immediate reaction Lewis replied: “One of surprise and one of shock, really.
“I think the thing that was unique to this paper was the indication that the numbers that had been declared had a potential misstatement within them.”
He added: “What was new was the proposition here that £246 million of income had been included in the first half of the year that on that basis of this paper was deemed to be questionable.”
Lewis then explained why decided to do something about it.
“I had never experienced anything like this before, but it was quite clear that having read the paper, and the manner in which it was served, I felt that it had to be taken very seriously,” he told the court.
Lewis then described how he called Tesco chairman Sir Richard Broadbent to explain what the document said, and how a team of internal and external auditors was assembled to work through the weekend.
It was then discovered the actual amount of shortfall was £263 million, and Tesco made the public announcement about the misstated accounts on September 22.
“It was a very intensive amount of investigation of these numbers,” Lewis said.
“It required a huge amount of review of paperwork, documentation between pretty much all of the suppliers to Tesco and the different categories in order to validate the number.
“So that was quite an extensive exercise.”
The trial continues.