Should Tesco directors ever have faced fraud trial?

Should Tesco directors ever have faced fraud trial?

Questions have been raised about the use of DPAs by the Serious Fraud Office (SFO) case after the case against final defendant Carl Rogberg was dropped

Should Tesco directors ever have faced fraud trial?

Carl Rogberg was the last defendant to be acquitted in a trial against former Tesco directors on Wednesday January 23.

The prosecution case, brought by the Serious Fraud Office, was said by judge Sir John Royce last month to be “so weak it should not be left for a jury’s consideration.”

He made that statement while acquitting Chris Bush and John Scouler.

Then the case against Rogberg was dropped after the SFO failed to present any evidence against him.

Why did it come to court?

An initial investigation was sparked after Tesco announced in 2014 it had overstated its profits by £250m.

Tesco agreed to pay a fine of £129m at the time and £3m investigation costs. To avoid prosecution, the company signed a deferred prosecution agreement, which named the three defendants as the guilty parties.

Rogberg was unable to stand trial at the original date, as he suffered a heart attack.

The DPA allowed Tesco to get back on its feet again, but took a heavy toll on the defendants.

In a statement, Rogberg said afterwards: “The trial has had enormous consequences on my health and exemplary career, as well as for my wife, my son, my family and my friends.”

The SFO case had stated that the directors pressurised staff below them to make Tesco appear in ruder financial health than it really was.

What are DPAs and why are they controversial?

DPAs were introduced in the UK in February 2014. They allow a company to suspend a prosecution in return for meeting specified conditions, such as paying a fine and showing that its culture has changed. DPAs have been used in the US for many years.

But lawyer Ross Dixon of Hickman & Rose, who represented Bush and Scouler in the original trial, said the use of DPAs exposed a “fundamental unfairness” and the case should be a warning to anyone concerned about how the justice system works.

“We now have two contradictory outcomes: that of the criminal trial in which the allegations were dismissed for lack of evidence, and the DPA, based on the same allegations, which tells a different story.

“The discrepancy between these outcomes is deeply worrying and should particularly concern senior executives working for a company under investigation by the SFO.

“They may find themselves, as in this case, acquitted of wrongdoing yet have their reputation publicly besmirched in an agreement between the SFO and the company under investigation.

“The problem stems from the fact that while DPAs are seen as a great outcome for the SFO, there is a risk that in pursuit of this goal, the SFO has little incentive to properly test the assertions on which it is based.”

Although the SFO eventually offered no evidence against Rogberg, he pointed out, after the case against the first two was also dropped, the three men suffered a blow to their reputations due to the DPA.

In a statement on its website, the SFO said: “Through the DPA Tesco Stores Limited accepted responsibility for false accounting practices.

“Between February and September 2014, instead of working to safeguard the financial interests of the company and its shareholders, a culture existed at Tesco that encouraged illegal practices to meet accounting targets, including improperly recognised income in the UK accounts, by ‘pulling forward’ income from subsequent reporting periods.”

But Ross Dixon said the statement, which contradicts the not guilty verdicts, was “an unfair and extraordinary outcome.”

It remains to be seen now if there will be changes to the DPA system as a result of this case, described by Rogberg’s lawyer as “unprecedented.”

 

 

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