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31 October 2014 / by / in ,

Tricks and Treats for Tesco

On 29 October 2014, the Serious Fraud Office announced that they would be launching a criminal investigation into Tesco’s £263 million profit overstatement. An early Halloween horror show for the retailer. Up to that point it was only the FCA who were interested. Not ideal, but a finding of a regulatory breach by the company would no doubt be regarded as being preferable to a criminal conviction against either the company or one or more of its directors. The FCA can bring criminal prosecutions but these tend to be limited to prosecutions for insider dealing or more technical breaches of the Financial Services and Markets Act 2000. The involvement of the SFO signals wider concerns about dishonest practices within the business.

The SFO are keeping their cards close to their chest about the details of the investigation, and quite rightly so. The investigation may well result in no action being taken against either the company or any individuals. They do, however, have extensive powers under the Criminal Justice Act 1987 to compel individuals to produce documents and to attend interviews to answer questions from SFO investigators. It is likely that these powers will be used initially to gather material and information and establish if and where there is any criminal culpability. The SFO may well also have access to the report by Tesco’s internal investigators, Deloitte, and the material gathered by the FCA to date.

If the SFO feel that there is enough evidence against any individuals to make them a suspect then they would be likely to interview them under caution. This would give an individual a right to make no comment to the questions put, but also, unlike a compelled interview, enables the SFO to use the interview in any subsequent criminal proceedings.

The investigation may take years to complete, but once it is finished the SFO will need to decide whether any individual or the company itself should be charged with a criminal offence. That decision is a long way off at the moment, but what is certain is that the next few months and even years are not going to be comfortable for the management of Tesco.

Roland Ellis

Roland qualified as a solicitor in 2004 and was awarded higher rights of audience in 2008. Roland trained in general criminal defence before specialising in regulatory and business crime. He has been involved in some of the UK’s highest profile and complex investigations and prosecutions brought by the Serious Fraud Office (SFO), Financial Conduct Authority (FCA) and Crown Prosecution Service (CPS).

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