Two Tesco employees felt so compromised by their bosses’ decision to ‘cook the books’ and inflate profits that they quit their jobs because they knew it broke the law, a court heard today.
Christopher Bush, Tesco UK managing director, Carl Rogberg, UK finance director, and John Scouler, UK commercial director, allegedly started their ‘white collar crime’ after the supermarket reported its first loss for 20 years in 2013.
After their new profit targets were set ‘unrealistically high’ the executives began ‘window dressing’ figures to ‘camouflage’ their failure to hit them in 2014.
At the time, Bush earned £3million, Scouler £1.5million and Rogberg more than £1million while orchestrating the grocer’s ‘biggest kept secret’.
Prosecutor Sasha Wass QC told their trial at Southwark Crown Court today: ‘Two people who felt so compromised by the mis-recording of profits that they did resign rather than engage in what they considered to be practices that were unlawful.’
Former Tesco bosses Carl Rogberg, 50, and Chris Bush, 51, (pictured last week) are on trial over the supermarket’s £250 million accounting black hole that rocked the supermarket and led to two staff quitting, their trial heard today
A public announcement on September 22 2014, which stated that it had previously over-estimated its profits by approximately £250million, sent ‘shockwaves’ through the stock market, Southwark Crown Court in London has heard.
Former Tesco UK commercial Director John Scouler, 49, pictured last week, is also in the dock over the accounting scandal
The three men are accused of ‘cooking the books’ in a scandal which wiped £2 billion off the supermarket’s total share value.
The jury was told that the practice of bringing forward income from the future to artificially inflate the figures of the present ‘was contrary to proper accounting standards and principles’.
Tesco would ‘change senior personnel’ if they failed to meet targets, which gave the men a ‘very personal interest’ in overstating the company’s financial position, the court was told last week.
Ms Wass QC, prosecuting, told jurors that, at the end of meetings with commercial directors before the first half ended in August, Bush knew how critical the situation was if it continued.
She said: ‘Mr Bush knew that the hole in the accounts at the end of the second half in the financial year could be as large as £600 million if nothing changed.
‘Mr Bush said they would be able to sort it out when the new chief executive officer arrived. But until the new chief executive officer arrived, Mr Bush’s instructions were to get to zero the budgets for half one and half two.’
But jurors heard that not all those who worked on the company’s finances agreed with the way they were handled, and that the situation had left some staff ‘in tears’, fearing the loss of their accounting qualifications.
Miss Wass said: ‘Let me tell you about two people who felt so compromised by the mis-recording of profits that they did resign rather than engage in what they considered to be practices that were unlawful.’
She told the court about Richard Parsons, a project manager at the supermarket, who in an exit interview said ‘It has broken me’ and that he was angry at having been put in a position which compromised his ethics.
Miss Wass added: ‘Richard articulated that this is the biggest kept secret in Tesco and if this was to get out, it would not be good for Tesco.’
Prosecutor Sasha Wass said the accounts were manipulated to meet profits targets the supermarket chain failed to meet – and help them more money
Jurors also heard that former Tesco accountant Aysen Nadiri quit her role on August 26 2014.
Miss Wass said: ‘Miss Nadiri became increasingly concerned about the message from senior management because they refused to accept that targets could not be met and they had a disregard, in Miss Nadiri’s view, for proper accounting principles.
Rogberg was ‘directly responsible’ for authorising the falsified figures and received a remuneration package of more than £1 million in 2014, the court heard
‘But Miss Nadiri became more and more uncomfortable attending meetings of the senior commercial teams when this practice was discussed, and she felt she no longer wanted to be part of the company.’
She added: ‘Miss Nadiri said that she was nervous about things going on. She was uncomfortable that things would not stand up at audit and she felt compromised as a financial professional.’
The court also heard that one of Tesco’s senior accountants, Amit Soni, who eventually presented findings of the hole in the accounts to the board, spent weeks agonising about what he was going to do about the situation.
In an email on September 3 2014, he told colleagues: ‘Keep the file with you, the whistle is about to blow.’
He added: ‘It has consumed my life in the last four to five weeks, collecting information in secret, getting my team to understand what I want and then doing it in a subtle way and only on my desktop.
‘Yesterday, after a long time, I slept properly, but the fight starts now.
‘It is a fight I have to have if Tesco is to become better.’
Rogberg, of Chiselhampton, Oxfordshire, Bush, of High Wycombe, Buckinghamshire, and Scouler, of St Albans, Hertfordshire, all deny the charges.
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