A number of the eight Tesco executives who stepped aside in the wake of the accounting scandal that wiped billions of pounds off the supermarket giant’s stock market value have formally left the business, it has emerged.
The retailer parted company this week with Kevin Grace, its group commercial director, Carl Rogberg, the UK finance director, and John Scouler, food commercial director, according to the Financial Times.
The three individuals could not be reached for comment, but have not been accused of any wrongdoing.
They were members of the so-called “Cheshunt Eight” – named after the location of Tesco’s Hertfordshire head office – suspended when the £264m profits overstatement came to light in the autumn.
The fate of the other suspended managers, who include Tesco’s UK managing director Chris Bush, is not known, but the matter is now the subject of a criminal investigation by the Serious Fraud Office. Tesco declined to confirm the departures.
Experts have predicted the SFO investigation could take several years.
The departures enable new chief executive Dave Lewis to start assembling his senior team. Tesco’s UK chain is being run on an interim basis by multichannel boss Robin Terrell as it enters the crucial Christmas trading period. The other executives on leave include Dan Jago, Tesco’s UK and group wine director, Sean McCurley, director of convenience foods, William Linnane, director of impulse purchases, and Matt Simister, who is responsible for sourcing, leaving key positions unmanned on a permanent basis.
When Tesco eventually updated investors on its first half performance back in October it said the profits overstatement related to when the retailer booked payments received from suppliers, which pay the big grocery chains to run in-store promotions on their behalf. The company’s own report on the matter by forensic accountants from Deloitte concluded supplier payments had been “pulled forward or deferred” in a manner that was contrary to Tesco accounting policies. It also found there had been “similar practices in prior reporting periods” and that the sums “pulled forward grew period by period”.
Getting its financial house in order almost wiped out Tesco’s first half profits, which crashed 92% to £112m as the retailer bore £500m of one-off costs, including those relating to cleaning up the accounting issue.
The crisis prompted chairman Sir Richard Broadbent to fall on his sword and he will step down next year. Bonus payments to former chief executive Phil Clarke – who under the terms of his contract continues to be paid his salary until January – and former group finance director Laurie McIlwee have been withheld until the accounting matter is resolved.
Earlier this week Stewarts Law, the law firm, appealed to Tesco shareholders to participate in a lawsuit against the UK’s biggest retailer. The proposed legal action would seek to establish whether shareholders are entitled to compensation for financial losses suffered in the wake of the accounting fiasco, which has sent the company’s share price to an 11-year low.
“We expect to issue proceedings against Tesco in the high court in London within six months,” said Stewarts Law partner Sean Upson. “We do not intend to wait for the outcome of the SFO investigation, which may take some years.”
