SFO under fire for ‘fundamental misunderstanding’ in Tesco trial

The collapse of the trial of two former Tesco directors accused of false accounting will cause more embarrassment for the Serious Fraud Office (SFO) and also call into question an earlier deferred prosecution agreement (DPA) between the supermarket and the fraud-busting agency, lawyers have predicted.

It was revealed this morning that a judge at Southwark Crown Court had thrown out the case after hearing the SFO’s evidence. Chris Bush, Tesco’s former UK boss, and John Scouler, the former commercial food director, have been acquitted of all charges.

The case related to an alleged hole in Tesco’s accounts. Both men were suspended in 2014 after it was revealed Tesco had overstated its profits by £250m.

In a fiery statement Bush’s solicitor, Ross Dixon, partner at Hickman and Rose, demanded answers as to how the SFO could ‘fundamentally misunderstand the effect of its own evidence’. ’The SFO appeared determined to blame a small number of senior individuals including Bush, despite the lack of any evidence that he was told about or concealed unlawful behaviour,’ Dixon said.

He added: ‘Given its status as the UK’s leading investigator of serious and complex fraud, the SFO made many basic mistakes. For example, failing to identify the correct versions of documents shown to Bush, and failing to undertake any detailed forensic analysis of the underlying accounting evidence.’

The trial collapsed last week but reporting restrictions were put in place. The SFO sought to appeal the ruling but the Court of Appeal refused and restrictions were lifted this morning.

The supermarket had already paid the SFO £129m as part of a DPA agreed in April last year relating to false accounting at Tesco Stores Limited, a subsidiary of the retailer, between February and September 2014.

Alison Geary, counsel in the white collar defence team at international firm WilmerHale, said: ‘This throws into stark relief the very different considerations between concluding a court approved DPA with a company and prosecuting individual executives. It should not be assumed that the prosecution of individuals will inevitably follow the conclusion of a DPA.’

Maria Cronin, partner at Peters & Peters, said the acquittals are likely to cause companies to ’reconsider the potential advantages of DPAs’.

She added ‘It is notable, that, to date, the SFO has had little success in securing convictions against individuals following a DPA.’ ‘That the judge considered that the SFO’s case was unsupported by evidence is extremely concerning,’ Cronin said.

The SFO said it is considering whether to pursue a retrial in light of the findings.

The Law Society Gazette | December 6, 2018
https://www.lawgazette.co.uk/law/sfo-under-fire-for-fundamental-misunderstanding-in-tesco-trial/5068603.article