By: Erin Smith
Tesco has in it’s recently released annual report stated that “regrettably, we have conclude that there have been a number of instances of probable breaches of the Code which fall short of the high standards we expect to uphold in our dealings with our suppliers.”
Despite “taking effective action to prevent this arising again” the company is already in hot water with its shareholders.
Tesco Shareholder Claims Limited (TSC) last month announced it is now being advised by Philip Marshall QC. The group which launched on 24 March 2015 said “compensation will be sought from Tesco in connection with the company’s disclosures in the autumn of 2014 that overstated its profits for multiyear period dating back to at least the fiscal year ended 23 February 2013.”
TSC is a not for profit organisation that is bringing a claim against Tesco on behalf of institutional shareholders. TSC confirmed that of the end of last month the firm had “already signed up various institutional investors to join the claim for compensation.”
John Bradley, the chairman of the TSC, said, “With the benefit of the advice received from Philip Marshall QC we believe we have a strong case and we wish to pursue it vigorously.”
The scandal which has rocked the supermarket retailer first came to light in 2014, following the resignation of chief executive Philip Clarke and chief financial officer Laurie McIIwee earlier that year. Originally the company reported that the misstatement of profits was £250m, which was then revised to £263m and now sits at £326m.
There are two legal teams pursuing the lawsuit, Scott+Scott LLP is a US litigation firm which is leading the lawsuit in the US, while TSC said it intends to appoint law firm McGuireWoods LLP to conduct the litigation in the UK.
A statement released by TSC said: “What is increasingly clear is that senior management of Tesco were likely responsible for misleading shareholders. Tesco has acknowledged that it hid the true state of its finances.”
Further the statement said that a “whistleblower” that chief executive officer Dave Lewis described as a “reasonably senior person” who made earlier efforts to get top management to address “improper accounting practices” were unsuccessful. Lewis was, upon receiving the information, able to confirm over a single weekend that “substantial problems existed”.