LONDON, May 28, 2015 /PRNewswire/ --
Tesco Shareholder Claims Limited ("TSC" or "the Group") today announced that it is being advised by the renowned barrister, Philip Marshall QC, and that, in light of the advice provided, it intends to pursue claims against Tesco PLC ("Tesco") vigorously on behalf of affected shareholders. TSC also confirmed that it has already signed up various institutional investors to join the claim for compensation. Whilst it is too early to predict the ultimate size of the Group it is already clear that the case against Tesco is strong, and will involve a substantial claim.
Today's announcement follows the launch of the Group on 24 March 2015. Compensation will be sought from Tesco in connection with the company's disclosures in the autumn of 2014 that it had materially overstated its profits for a multi-year period dating back to at least the fiscal year ended 23 February 2013. TSC intends to demonstrate that Tesco's repeated overstatements of profit caused substantial losses among its members. The Group further intends to seek recoveries under section 90A of the Financial Services and Markets Act, while exploring other possible claims as well.
TSC is a not-for-profit organisation formed to bring this claim for compensation against Tesco on behalf of institutional shareholders. The Group will operate on a fully funded and insured basis, meaning that the claimants will only have to contribute to costs if the claim is successful. TSC is supported by Scott + Scott LLP, a leading US litigation firm which brought a similar claim against Tesco in the US. The Group intends to instruct leading law firm McGuireWoods LLP to conduct the litigation in the UK.
While the legal teams are investigating and developing the case, 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. What has since emerged is strong evidence that, from as early as 2011, the business was under ever increasing pressure to maintain financial performance, and to inflate its publicly reported profits so as to avoid having to report the true extent to which the business was beginning to underperform. In November 2013 there were reports of Tesco having engaged in the practice of demanding money from suppliers to help hit profit targets - something Tesco denied at the time.
However, as the scandal broke in the autumn of 2014, Tesco itself admitted that it had overstated its profits dating back to fiscal 2013 by £250m (a figure since twice revised upwards to £263m and, most recently, to £326m). The pervasiveness of the misconduct at Tesco is further indicated by the fact that by the end of 2014 Tesco had suspended at least eight senior former senior executives; similarly, in October 2014 a former Tesco executive was quoted in BBC reports as saying that the heads of Tesco's various retail divisions would "put out a call" as the end of each half year approached to squeeze more money out of Tesco's suppliers, and that "find me £30m would be the message." Notably, by September 2014, former Tesco CEO Philip Clarke and former CFO Laurie McIlwee had also already resigned their posts.
It is also noteworthy that earlier efforts by a Tesco whistleblower, described by current Tesco CEO David Lewis as a "reasonably senior person", to get top management to address Tesco's improper accounting practices were unsuccessful, until the issues were brought to Tesco's newly appointed CEO, Dave Lewis, in September 2014. That new CEO Lewis was able to confirm over just a single weekend that substantial problems existed (and that a significant number of senior management should be immediately suspended) only further confirms the implausibility of any notion that Tesco's senior management was somehow "unaware" of the massive and pervasive accounting improprieties that infected the Company's profits statements over the past several years.
TSC expects to formally issue a claim later this year.
John Bradley, 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."
David Scott, Managing Partner at Scott + Scott LLP added, "The advice we have received comes as no surprise. Our investigation over the last few months has shown that Tesco committed serious violations when it overstated its profits. We intend to pursue Tesco in order to help our clients recoup their losses."
SOURCE Tesco Shareholder Claims Limited