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."