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Serious Fraud Office starts Tesco criminal investigation Serious Fraud Office starts Tesco criminal investigation
(35 minutes later)
The Serious Fraud Office (SFO) is carrying out a criminal investigation into accounting irregularities at supermarket giant Tesco.The Serious Fraud Office (SFO) is carrying out a criminal investigation into accounting irregularities at supermarket giant Tesco.
Tesco says it has been "co-operating fully" with the SFO.Tesco says it has been "co-operating fully" with the SFO.
Last week, the supermarket announced that its profits had been overstated by £263m, up from an initial estimate, made last month, of £250m.Last week, the supermarket announced that its profits had been overstated by £263m, up from an initial estimate, made last month, of £250m.
The inflated profit figure was the result of Tesco bringing forward rebates from suppliers.The inflated profit figure was the result of Tesco bringing forward rebates from suppliers.
The SFO confirmed the probe, but declined to give further details.The SFO confirmed the probe, but declined to give further details.
The new probe means an investigation by the Financial Conduct Authority (FCA) will be ended, Tesco said.The new probe means an investigation by the Financial Conduct Authority (FCA) will be ended, Tesco said.
Internal investigation 'More serious'
The FCA will be turning over its evidence to the SFO investigators.The FCA will be turning over its evidence to the SFO investigators.
"The management at Tesco will have been aware of the close working relationship between the FCA and the SFO, and the potential for the matter to move to this more serious criminal phase," said Robert Amaee, partner law firm Covington & Burling and former head of anti-corruption and head of proceeds of crime at the SFO.
"The SFO will no doubt be engaging with the new management to review the scope and focus of Tesco's ongoing internal investigation, and the steps taken for example in relation to the preservation of documentary evidence, and the interviewing of witnesses, some of whom have already been suspended by the company," he said.
Tesco had been doing deals with suppliers over promotions, which is commonplace for supermarkets.Tesco had been doing deals with suppliers over promotions, which is commonplace for supermarkets.
But it appears Tesco had been booking returns from those promotions too early, while pushing back the costs.But it appears Tesco had been booking returns from those promotions too early, while pushing back the costs.
The UK accountancy regulator, the Financial Reporting Council, is also monitoring Tesco.
"Now that Tesco are being investigated for fraud by the SFO, the Financial Reporting Council have yet greater reason to start an investigation into the auditors' role with regard to these irregularities," said Warwick Business School's Prof Crawford Spence.
Tesco auditor PwC declined to comment.
Overstated
The accountancy firm Deloitte last week completed its investigation into Tesco's misreported profits.The accountancy firm Deloitte last week completed its investigation into Tesco's misreported profits.
It found that they were overstated by £118m in the first half of this year, by £70m in the 2013-2014 financial year and by £75m before that.It found that they were overstated by £118m in the first half of this year, by £70m in the 2013-2014 financial year and by £75m before that.
The UK accountancy regulator, the Financial Reporting Council, is also monitoring Tesco.
Tesco rose 2.74% to 174.45 pence in London trading, while the FTSE 100 advanced 0.9%.Tesco rose 2.74% to 174.45 pence in London trading, while the FTSE 100 advanced 0.9%.
The supermarket giant's shares have lost more than half their value in the last 12 months, tumbling from 369.10 pence.The supermarket giant's shares have lost more than half their value in the last 12 months, tumbling from 369.10 pence.
While eight executives have been suspended since that practice was revealed, Tesco has said there was no evidence of personal gain from the mis-statement.While eight executives have been suspended since that practice was revealed, Tesco has said there was no evidence of personal gain from the mis-statement.