Tesco chief executive Dave Lewis told Southwark Crown Court today of his “genuine shock” at being presented with an internal memo detailing a £250m misstatement in the supermarket giant’s accounts.
Lewis, a witness at the fraud trial of Tesco’s ex-managing director Chris Bush and ex-UK food commercial director John Scouler, said he was presented with the so-called “legacy” paper on Friday 19 September 2014, just three weeks after joining the company.
Lewis said he was in a meeting with Tesco’s marketing team when an executive assistant interrupted and asked him to meet the company’s general counsel Adrian Morris.
He said Morris presented him with the legacy paper, which had been drawn up by Tesco finance director Amit Soni, which calculated that Tesco had misstated £246m of profits in its accounts.
Lewis said the paper “took two readings” and said the “most striking” implication was that there had been a “potential misstatement” in the firm’s results in the first half of the financial year.
The detailed paper also talked about a number of accounting techniques used at Tesco to flatter the company’s figures.
Former Unilever executive Lewis said “what was inside” the paper described “a way of operating I had not ever seen before”.
Both Scouler and Bush had previously seen the legacy paper but prosecutors said they remained silent about what was contained in the document.
Lewis pulled together a team which spent the weekend trawling through documents alongside Tesco’s auditors PwC, he also instructed audit firm Deloitte to carry out a separate review.
Lewis said by Sunday it had become clear there was a “significant issue” and Lewis and Tesco’s board agreed a statement to be issued to the stockmarket at 7am on Monday 22 September.
The statement, which sent Tesco’s shares price plunging, said Tesco believed it had overstated profits for the first half of 2014 by an estimated £250m “due to the accelerated recognition of commercial income and delayed accrual of costs."
Bush and Scouler have both been charged with one count of fraud and false accounting.
They both deny the charges.
The trial continues.