The top management of Tesco, which is the largest retailing chain in the UK, has suspended four of its senior executives over a 'serious scam' in company's accounts, involving misappropriation of profits worth around GBP 250 million.
While revealing that Tesco's profits for the last six months have been overstated by over 250 million, the company, in a statement, announced suspension of its UK chief Chris Bush, UK Finance Director Carl Rogberg, Food Commercial Director John Scouler and the head of Food Sourcing Matt Simister.
Bush, who is Tesco's most senior executive in Britain after CEO Dave Lewis and was only appointed to the role in 2013. He has worked at Tesco for 32 years and previously ran the company's operations in Thailand. John Scouler handled the responsibility to look into the company's deals with food suppliers in the UK. In the statement it was noted that Scouler and Bush used to run trade briefing with Tesco's suppliers, which is due to be held next year in April at Wembley and also informed the suppliers about the latest news on Tesco's strategy.
Meanwhile, the company, which is headquartered in England's Hertfordshire county, has appointed its Multichannel Director Robin Terrell as Bush's replacement. Previously, Terrell used to work for Amazon and House of Fraser in online roles and has no experience of running physical stores. Head of the clothing division Jason Tarry will step into Scouler's role.
The recent statement from Tesco, which is the company's third profits warning within few weeks, shocked investors, resulting in downfall of its shares by 11.8% after trading opened. Market experts say that Tesco's recent update means that its profits for the first half will be almost 25% lower than expected, which were already well below initial expectations.
The retailing giant, which also operates in around 12 countries across Asia, Europe and North America, has brought in New York-based Deloitte to lead an investigation, alongside its lawyers Freshfields and has delayed the publication of its interim results by three weeks to October 23.
It was reported that the black hole relates to the recognition of revenues and costs on contracts with suppliers in the UK. Analysts have accused Tesco of booking revenues early and paying suppliers later. While calling the discovery a 'serious issue', Tesco's Chief Exective Dave Lewis, who was recently appointed on September 1 to deal with company's poor performance in the global market, said: "This is out of the ordinary, even the auditors didn't spot it."
The problem was brought to the attention of Tesco by an "informed" member of staff, who told the general counsel. Lewis was then informed and the company spent the weekend identifying the scale of the problem. The Financial Conduct Authority has been informed about the accounting blunder.
While talking to the media, Sir Richard Broadbent, who is the company's chairman, insisted that he would not step down despite the profit warning suggesting that the company's internal governance systems have failed. "Things are always unnoticed until they have been noticed. Shareholders will have to decide whether I am part of the problem or part of the solution. This is not a welcome event. No one here is having a good day today," he said.
Lewis later clarified that the four senior members of staff who had been suspended were not disciplined but had been asked to step aside to "facilitate the fullest and deepest investigation possible." He said: "The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."
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