Two former senior executives of Tesco who are on trial for fraud in London were presiding over a “car crash waiting to happen” Southwark Crown Court that was heard today.
The prosecuting for the Serious Fraud Office (SFO), Sasha Wass QC, said Chris Bush, the former UK managing director of Tesco, and John Scouler, the former UK food commercial director, were aware of a shortfall of almost a quarter of a billion pounds in the accounts of the supermarket during the 2014-2015 financial year.
Both Bush and Scouler have been charged with one count of fraud and false accounting.
However, both have since denied the said charges.
Wass said that Scouler and Bush knew that there was a massive hole in the accounts of Tesco during the 2014-2015 financial year but they did nothing to draw some attention to it.
Wass said that Bush “was acting dishonestly” and “did nothing to remedy the situation.” She also said that Scouler “remained silent” and “did not blow the whistle” over the “explosive information” thar Wass said he was aware of.
Wass informed the court that Scouler and Bush forged a connivance on a series of “complex” and “clever” accounting practices that concealed the true state of the accounts of Tesco from its auditors and the stock market.
According to the statements of witnesses, a practice that was called as “pull-forward” was utilise to help achieve the financial targets of the company by recognising the income from future accounting periods in an earlier period.
Wass said that the pulling forward of income resulted in a “snowball effect” whereby a new accounting period would begin with a “legacy” shortfall that required to be met, which resulted in further pulling forward of income to fill the hole.
It also resulted in what a witness described as “unachievable targets” since they were based on artificially inflated numbers that were carried over from the previous period.
David Lewis, the chief executive of Tesco who was appointed three weeks prior to the accounting scandal became public, is scheduled to appear as a witness tomorrow.