Home

PETER FROST investigates the latest dodgy goings-on on the high street

Just three weeks after Tesco brought in its new top boss Dave Lewis to try to save the ailing company, a whistleblower has revealed that the existing management team has cooked the books to the tune of £250 million.

More than £2 billion has been wiped off the value of Britain’s biggest supermarket chain.

Some City analysts are even throwing doubt on the long-term survival of the high street giant that, not so long ago, captured one pound of every seven spent on British high streets.

Tesco was already facing the worst crisis in its 95-year history. Now things are even worse.

Shares have fallen 40 per cent this year, bringing huge losses not just to pension funds, traders and investors but also to present and retired staff who have been encouraged to buy shares in the company.

Only last month Tesco issued a warning that its profits for the first six months were a disappointing £1.1bn.

Now it seems even that was an exaggeration or a lie and in fact the actual likely profits had been exaggerated by at least £250m.

Four senior executives have been suspended, but also under strong criticism is chairman Sir Richard Broadbent and his main board, stuffed as it is with accountants and supposed City finance gurus.

Investors hold Broadbent responsible for a lapse in leadership and want the former banker to explain his failings. Broadbent has insisted he will not resign.

Tesco says it is too early to say whether this was a case of fraud but has called in its law firm Freshfields and accountants Deloitte to help them get over the embarrassment.

This whole issue will be hugely awkward for David Cameron and Nick Clegg’s City darling PriceWaterhouseCoopers, which has been Tesco’s auditor since 1983.

Cameron and Clegg were once so impressed by Tesco’s management that they suggested the supermarket’s boss Sir Terry Leahy to head — and no doubt help to sell off — the National Health Service. He turned the job down.

Tesco has already started the current cover-up despite shouting the normal buzzwords like “total transparency” from the rooftops. It tried to hide the names of the four executives now on gardening leave.

We can reveal the names. They are UK managing director Chris Bush, UK finance director Carl Rogberg, commercial director John Scouler and sourcing boss Matt Simister. All enjoy huge salaries, bonuses and many other benefits.

Tesco chairman Broadbent had already made some big changes at the top, replacing both finance director Laurie McIlwee and chief executive Phil Clarke within months of each other.

Dave Lewis joined Tesco from Unilever at the beginning of this month. Just three weeks into his new job, crisis hit.

Former chief executive Phil Clarke had cut prices and introduced branded restaurant chains, bakeries and coffee shops with little effect. It was like rearranging the deckchairs on the Titanic.

Tesco has taken a hit to profits after strong competition from low-cost rivals like Aldi and Lidl.

Many other scandals including the horsemeat fiasco have undermined what was already a sinking, or stinking, reputation.

Analysts said Tesco has been overstating its profits for some time and the problems may go far deeper.

Giving misleading information to the stock market is a serious offence and the potential breach of City rules has seriously damaged Tesco’s already rock-bottom reputation.

Both City regulator the Financial Conduct Authority and the Serious Fraud Office are likely to launch an inquiry, and court action or a huge fine are predicted.

The suspended directors, along with many other top staff at Tesco headquarters, were told to hand over their smartphones and laptops for investigation.

Two Tesco leavers last week

Laurie McIlwee left his post as chief financial officer last week just before the quarter-of-a-billion-pound hole in the accounts was discovered.

Tesco-CFO-Laurie-McIlwee-photo-Tesco-134-detail

That didn’t stop him negotiating a potential bonus of up to £886,000 and a “golden goodbye” of £970,800 as well as six months’ extra time, not working, but on full salary.

Tesco paid McIlwee (pictured) £1.5m last year, including a salary of £800,000, benefits of £119,000 and £537,000 from his pension.

He received £33,000 in car benefits and £31,000 for a driver, with an extra £29,000 on security for his £4m home.

McIlwee joined Tesco in 2000 from PepsiCo. At the time insiders expressed doubts about his experience — he had no background in supermarkets.

His going left Tesco with no finance director until his replacement Alan Stewart was rushed in early from Marks and Spencer.

Also last week Gladys Hope (not her real name) left her job as a checkout operator after a quarter of a century.

Hope wasn’t treated anywhere near as generously as Laurie McIlwee.

She told us: “Managers at Tesco always had three main messages for employees.

“The first was what a wonderful company Tesco was. The second was don’t have anything to do with trade unions, ‘Tesco will look after you,’ they always told us.

“Finally, use the many share schemes to invest in Tesco. It was a way of saving and would provide a guaranteed nest egg for retirement.

“Sadly I believed them. I became Mrs Tesco, I would do anything for the company.

I remember once, when they fitted new checkouts, I volunteered to work all day on Sunday to help with the change-over.

At the end of the day my manager gave me a bunch of Tesco flowers.

No wages, no money, no overtime, just a bunch of measly flowers — that was what Tesco was like.

“I did buy the shares. When I retired after 25 years I had Tesco shares that at their peak had been worth just over £25,000.

“Today I’d be lucky to sell them for £10,000 and the price is dropping fast. It is just like they are robbing my wages even after I have stopped working.”

Tesco in Korea

Meanwhile things in one outlying arm of the Tesco world empire are just about as bad as they can be.

Tesco in Korea has come under government investigation for selling information on individual customers, including buying habits garnered from the “big brother” loyalty card system to outside companies and organisations.

Also under investigation is a BMW car competition for customers that, amazingly, appears to have been won by a friend of one of Tesco’s top managers.

This article first appeared in the Morning Star 23 September 2014.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s