Skip to main contentSkip to navigationSkip to navigation
US shareholders sued Tesco for overstating profits.
US shareholders sued Tesco for overstating profits. Photograph: Matt Cardy/Getty Images
US shareholders sued Tesco for overstating profits. Photograph: Matt Cardy/Getty Images

Tesco agrees $12m payout to US shareholders over accounting scandal

This article is more than 8 years old

Agreement means UK’s biggest supermarket will settle without admitting liability

Tesco has announced a $12m (£7.94m) deal to settle one of two US shareholder class action suits over its accounting scandal.

Britain’s biggest supermarkets group said it had reached agreement in principle to settle a class action brought in New York on behalf of holders of American Depositary Receipts (ADRs) representing 2% of Tesco’s shares.

They sued the company and three former directors including Tesco’s former chief executive Philip Clarke, claiming that accounting irregularities inflated the retailer’s share price. The other two directors are Laurie McIlwee, the former finance director, and Chris Bush, the former UK managing director of Tesco.

Clarke was ousted in July 2014 after a string of profit warnings and replaced by Unilever executive Dave Lewis. He faces questioning by the UK’s Serious Fraud Office, which launched a criminal investigation into the multimillion pound accounting scandal in October 2014. Tesco admitted that it had overstated its profits because it had incorrectly booked payments from suppliers.

The agreement, which requires approval by a federal court in New York, means Tesco will pay $12m to settle the class action without admitting liability. The company faces another claim brought in Ohio by the remaining holders of ADRs representing less than 0.2% of Tesco’s shares.

Earlier this year, US litigation firm Scott + Scott funded a UK group to bring a claim on behalf of institutional shareholders in the UK, arguing that Tesco’s overstatement of its profits caused a “permanent destruction of value to shareholders”. Tesco said no litigation had been brought in the UK so far.

Clarke and McIlwee, who both left before the accounting scandal came to light, collected payoffs of £1.2m and £970,880 respectively for loss of office, but Tesco later introduced provisions to claw back their bonuses if either was found to have been guilty of gross misconduct.

The US settlement covers investors led by Stephen Klug, who sought class-action status on behalf of those who acquired Tesco’s ADRs and “F-shares” between 18 April 2012 and 22 September 2014. Kim Miller, a partner at Kahn Swick and Foti representing Klug, in a court filing called the settlement an “outstanding recovery” given the risks of continued litigation.

The average recovery will be 37 cents per American depositary share and 11 cents per F-share before deducting fees and expenses, court papers show.

Comments (…)

Sign in or create your Guardian account to join the discussion

Most viewed

Most viewed