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12 December 2018

Seeds of failure in Tesco trial were clear from start

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

cb-web__0006_david-corker_6541_final-jpg

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

cb-web__0004_claire-cross_6496_final-jpg

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

By Sangeeta Bedi

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

Categories: Blog, Financial Crime,

cb-web__0006_david-corker_6541_final-jpg

Categories: Blog, Financial Crime,

Prosecutors should accept with equanimity an accused’s acquittal by a jury following a trial.

If the case reaches that stage, it generally denotes that it was a proper and respectable one to bring. However, a dismissal of a prosecution case by a trial judge because it is too weak to be left to a jury to consider is a criticism and a rebuke of the prosecutor’s judgment.

The dismissal by the judge, upheld by the Court of Appeal, in the trial of the two Tesco executives suggests that the Serious Fraud Office’s internal case quality assurance system requires an overhaul.

The SFO’s prosecution concerned Tesco’s accounting treatment of supplier rebates in respect of future business. They were classed as revenue for the six-month accounting period during 2014 for which Tesco’s then board had made an ambitious profit forecast.

There was considerable internal and external pressure on Tesco to prove it could arrest its decline and demonstrate to the City that its revised retail strategy was working.

A prosecution founded on what is the proper accounting treatment of incentives for future business and therefore when it is justified to treat expected future revenue as current is inherently difficult to win. Where there is scope for a reasonable disagreement a prosecutor will need probative evidence of an intent to falsify.

The SFO ought to have realised all along how difficult it is to prove fraud in these circumstances. In December 2001 it suffered an ignominious failure when three of the four erstwhile directors of Wickes were acquitted in a case that was again about treating expected future income as current.

After a ten-month trial of that trio, the jury returned unanimous not guilty verdicts in less than an hour. The SFO nonetheless doggedly went on to prosecute the fourth individual, who unsurprisingly was also acquitted.

The SFO should not avoid prosecuting difficult and complex criminal cases – that is its function, which justifies its existence. But the seeds of failure in Tesco were evident from the start.

There was always a conspicuous absence of damning evidence. There was nothing concrete to prove that misleading the market as opposed to meeting the target was the predominant aim of each defendant.

The fact that Tesco itself had wanted to settle via a deferred prosecution agreement is and ought to have been regarded by the SFO as irrelevant. Companies usually settle. They value certainty over sufficiency of evidence.

And it would be a fallacy to contend that the recent acquittals mean the company was unwise to agree that deal.

The company’s apparent acceptance that its directors had acted criminally indicates nothing more than an eagerness to reach an early settlement with the SFO.

This article was originally published in The Times and can be accessed here, behind a paywall.

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