TescoGate latest: UK shareholders poised to sue over "reckless" accounting errors

By Gemma McKenna

Published: 26 November, 2014

A UK law firm is preparing legal action on behalf of Tesco shareholders that will allege directors and senior managers "knew or were reckless" over the retailer's "untrue of misleading" accounts, which overstated profits by £263 million.

Tesco Tesco is facing legal action from shareholdersThe supermarket is facing fresh legal action, this time from UK firm Stewarts Law, from shareholders seeking compensation over its misstatement of accounts, which caused them

Stewarts Law has said it will not wait for the outcome of the Serious Fraud Office investigation, which may take some time, but expects to file proceedings seeking compensation on behalf of shareholders at the High Court within six months. It will allege that company directors and senior management breached the Financial Services and Markets Act.

The claim is being financed by Bentham Ventures on a no-win, no-pay basis, but investors must have bought at least 10,000 shares between April 17, 2013 and October 22, 2014 to qualify. They have until January 23, 2015, to join the action.

John Walker, managing director of Bentham Europe, said: "The overstatement of earnings has caused significant harm to Tesco's shareholders who bought shares since 17 April 2013. Shareholders are justifiably concerned that Tesco has misrepresented its earnings resulting in material losses. We expect the legal claim to reveal the true extent of the problem and allow shareholders to seek compensation for harm suffered.

"Shareholders ought to be able to allocate capital on the London Stock Exchange assuming earnings are not being misstated. When there has been a material misallocation of capital due to misstated earnings, compensation ought to be paid. This is the biggest crisis in Tesco's history and shareholders - who saw billions wiped off the value of the company within days - deserve more than just an explanation for what went wrong."

Tesco has seen its market value halve following the accounting errors and a series of profit warnings. It is already facing a proposed class action lawsuit in the US which accuses Tesco and two named defendants, former chief executive, Philip Clarke, and ex-chief financial officer, Laurie McIlwee, of making false and misleading statements and failing to "disclose the truth regarding the company's financial condition".

The supermarket declined to comment on the lawsuit.

Stewarts Law is also currently acting for over 300 institutional shareholders in the multi-billion pound RBS Rights Issue litigation, which is also a claim under the Financial Services and Markets Act.

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