The Serious Fraud Office is set shortly to announce its findings following a criminal investigation into Tesco (LON:TSCO), a City expert claimed today.
The SFO began investigating Tesco in October 2014 following a multi-million pound accounting scandal that saw the suspension of a number of Tesco executives.
Mike Dennis, an analyst at Cantor Fitzgerald, expect the conclusion by the end of the week and warned there could be fines, forced repayments and restrictions imposed upon the supermarket giant.
Dennis said: "We believe, the implications of a stronger regulator, Grocery Code Adjudicator (GCA), a compliant grocery industry and potential restrictions from the SFO could place significant limitations on Tesco’s ability to recover margin and repay/refinance £1.1bn of bonds due in September 2016 and £330mln due in January 2017."
Tesco, the UK’s biggest retailer, could be fined more than 1% of its UK grocery sales (a cost of £350mln) and be forced to repay suppliers £100mln of ‘arbitrary unjustified cash payments’.
Individuals at the company at the time might also face prosecution.
The supermarket was accused of bringing forward payments to suppliers in order to skew its financial results following poor sales.
Cantor estimates that the amount Tesco collected in payments from suppliers rose by £1.7bln over five years to £2.4bln in February 2014.
This would account for 30% of cash profits in that given period.
Dave Lewis, the then chief executive, revealed a shortfall in the retailer’s accounts in September 2014, which led Tesco to suspend four of its senior staff.
In order to secure a case against the retailer, the SFO needed to prove that the commercial income fraud was linked to a controlling board director and senior management by criminal intent said Dennis.
He drew comparisons with last year’s Coles dispute in Australia.
The SFO’s Australian counterpart, the Australian Competition Consumer Commission (ACCC), fined the supermarket chain for a ‘Mind the Gap’ scheme, which demanded AU$60m from its suppliers in an attempt to boost trading profit.
Shares in Tesco have risen by around 5% since an upbeat trading statement on 14 January, but have dropped by about a third since the scandal broke.
The SFO was approached for comment and is aware of the press supposition, but could not confirm the status of the investigation.