The former chairman of Tesco was forced to rush back from a 2014 conference in Italy after an emergency call from the UK grocer’s chief executive officer alerted him to the possibility that the company had overstated profits by hundreds of millions of pounds.
Testifying Wednesday at the London trial of three ex-executives accused of fraud over the scandal, Richard Broadbent said CEO Dave Lewis called him in Rome on a Friday evening to alert him to a whistle-blower’s report detailing the accusations.
Broadbent returned the next morning and spent the weekend hashing out a Monday morning presentation to the market that outlined that the company may have overstated profit by as much as £246 million.
The revelations, brought to light in a report by Tesco finance employee Amit Soni, led to a scandal that wiped £2 billion from Tesco’s market value and led to a two-year investigation by the Serious Fraud Office.
Ex-UK chief Chris Bush, Carl Rogberg, the former British finance director, and John Scouler, ex-UK commercial director, are on trial charged with fraud and false accounting.
Unusual Circumstance
Broadbent, who was Tesco’s chairman between November 2011 and March 2015, said it was an “unusual circumstance” and the grocer’s management didn’t know at first what weight to give Soni’s report.
While they would have wanted months to investigate the situation, there was no question of not making a statement to the market immediately, he said.
“You could not possibly have not made an announcement with the knowledge that had come to the board’s attention,” Broadbent told the jury, wearing a charcoal suit, pale yellow shirt and flowery tie.
Prior to the profit statement, Broadbent had decided to replace former CEO Philip Clarke with Lewis. Broadbent told the court trading conditions were deteriorating “quite noticeably” at Tesco in 2013 and he thought Clarke’s strategy wasn’t going to work.
Broadbent told Clarke he was being replaced on a Friday evening in July 2014 before announcing Lewis would take over on the Monday morning.
Broadbent worked in the civil service after university and then joined Schroders Plc in 1986. He moved to Barclays Plc in 2003 as a non-executive on the board before becoming deputy chairman.
Lewis testified at the trial last week, stating he was shocked to discover that the company had overstated profit, despite asking senior managers to flag any financial challenges as he got to grips with a new job.
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