As it prepares to report one of the most difficult years in its history, Tesco may have gotten itself in more trouble by conducting exit interviews with executives involved in an accounting scandal by mail rather than in person.
Conducting the interviews - which led to firings in some cases - by post was a bid to show prosecutors it wasn’t interfering with the criminal probe, four people with knowledge of the matter said.
But refusing to meet in person may have violated employee rights to due process, and could leave Tesco vulnerable to civil suits, according to the people, who asked not to be identified because the talks are private.
Lawyers agree it’s hard to reconcile complying with a mandate by the UK Serious Fraud Office to avoid face-to-face communications with staff targeted in probes with getting those employees off the payroll.
Companies sometimes try “to do things differently to comply with the requirements of the regulator or prosecutor but still deal with individuals quickly,” said Michael Burd, an employment lawyer at Lewis Silkin LLP in London. “Of course, this may expose them to claims.”
The SFO started investigating Tesco’s accounting practices in October after the grocer said it had overstated profits by £263 million. The retailer put nine senior managers on leave last year, of which six have since been dismissed or left, according to another person with knowledge of the situation. Tesco sent the executives a list of questions to answer by mail, and cited SFO guidance when declining requests to meet in person, the people said.
Analysts predict that Tesco may write down the value of its real estate by billions of pounds and unveil record pension liabilities when it reports a plunge in full-year earnings Wednesday.
Chief Executive Officer Dave Lewis is closing dozens of stores, canceling some openings, consolidating head offices and cutting prices on hundreds of products as he seeks to win back shoppers that have deserted to discount competitors.
“It’s very unusual for disciplinary procedures not to be carried out in person,” said Burd, who isn’t involved in the case.
Spokesmen for Tesco and the SFO declined to comment. The individuals either declined to comment or didn’t respond to requests to comment through LinkedIn and their lawyers. None of the executives have been accused of wrongdoing or filed claims.
Tesco’s decision to go to such lengths to cooperate shows the SFO is getting more respect, litigators say. It’s often been criticised by politicians, lawyers and companies for how long investigations take. On average, they run between four and six years, according to the prosecutor. Cases can drag out because firms ignore rules meant to expedite probes, such as allowing investigators to talk to employees first, the agency has often said.
News by Bloomberg, edited by ESM
