Tesco pays out $12m to settle lawsuit over profit overstatement

TESCO will pay $12m (£8m) to settle a lawsuit brought by US shareholders who claimed that accounting irregularities inflated the share price of Britain’s biggest supermarket group.

The legal action claimed that Tesco’s profit overstatement, which it revealed last year, breached certain US securities laws. Court papers show that Tesco denied any wrongdoing in agreeing to settle the class action.

Tesco was plunged into crisis in September last year when it revealed that it had overstated its first-half profits by £250m after it incorrectly booked supplier payments. A month later, Tesco increased the overstatement to £263m.

The accounting scandal led to a Serious Fraud Office investigation, the departure of several top executives, including UK FD Carl Rogberg, and the replacement of its long-term auditor PwC, which is itself being investigated by the accounting profession’s watchdog over its work at the retailer.

Tesco said in a statement: “The class action was against the company and certain of its former directors and alleged breaches of certain US federal securities laws in connection with the overstatement of commercial income, which was announced in September 2014.

“The settlement agreement, which is subject to confirmation by a federal court in New York, provides for Tesco to pay $12m to settle the class action with no admission of liability. This agreement, if confirmed, will settle one of two claims before US courts arising out of the commercial income overstatement.”