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Tesco faces US lawsuit over profit overstatement Tesco faces US lawsuit over profit overstatement
(about 3 hours later)
A US law firm is asking Tesco shareholders to join a group with the intention of seeking billions of pounds in compensation for losses relating to the British retailer’s overstatement of profit last year. A US law firm is asking Tesco shareholders to join a group seeking billions of pounds in compensation for losses relating to the British retailer’s overstatement of profit last year.
Tesco said last September it had overstated first-half profit by £250m. It raised that figure to £263m when it published first-half results on 23 Oct. 23. Tesco said in September it had overstated first-half profit by £250m. It raised that figure to £263m when it published first-half results on 23 October.
The overstatement led to a sharp decline in the market value of Britain’s biggest retailer, driving its share price down to a 14 year low, and prompted a criminal investigation by Britain’s Serious Fraud Office. The overstatement led to a sharp decline in the market value of Britain’s biggest retailer, driving its share price down to a 14-year low, and prompted a criminal investigation by Britain’s Serious Fraud Office.
Tesco Shareholder Claims Limited (TSC), a group funded by US. litigation firm Scott + Scott, said on Tuesday it would seek to bring an action against Tesco on behalf of institutional shareholders, arguing the profit overstatement “caused a permanent destruction of value to shareholders.“ Tesco Shareholder Claims Limited (TSC), a group funded by US litigation firm Scott + Scott, said on Tuesday it would seek to bring an action against Tesco on behalf of institutional shareholders, arguing that the profit overstatement “caused a permanent destruction of value to shareholders”.
Tesco declined to comment. Tesco declined to comment on the news.
Scott + Scott has already brought an action against Tesco in the United States, while British law firm Stewarts Law launched a similar move in November, alleging Tesco directors and senior managers knew or were reckless as to whether the firm’s statements to the market were untrue or misleading. Scott + Scott has already brought an action against Tesco in the US, while British law firm Stewarts Law launched a similar move in November, alleging that Tesco directors and senior managers knew or were reckless about whether the firm’s statements to the market were untrue or misleading.
TSC will be represented in Britain by McGuire Woods. TSC will be represented in the UK by McGuire Woods.
“A permanent destruction of value has occurred and had the accounting irregularities not taken place the share price, and value of the company, would today be materially higher,” said TSC.“A permanent destruction of value has occurred and had the accounting irregularities not taken place the share price, and value of the company, would today be materially higher,” said TSC.
It said it expected the claim, open to any institutional shareholder that bought shares in Tesco prior to the firm’s 22 September announcement, to be in the region of 50-70p per share. Tesco has 8.1bn shares listed, suggesting the claim could be for billions of pounds. The group said it expected the claim,which is open to any institutional shareholder that bought shares in Tesco prior to the firm’s 22 September announcement, to be in the region of 50-70p per share. Tesco has 8.1bn shares listed, suggesting the claim could be for billions of pounds.
Shares in Tesco were down 0.6% at 245.2p in early trading on Tuesday, valuing the business at about £20bn.Shares in Tesco were down 0.6% at 245.2p in early trading on Tuesday, valuing the business at about £20bn.
TSC said it was in talks with institutions in Britain, Europe and the United States about joining the claim on a no win, no fee basis. TSC said it was in talks with institutions in the UK, Europe and the US about joining the claim on a no-win, no-fee basis.
Tesco’s accounting practices are also being investigated by Britain’s Financial Reporting Council, while the grocery industry watchdog, the Groceries Code Adjudicator, is investigating the firm’s relations with its suppliers. Tesco’s accounting practices are also being investigated by the UK’s Financial Reporting Council, while the grocery industry watchdog, the Groceries Code Adjudicator, is investigating the firm’s relations with its suppliers.