Freshfields advises as Tesco agrees £129m fine for overstating profits


Freshfields Bruckhaus Deringer and Kingsley Napley are advising Tesco as it reaches an agreement with the Serious Fraud Office (SFO) to pay a £129m fine to avoid prosecution for overstating its profits in 2014.

Tesco and the SFO confirmed today that the pair have reached a deferred prosecution agreement (DPA), following a two-year investigation into the supermarket giant.

In addition to the £129m fine, Tesco has also agreed with the Financial Conduct Authority (FCA) to pay £85m in compensation to shareholders and bondholders who bought assets between 29 August and 19 September 2014.

In total, Tesco expects to book a £235m exceptional charge including the fine, compensation and other charges, including the SFO’s costs.

The investigation was prompted after it emerged that the supermarket gave false accounts of its profits between February 2014 and September 2014, with a trading statement on 29 August that year showing inflated profits.

Freshfields has been advising Tesco on the case since 2014, with London dispute resolution partners Ali Sallaway and Ian Taylor leading the firm’s team on the DPA. Sallaway is co-head of the firm’s London global investigations practice.

The magic circle firm instructed Kinglsey Napley on the case in 2015. Its team was at that point being led by criminal litigation head Stephen Parkinson.

Freshfields is one of Tesco’s key legal advisers, alongside Berwin Leighton Paisner (BLP). The magic circle firm carries out much of the retailer’s corporate/commercial matters, with BLP handling real estate work.

Earlier this year, Freshfields won a mandate to advise Tesco on its £3.7bn acquisition of food wholesaler Booker Group.

Last year, the firm advised Tesco on the sale of its coffee chain Harris + Hoole to Caffe Nero, while in 2015 it acted on the £4.2bn sale of its Korean business, Homeplus.

Tesco has previously used Ashurst and Clyde & Co for real estate work; however, a streamlining of its key legal advisers in 2014 saw BLP established as the company’s go-to real estate adviser.