Newly-installed Serious Fraud Office (SFO) director Lisa Osofsky has suffered her first major setback, as the agency’s prosecution of two former Tesco executives was quashed this morning.
At Southwark Crown Court, Judge Sir John Royce instructed the jury to acquit John Scouler, formerly Tesco’s UK food commercial director, and Chris Bush, previously Tesco’s UK managing director. Both men had been prosecuted by the SFO on fraud and false accounting charges over a £250m profit overstatement by Tesco in 2014.
The judge ruled on 2 November that the defence had no case to answer, and indicated he would direct the jury to acquit Scouler and Bush. The SFO appealed that decision, however this was dismissed by the Court of Appeal yesterday (5 December).
The verdict marks the first significant defeat of Osofsky’s leadership, with the ex-FBI deputy general counsel replacing previous incumbent David Green QC on 28 August. The decision will also be closely-watched by litigation specialist Stewarts, which is currently representing over 125 institutional funds who claim to have lost money as a result of Tesco overstating its profits.
An original trial against Scouler, Bush and former Tesco UK finance chief was abandoned in February after Rogberg suffered a heart attack. Rogberg was severed from this retrial, but there are reporting restrictions as to why he was omitted.
In a statement, the SFO said it is ‘considering whether to pursue a retrial in light of the judgment’. Scouler was advised by BCL Solicitors partner Richard Sallybanks. He commented: ‘We have long argued that the SFO’s prosecution of Mr Scouler was fundamentally flawed, that he should not have been charged, and that the SFO should not have proceeded with this trial.’ Sallybanks described the decision as ‘a very significant defeat for the SFO’.
Bush was represented by Hickman Rose, while Rogberg had been advised by Norton Rose Fulbright partner Neil O’May. Tesco had already entered into a deferred prosecution agreement (DPA) with the SFO in March 2017, agreeing to pay the watchdog £129m to avoid prosecution after a two-year investigation.
Bush’s solicitor, Hickman and Rose partner Ross Dixon, commented: ‘Given its status as the UK’s leading investigator of serious and complex fraud, the SFO made many basic mistakes. For example, failing to identify the correct versions of documents shown to Mr Bush, and failing to undertake any detailed forensic analysis of the underlying accounting evidence.
‘The SFO’s failings have resulted in a four year ordeal for Mr Bush, and the waste of millions of pounds of taxpayers’ money.’
WilmerHale white-collar crime specialist Alison Geary commented: ‘This throws into stark relief the very different considerations between concluding a court approved DPA with a company and prosecuting individual executives. It should not be assumed that the prosecution of individuals will inevitably follow the conclusion of a DPA.’
Maria Cronin, financial crime partner at Peters & Peters, described the judge’s verdict on the SFO’s case as ‘extremely concerning’. She added: ‘The fact that this case was thrown out on the basis that there was no evidence at all against the defendants, raises serious questions about how and why the SFO came to prosecute this case at all.’
Cronin warned that Osofsky ‘will need to carefully consider what went wrong in this case, including why this case was ever prosecuted, and how the SFO addresses these serious failings going forward.’