The accountancy watchdog has dropped an investigation into the former Tesco chief financial officer Laurie McIlwee, nearly two years after an accounting scandal emerged at the supermarket.
McIlwee left his job at Tesco in April 2014 with a £1m payoff following tensions with the then chief executive, Philip Clarke. Five months later, Clarke’s successor, Dave Lewis, flagged up the discovery of a black hole in the company’s accounts that was eventually valued at £263m.
In December 2014, the Financial Reporting Council, the accountancy watchdog, launched an investigation into the actions of Tesco’s financial team, including McIlwee, and the role of its auditor, PwC, in the profits overstatement.
On Wednesday, the FRC said it had closed the investigation into McIlwee after concluding that there was “no realistic prospect that a tribunal would make an adverse finding in relation to [his] conduct”.
PwC remains under investigation. The scandal is also being looked at by the Serious Fraud Office, which interviewed Clarke under caution last year. It is understood that McIlwee has been interviewed by the SFO, but only as a witness, and he is not being considered for prosecution.
The FRC clearance means that McIlwee, who has not been in full-time work since leaving Tesco, is unlikely to face any action over the scandal and can look for a new role.
The move also suggests that the SFO may be preparing to release the findings of its investigation.
A third investigation by the grocery market watchdog in January led to Tesco being ordered to make “significant changes” in the way it deals with suppliers, after finding that the supermarket, Britain’s biggest, had deliberately delayed payments to maximise profits.
The accounting scandal was revealed weeks after the arrival of Lewis, who was brought in to turn around falling sales and profits.
McIlwee was paid £400,000 in the six months after he quit Tesco, during which time he was requested to be available to assist the supermarket. It later emerged that McIlwee did not provide any services to Tesco during that time and was asked not to come into the office. In McIlwee’s absence, Clarke assembled a team of senior finance personnel to oversee monetary matters.
When a whistleblower alerted Lewis to a problem with Tesco’s accounts, a team of forensic accountants from Deloitte took over and established that the company had artificially inflated an estimate of first-half profits given to the City in August 2014. They found that similar practices had been in place during previous reporting periods, taking the total to £263m. In April, Tesco said it had found another £60m in mis-statements from previous years, mostly as a result of an audit of its Irish operations.
Deloitte said £118m of the £263m figure related to the first six months of the financial year and £145m related to previous years.
