Tesco CEO was kept in dark over accounting issues, court hears

LONDON (Reuters) - Tesco's then UK managing director did not alert the British retailer's chief executive to possible problems with its 2014-15 half year accounts, despite having opportunities to do so, a London court heard on Thursday.

Tesco CEO Dave Lewis was giving evidence at the trial of three former senior executives of Britain's biggest retailer who are accused of fraud and false accounting in 2014.

Christopher Bush, 51, who was managing director of Tesco UK, Carl Rogberg, 50, who was UK finance director, and John Scouler, 49, who was UK food commercial director, all deny any wrongdoing and have pleaded not guilty.

The case centres on Tesco's Sept. 22, 2014, announcement to the stock exchange that its profit forecast had been overstated by 250 million pounds ($328 million), mainly due to booking commercial deals with suppliers too early.

Lewis replaced Philip Clarke as Tesco CEO on Sept. 1, 2014.

He told the court he first became aware of issues with the accounts on Sept. 19 when he was notified by Tesco's chief legal counsel Adrian Morris.

Lewis said he was presented with a paper which the court has heard was commissioned by Amit Soni, a senior accountant at Tesco who is described by the prosecution as a whistleblower in the case, and said he reacted with "surprise and shock".

"The thing that was unique to this paper was the indication that the numbers that had been declared (on Aug. 29) had a potential misstatement within them," Lewis told the court.

"What was new was the proposition in here that 246 million of income had been included in the first half of the year that on the basis of this paper was deemed to be questionable."

Lewis said that between joining Tesco on Sept. 1 and notification on Sept. 19 he had met Bush on a couple of occasions and there had also been executive committee meetings that Bush had attended, but no issues with the accounts had been raised.

"(It was) not until the morning of the 19th that anyone raised (it) with me," he said.

Soni told the court last month that Bush was read out "almost word by word" the paper detailing the hole in the accounts on Sept. 16. Soni said Bush told him the paper would have to be discussed with Lewis.

Tesco's Sept. 22 disclosure saw its shares tumble and plunged the company into the worst crisis in its near 100-year history.

Lead prosecutor Sasha Wass told the court last month that all three defendants were well aware that a hole in Tesco's accounts was "spiralling out of control" in the first half of 2014 but connived to conceal their failure to meet targets.

No charges have been brought against Clarke.

The trial is expected to last beyond Christmas.

($1 = 0.7617 pounds)

(Reporting by Michael Holden; Writing by James Davey; Editing by Mark Potter)