Tesco in $12m US legal payout over accounting irregularities

Tesco has agreed to pay $12m (€11.28m) to settle a US shareholder lawsuit claiming that accounting irregularities inflated the share price of Britain’s largest retailer.

The all-cash settlement was disclosed in filings in the US District Court in Manhattan, and requires court approval.

Tesco denied wrongdoing in agreeing to settle, court papers show.

Tesco was sued after revealing in September 2014 that it had overstated first-half profit by £250m (€354.9m) because it incorrectly booked payments from suppliers.

That led to the price of Tesco’s American depositary shares falling 15% on the next trading day.

Tesco later raised the estimated overstatement to £263m.

The scandal led to the departure of several top executives, probes by Britain’s Serious Fraud Office and other regulators, and the replacement of Tesco’s long-time auditor.

Wednesday’s settlement covers investors led by Stephen Klug, and who sought class-action status on behalf of those who acquired Tesco’s American depositary shares and “F-shares” between April 18, 2012 and September 22, 2014, court papers show.

The lawsuit claimed that Tesco and top executives misled investors into believing the company was performing well.

Kim Miller, a partner at Kahn Swick & Foti representing Mr Klug, in a court filing called the settlement an “outstanding recovery”.

The average recovery will be 37 cents per ADS and 11 cents per F-share before deducting expenses, court papers show.

Kahn Swick & Foti plans to seek legal fees of up to 30% of the gross settlement fund, the papers show.