FRC Drops Probe Into Ex-Tesco Exec Over Profit Mis-Statement

The former finance chief of ‎Tesco (Frankfurt: 852647 - news) will be able to rebuild his career when the accountancy watchdog clears him this week of wrongdoing over the profit mis-statement which plunged the supermarket chain into crisis in 2014.

Sky News has learnt that the Financial Reporting Council (FRC) will announce on Wednesday that it is no longer investigating Laurie McIlwee, who resigned as Tesco's chief financial officer two-and-a-half years ago.

The FRC's statement will exonerate Mr McIlwee of any wrongdoing in relation to the finance and accounting ‎practices of the UK's biggest retailer.

Mr McIlwee, who left the company amid tensions with its then chief executive, Philip Clarke, was never formally named by the FRC as being under investigation.

However, in a statement in December 2014, the regulator said it had launched a probe "into members and a member firm in relation to the preparation, approval and audit of the financial statements of Tesco plc for the financial years ended [2012, 2013 and 2014]‎ and their conduct in relation to the matters reported in the company's interim results for the 26 weeks ended 23 August 2014".

A whistleblower in Tesco's finance department had alerted Mr Clarke's successor, Dave Lewis, to apparent irregularities in the way that supplier payments were booked, leading the company to admit that profits had been overstated by at least ‎£263m.

The crisis sparked a criminal probe by the Serious Fraud Office (SFO), which remains ongoing, and prompted a far-reaching shake-up under Mr Lewis of the company which had dominated British retailing for two decades.

The FRC's decision to clear Mr McIlwee effectively leaves him free to rebuild his career, since he has never been under investigation by the SFO, and was only interviewed by it as a witness.

The SFO's probe is said to focus largely on the months after Mr McIlwee's departure from Tesco.

A source close to the accounting regulator acknowledged that it had trawled through "a large amount of correspondence" involving Mr McIlwee and had found no evidence that he had behaved in anything other than a proper manner.

The former Tesco finance chief had been absent from its headquarters for more than five months after his resignation when the profit overstatement emerged, because Mr Clarke had requested that he should not attend its offices during his notice period.

Mr McIlwee, a 15-year Tesco veteran, who previously worked at Pepsico (NYSE: PEP - news) , became the retailer's number two executive in 2009.

The FRC's inquiry into PricewaterhouseCoopers, Tesco's auditor, is said to still be ongoing.

The FRC declined to comment, while Mr McIlwee could not be reached for comment on Tuesday night.