• Register
Return to: Home > News > Big Four > News brief: Accounting scandals roundup of BT Group, Tesco, Morgan Stanley and Citigroup

News brief: Accounting scandals roundup of BT Group, Tesco, Morgan Stanley and Citigroup

A roundup of todays accounting scandals including the profits dip of BT, lawsuits and accelerated audit tender, Tesco's new lawsuit, and Morgan Stanley and Citigroup's huge fine from the SEC.


BT Group

BT Group profits have dropped in Q3 to £526m, from £832m, a hit related to the accounting scandal at its Italian business costing £530m instead of the expected £145m. Shares tumbled over 20% and knocked £8bn off its stock market value. The Financial Times reported that BT will now accelerate a review of its auditor, PwC, ending their 30 year relationship, which was due for tender in 2019.

The FTSE 100-listed firm has also been hit by at least two shareholder lawsuits in the USA from the scandal. The lawsuits accusing the British company and three top executives of security fraud were brought by individuals seeking class-action status. The New York case was brought on behalf of investors in ADRs, while the New Jersey case also covers other securities. Companies are frequently sued in the US after releasing negative news that investors say they did not expect.

The lawsuits accuse BT of having concealed or made misleading statements about the accounting practices in Italy, to inflate earnings and stock price. Both lawsuits seek unspecified damages.



Tesco is facing a new lawsuit relating to an accounting scandal that followed an investigation by Deloitte in October 2014 that saw the retailer overstate profits by £263m.

Manning & Napier, a US investment management firm, is suing Tesco, claiming it lost $212m (£168m) due to their accounting irregularities in 2014, according to the Financial Times.

The lawsuit is separate to another ongoing case, where several shareholders are seeking to recoup losses. Tesco stated that it was aware of the legal action but declined to comment.


Morgan Stanley and Citigroup

Both banks, Morgan Stanley and Citigroup, were hit with an almost $3m fine over making false and misleading statements about a foreign exchange trading program they sold to investors known as CitiFX Alpha from August 2010 to July 2011.

The USA Securities and Exchange Commission (SEC) charged them both $2.96m each since discovering the trading program. Citigroup held a 49% ownership interest in Morgan Stanley at the time.

The investors were not informed that they could be placed into the program using more leverage than advertised and mark-ups would be charged on each trade, causing “significant losses” to investors. Neither bank admitted or denied the SEC’s claims, but both agreed to pay the fine, as well as a disgorgement of $624,458 and interest of $89,277, in total more than $5.9m.

Top Content

    MSI joins AGN and DFK in Global Connect

    A year after AGN International and DFK International launched Global Connect, multi-disciplinary association MSI has joined the group.

    read more

    Views from the Eurozone

    With Brexit looming, populist governments gaining footholds in a number of countries and movements such as the Yellow Jacket protests in France, 2018 was anything but a quite year for the eurozone. Here leaders report to the IAB on their markets.

    read more

    Eastern promise and how to find it

    With China rising as a global power, Jonathan Minter spoke with ShineWing’s Zhang Ke and Marco Carlei at the World Congress of Accountants 2018 in Sydney, to discuss the cultural challenges that occur when Chinese networks look beyond their border, and the dividends available for those who overcome them.

    read more

    The UK: uncertain waves rule Britannia

    The UK’s accountancy profession is currently in a period of much uncertainty. The Competition and Markets Authority (CMA) has released its review into the listed audit market which could cause the biggest shake-up the profession has seen in years, the Kingman Review has described the Financial Reporting Council (FRC) as not being fit for purpose and called for it to be replaced. All the while the country remains in a deadlock on Brexit negotiations.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.