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Serco fined £19m for wrongful billing fraud

A subsidiary of contractor Serco engaged in quite deliberate fraud against the Ministry of Justice when providing services vital to the criminal justice system, under an Electronic Monitoring (EM) contract.

Mr Justice William Davis has agreed a Deferred Prosecution Agreement (DPA) whereby Serco has taken responsibility for three offences of fraud and two of false accounting arising from a scheme to dishonestly mislead the Ministry of Justice (MoJ) about the true profits made between 2010 and 2013, from its electronic monitoring services contract. By deceiving the MoJ about the true profits, Serco prevented the MoJ from attempting to limit any of SL’s future profits, recover any of SL’s previous profits, seek more favourable terms during contract renegotiations.

Serco will pay a fine of £19.2m plus £3.7m in the Serious Fraud Office’s investigation costs. Serco also paid £12.8m compensation to the MoJ as part of a £70m civil settlement in 2013.

Director of the Serious Fraud Office, Lisa Osofsky, said Serco engaged in a concerted effort to lie to the Ministry of Justice to profit unlawfully at the expense of UK taxpayers. “The SFO will pursue those who engage in this sort of criminal conduct so that they are held to account.”

The firm said that its Corporate Renewal Programme included over 80 actions and initiatives, including rewriting a system of management control.

Rupert Soames, Serco Group Chief Executive, said: “Those of us who now run the business are mortified, embarrassed and angry that, in a period between six and nine years ago, Serco understated the level of profitability of its Electronic Monitoring contract in its reports to the Ministry of Justice. Serco apologised unreservedly at the time, and we do so again. Nobody who sat on the Board of Serco Group, or who was part of the Executive Management Team at the time these offences were committed, works for the Group today.

“Over the last six years we have worked extremely hard to regain the trust and confidence of Government, implementing in its entirety a Corporate Renewal Programme which was approved by Government and which has helped us to transform our corporate culture, processes and governance. The management and culture of Serco, and the transparency with which we conduct our affairs, have changed beyond all recognition, and we are pleased that this has been acknowledged by both the SFO and by the Government.”

The SFO opened its investigation into Serco on November 2013. The original investigation was into allegations that Serco and fellow contractor G4S were billing the MoJ for electronic tagging not provided. The SFO found insufficient evidence for a realistic prospect of conviction of Serco. In reviewing its documents, Serco found evidence of accounting regularities, which it reported voluntarily to the SFO in November 2013.


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