No criminal charges for firm as subsidiary takes responsibility for fraud related to MoJ contracts

This article is more than 1 year old

This article is more than 1 year old

The outsourcing company Serco has been fined nearly £23m as part of a settlement with the Serious Fraud Office (SFO) over electronic tagging contracts.

The firm said it was “mortified”. It said its UK subsidiary Serco Geografix had taken responsibility for three offences of fraud and two of false accounting between 2010 and 2013, related to understating profits from its electronic monitoring contracts with the Ministry of Justice (MoJ). It was fined £19.2m and ordered to pay £3.7m in costs.

An agreement with the SFO, which is subject to approval by the courts, will result in a lengthy investigation ending without Serco facing criminal charges.

The issue was first reported by Serco to the SFO in 2013.

In 2013 Serco paid a £70m settlement to the MoJ after the firm and fellow outsourcing group G4S faced allegations of charging for tagging people who were either dead, in jail, or had left the country.

Rupert Soames, Serco’s 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.”

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He added: “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.”

It was stripped of its responsibility for tagging criminals in the UK in late 2013.

Serco said it had taken “significant steps” to reform itself, including rewriting its system of management control, and strengthening its bidding, contract management, internal audit and management assurance processes.

It said no board members or senior executives that were in post at the time of the offences still worked for the company.

The group now reports annually to the SFO and the Cabinet Office on its assurance programme.

The Financial Reporting Council also launched an investigation in June 2016 into Deloitte, Serco’s group auditor at the time of the offences.