Serious Fraud Office fines Serco £19.2m



The Serious Fraud Office has fined a subsidiary of Serco Group £19.2 million.

The SFO announced that a deferred prosecution agreement (DPA) with Serco Geografix Limited (SGL), a wholly-owned subsidiary of Serco Group, has been approved in principle by Mr Justice William Davis.

Tomorrow the SFO will apply for final approval of the DPA before the same judge at Southwark Crown Court.

If approved, the DPA will result in a payment by SGL of £19.2m and payment of the SFO’s costs. Compensation to the victim of the conduct, the Ministry of Justice (MoJ), has already been paid by Serco as part of a £70m civil settlement in 2013.

Accompanying the DPA with SGL is an Undertaking in which Serco Group assumes certain obligations including ongoing cooperation with the SFO and further strengthening of its group-wide ethics and compliance functions, as well as annual reporting on its Group-wide assurance programme. Separately, Serco have agreed that this annual report will be provided to the Cabinet Office.

In entering the DPA, SGL has taken responsibility for three offences of fraud and two of false accounting arising from a scheme to dishonestly mislead the MoJ as to the true extent of the profits being made between 2010 and 2013 by SGL’s parent company, Serco Limited (SL), from its contract for the provision of electronic monitoring services.

The scheme was designed to prevent the MoJ from obtaining information to which it was entitled and from using this to decrease SL’s revenues under that contract.

The SFO has agreed in principle to this resolution based on a number of factors, including SGL’s prompt and voluntary self-disclosure of the conduct giving rise to the above charges, its substantial cooperation with the SFO’s investigation, and its significant remedial efforts – achieved through company-wide efforts undertaken by Serco Group.

Director of the Serious Fraud Office, Lisa Osofsky said: “SGL engaged in a concerted effort to lie to the Ministry of Justice in order 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.

“This resolution not only ensures such accountability, but also recognises SGL’s voluntary self-reporting of the misconduct, its and Serco Group’s substantial cooperation with our investigation and Serco Group’s extensive corporate reform and other remediation. It also provides substantial assurances regarding the future corporate integrity of Serco Group, one of the UK’s largest government contractors.

“These measures are designed to achieve the goal of fair and transparent dealing with the Government and other market participants.”

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.”