Friday, October 23, 2020

SFO completes DPA with Serco Geografix Ltd in Fraud and Dishonesty Case

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The Serious Fraud Office and Serco Geografix Ltd (SGL) have today received final approval from Mr Justice William Davis for a Deferred Prosecution Agreement (DPA).

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 Ministry of Justice (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. By deceiving the MoJ about the true extent of SL’s profits, SGL 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 renegotiations of contracts, or otherwise threaten SL’s contract revenues.

SGL will pay a financial penalty of £19.2 million, and the full amount of the SFO’s investigative costs (£3.7m). This is an addition to the £12.8m compensation already paid by Serco to the MoJ as part of a £70m civil settlement in 2013.

Background

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

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During the three-year term of the DPA, SGL will fully cooperate with the SFO and other foreign and domestic law enforcement and regulatory authorities, report evidence of fraud by itself or related companies and individuals, and enhance and report annually on the effectiveness of its ethics and compliance programme.

The DPA is accompanied by an undertaking in which Serco Group, SGL’s parent company, agrees to ongoing cooperation with the SFO and other law enforcement and regulatory authorities, reporting evidence of fraud by itself or related companies and individuals, any necessary strengthening of its Group-wide Ethics and Compliance functions, and annual reporting on its Group-wide assurance programme.

In his judgment, Mr Justice Davis said:

“SGL engaged in quite deliberate fraud against the Ministry of Justice in relation to the provision of services vital to the criminal justice system.”

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“[DPA] approval will only be given where there is the clearest possible demonstration of integrity on the part of the company concerned once the criminal activity has become apparent. This [requires] early self-reporting to the authorities, full co-operation with the investigation, a willingness to learn lessons and an acceptance of an appropriate penalty. The willingness to learn lessons must be shown via real, substantial, and continuing remedial measures. All of that has been demonstrated by Serco Group PLC in this case.

“The obligations accepted by Serco Group PLC are a key component of the DPA [and] this is the first occasion on which undertakings of the kind made by Serco Group PLC have been [made] by a parent company in relation to a DPA entered into by one of its subsidiaries. It is an important development in the use of DPAs.”

“The approach taken by Serco Group PLC in this case strengthens the public interest in the approval of this DPA.”

Welcoming the approval in principle of the DPA yesterday, 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.”

This DPA concludes the SFO’s investigation of SGL and all Serco Group companies for this conduct, but the investigation into individuals associated with this conduct remains active.

  • The DPA was approved in principle on Thursday 27 June and announced here.
  • The full judgment can be found here.
  • The DPA and Undertaking by Serco Group are published here.

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