Serious Fraud Office launches inquiry into G4S and Serco overcharging claims

Investigation follows justice secretary's claims that firms overcharged on electronic tagging contracts for offenders

The Serious Fraud Office has launched a formal criminal investigation into two of the government's biggest suppliers, G4S and Serco, following claims by the justice secretary, Chris Grayling, of tens of millions of pounds of overcharging on electronic tagging contracts for offenders.

Grayling asked the SFO to look into the billing allegations in July when he told MPs that an external audit had revealed that the overcharging included billing for tracking the movements of criminals who had moved abroad, who were back in prison, who had had their tags removed and even, in a few cases, those who had died.

The justice secretary said that in some cases the bills had continued to be presented years after active monitoring had stopped.

Whitehall sources have confirmed that the central allegation in the case revolves around charges for 3,000 phantom offenders. The justice ministry was being billed by the two companies for the tagging of 18,000 offenders a day under the £700m contract when only 15,000 were actually being monitored.

G4S said it would co-operate with the investigation and had been notified by the SFO director, David Green, that it would cover "the contract for the provision of electronic monitoring services which commenced in 2005 as amended and extended until the present day".

In July Grayling asked the SFO to look into the situation after G4S refused to co-operate with a justice ministry internal forensic audit to establish whether any dishonesty had taken place. The decision to refer Serco, which did co-operate with the MoJ audit, to the SFO was taken in September.

In July Serco said senior management had not been aware of the discrepancies but they did not believe anything dishonest had taken place. The company agreed with the MoJ that if the forensic audit showed dishonesty had taken place they would jointly call in the SFO.

The pattern of overcharging was revealed by a PricewaterhouseCoopers external audit commissioned by Grayling in May after billing discrepancies were discovered during the re-tendering process.

Under the contracts, more than 20,000 offenders are monitored on electronic tags at any one time. They are a key element in the criminal justice system's menu of community punishments as they are used to enforce curfews for prisoners on early release as well as some court orders.

In a small number of cases they have been used to track the movements of terror suspects and paedophiles. Last week prosecutions were halted against three terror suspects accused of tampering with their G4S-supplied GPS tags amid claims of faults with the tags and their straps.

The two companies are among the government's biggest suppliers. Both have already agreed to withdraw from bidding for the £3bn next-generation tagging contract.

The Cabinet Office has also been reviewing the 28 contracts that the two companies currently hold with the government worth a total of £9bn, including the management of the atomic weapons establishment at Aldermaston. Grayling has said that both companies can bid for contracts to run 70% of the probation service but will not be awarded them unless the SFO give them a clean bill of health.

Sadiq Khan, the shadow justice secretary, said the SFO decision was a major development. "In July I wrote to the SFO calling on them to investigate claims against G4S and to act swiftly to secure any possible evidence that might be needed. I hope that the time taken to launch this investigation hasn't resulted in the loss of important evidence," he said.

"With future Ministry of Justice contracts up for grabs, including more than £600m of probation contracts, the government must act swiftly and bar G4S from bidding for any more until the SFO has concluded its investigation. By failing to do so, David Cameron risks undermining public confidence in our justice system."

Article Source : http://www.guardian.co.uk
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