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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Police called in over alleged fraud by Serco staff

Staff working on contract to transport prisoners alleged to have been misleadingly recording prisoners as ready for court

The justice secretary, Chris Grayling, has called in the City of London police to investigate alleged fraud by Serco staff working on a £285m contract to transport prisoners to and from courts across London and East Anglia.

Grayling said it had "become very clear there has been a culture within parts of Serco that has been totally unacceptable".

Last month, Grayling asked the Serious Fraud Office to investigate potential overcharging by tens of millions of pounds by the private security company G4S on a £700m contract for the electronic tagging of offenders.

The Ministry of Justice (MoJ) said detailed audit work initiated as a result of the investigation into the tagging contract in July had shown that some Serco staff were recording prisoners as having been ready for court when in fact they were not. This data is a key performance measure for the contract that could determine whether or not it is terminated.

It is thought the "potentially fraudulent behaviour" has been going on since last summer, when persistent delays in transporting prisoners between jails and courts led to an official improvement notice being issued.

It is alleged that instead of ending the delays, Serco staff simply fiddled the paperwork, for example by recording the time that the van arrived at court as if that meant prisoners were ready to appear in the dock.

There has been a culture within parts of Serco that has been totally unacceptable,' says justice secretary Chris Grayling

The ministry said in a statement: "MoJ has informed Serco in the light of the new evidence, it is putting the contract under administrative supervision with immediate effect. Serco have agreed to repay all past profits made on the prisoner escorting and custodial services contract and to forgo any future profits."

The decision to call in the City of London police is particularly embarrassing for Grayling as two of his department's major private sector suppliers are now being investigated for fraud at a time when he is trying to accelerate the pace of his probation and prison outsourcing programme.

Serco is also involved in the allegations involving overcharging on the bigger tagging contract, but unlike G4S it agreed to co-operate with an outside forensic audit to establish whether there had been any dishonest behaviour on its part.

Ministry sources said Serco had asserted that no member of the company's board had any knowledge of the alleged fraud on the prisoner transport contract. "If any evidence of corporate as opposed to individual wrongdoing emerges, MoJ will terminate this contract," it said.

The company has been put on three-month notice that it will have to overhaul its management, strengthen its internal audit procedures and open up its accounts to much more intense government scrutiny.

After three months a specially convened committee of government non-executive directors will assess whether the necessary changes have been put in place.

"Unless government is satisfied the changes made by the company are sufficient to guarantee the future integrity of government contracts, Serco will face exclusion from all new and future work with the government," the MoJ said.

The threat is serious for Serco which is one the government's most important private sector suppliers managing services that range from running prisons and local education authorities to the atomic weapons establishment.

Grayling said: "We have not seen evidence of systemic malpractice up to board level, but we have been clear with the company: unless it undertakes a rapid process of major change, and becomes completely open with government about the work it is doing for us, then it will not win public contracts in future. The taxpayer must know that their money is being properly used."

Chris Hyman, chief executive of Serco, said: "The justice secretary is right to expect the highest standards of performance from Serco. I am deeply saddened and appalled at the misreporting of data by a small number of employees on the contract.

"This is a very serious matter for the customer and for us. We will not tolerate any wrongdoing and that is why we have referred this matter to the police. It is also why I have immediately initiated a programme of change and corporate renewal.

"The overwhelming majority of our people work hard every day to deliver important public services and will share my deep concern about this matter."

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

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