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Thursday, 18 July

Soames Mortified At Serco Tagging Fraud

Serco CEO Rupert Soames

Serco Group CEO, Rupert Soames has declared himself and his management team 'mortified' at the fraudulent behaviour of a Serco offender tagging company before he took office.

An investigation by the Serious Fraud Office into Serco companies has concluded with a Deferred Prosecution Agreement. Serco has commented.

A company statement reads: 'Serco Geografix Ltd (a wholly-owned subsidiary of the Serco Group) has admitted three offences of fraud and two of false accounting.

'These issues were reported by Serco to the Serious Fraud Office (SFO) and the Ministry of Justice (which let the contract) in November 2013. the investigations were understandably of significant public and Parliamentary concern. They have now been concluded without any criminal charges against Serco'.

 

Fine off for good behaviour

The statement continues: 'Serco Group will now pay a fine of £19.2 million together with £3.7 million related to the SFO’s investigation costs. The fine reflects a discount of 50% as a result of Serco’s self-reporting, as well as its significant and substantial cooperation with the investigation.

'No damages or disgorgement of profit will be payable to the MoJ because the SFO has agreed that Serco has already fully compensated the Department in respect of the offences as part of a £70 million settlement paid by Serco to the MoJ in December 2013.

 

House in order

'The SFO has recognised the significant steps Serco has taken to reform itself, including the thorough implementation under independent supervision of a comprehensive Corporate Renewal Programme approved by the UK Government'.

 

Management control

This programme included over 80 actions including rewriting a system of management control, as well as strengthening Serco's bidding, contract management, internal audit and management assurance processes.

 

Tin-tack

According to Serco Group, nobody who sat on the Board of Serco Group who was part of the Executive Management Team at the time these offences were committed, works for Serco today.

Current Group CEO, Rupert Soames said on Tuesday July 3: "Alongside the DPA, Serco has assumed certain obligations including on-going co-operation with the SFO and further strengthening of our Group-wide Ethics and Compliance functions, as well as agreeing to report annually to the SFO and the Cabinet Office on the Group’s assurance programme."

 

Deloitte

Soames continued: "In June 2016, the Financial Reporting Council announced an investigation into the conduct of the Group’s auditors at the time, Deloitte. Nothing in these matters impacts the previously reported statutory accounts of Serco Group."

 

Mortified

Soames also expressed his and the Group's embarrassment: “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.

“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 the 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. We are pleased that this has been acknowledged by both the SFO and by the Government.”

 

Taking a chance

Serco was advised by corporate lawyers, Clifford Chance LLP.

 

Further measures

Accompanying the DPA, Serco Group has assumed certain obligations including ongoing cooperation with the SFO and further strengthening of its Group-wide Ethics and Compliance functions. The Group will also report on its Group-wide assurance programme

Separately, Serco have agreed that its next annual report will be provided to the Cabinet Office.

 

Off lightly

The SFO has agreed in principle to this resolution based on a number of factors, including Serco Group, Serco Limited and Serco Geografix Limited's prompt and voluntary self-disclosure of the conduct; their cooperation with the SFO’s investigation; and the remedial efforts undertaken by Serco Group management - a complete change of which took place after the 2013 conclusion of the investigation.

Added to this was the prompt and complete disgorgement and compensation paid to the MoJ, again in 2013.

Picture: Serco Group CEO, Rupert Soames who was mortified at his company's fraudulent activities before he took over.

Article written by Brian Shillibeer

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