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Serco subsidiary to pay a financial penalty of £19.2m to SFO for fraud and false accounting

Serco subsidiary Serco Geografix Ltd (SGL) will pay a financial penalty of £19.2 million plus costs to the Serious Fraud Office (SFO) under a deferred prosecution agreement (DPA) for three offences of fraud and two of false accounting.

Serco subsidiary to pay a financial penalty of £19.2m to SFO for fraud and false accounting
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The Serious Fraud Office and Serco Geografix Ltd (SGL) have received final approval from Mr Justice William Davis for a Deferred Prosecution Agreement (DPA). 

Serco subsidiary 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 Serco, from its contract for the provision of electronic monitoring services.  

According to SFO, 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.

During the three-year term of the DPA, SGL has agreed to 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.

“SGL engaged in quite deliberate fraud against the Ministry of Justice in relation to the provision of services vital to the criminal justice system," Mr Justice Davis said in his judgement. 

“[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," Mr Davis added. 

Welcoming the approval in principle of the DPA, 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". 

The SFO disclosed that the DPA has concluded its investigation of SGL and all Serco Group companies, but that the investigation into individuals associated with this conduct remains active. 

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