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Serco fabricated tagging invoices worth £15m to defraud taxpayers

Electronic ankle tag
Electronic ankle tag

Serco staff were fabricating invoices worth £500,000 a month to “soak up” excess profits made from an offender tagging contract, according to evidence published by the Serious Fraud Office.

The revelations were published less than 48 hours after a trial against two Serco’s directors collapsed at Southwark Crown Court, marking a fresh blow for the white collar crime agency.

The false charges amounted to almost £15m between August 2011 and January 2013.

The outsourcer originally was contracted in 2005 to monitor electronic tags, entitling it to make a profit margin similar to that made in the original bid.

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Excess profits would be returned to the Ministry of Justice under a “value for money” clause.

A statement of facts, originally lodged with the Crown Court in 2019 by the SFO, but restricted from publication until Wednesday, revealed that Serco was making excess profits from an early point in the contract.

Staff initially shifted costs from other companies within the Serco group to the contracted subsidiary, Serco Geografix Limited, so that profits presented to the Ministry of Justice would not trigger the “value for money” clause.

By 2011, however, staff were told that there were insufficient costs to “soak up the rest” of Serco Geografix Limited’s excess profits and were told to “move” £500,000 a month.

The statement of facts read: “[The] proposals were not driven by actual [Serco Geografix Limited] charges with any underlying basis or substance. No purchase order or invoice had been raised for any of the proposed charges.

“No additional goods or services were provided to SL by SGL in consideration of the proposed charges, and [Serco Geografix Limited] had not incurred any additional costs or expenses itself that could explain an increase in charges in the amounts proposed.

“The fictitious nature of the charges was reflected in [Serco Limited] Manager 1’s explanation to [Serco Limited] Manager 1’s supervisors that ‘[w]e can, of course, make the numbers whatever we wish’.”

The filing continued by revealing Serco staff discussed what to call the fictitious charges. They settled on “improvement” charges rather than “development”.

“‘Calling any additional charges from [SGL] ‘development’ may not be the best name,’” one employee said.

On Monday former Serco directors Nicholas Woods and Simon Marshall were cleared of concealing profits under the electronic tagging contract.

A judge ordered the jury to return a not guilty verdict after the SFO withdrew its evidence against the pair.

The statement of facts was part of Serco agreeing to a deferred prosecution agreement (DPA) two years ago. The outsourcer agreed to a £19.2m fine and paid SFO costs of £3.7m. It has subsequently overhauled working practices and has returned to being a government supplier.

The SFO and Serco declined to comment.