Serco to pay $24 million fine over electronic tagging scandal

By Paul Sandle and Kirstin Ridley

LONDON (Reuters) - A division of Britain's Serco is close to securing a deal under which it will pay a 19.2 million pound ($24 million) fine that looks to draw a line under a long-running scandal over how it billed for electronic tagging contracts.

Serco, one of Britain's largest government contractors, said on Wednesday its Serco Geografix (SGL) unit and the UK Serious Fraud Office (SFO) had reached a Deferred Prosecution Agreement (DPA), the SFO's fifth court-approved corporate plea-bargain since such deals were introduced in 2014.

A judge has granted approval in principle for the DPA, which allows a prosecution to be suspended for a defined period if specific conditions are met. A final decision is due on Thursday, the SFO said.

Under the deal, SGL will also pay the SFO's costs of 3.7 million pounds.

However, a separate criminal investigation continues into individuals linked to the case and a charging decision could come as soon as this year, an SFO spokeswoman said. An inquiry into G4S, another outsourcing company, also continues.

The Serco division has taken responsibility for three offences of fraud and two of false accounting after a "concerted effort to lie to the Ministry of Justice" in order to profit unlawfully for electronic monitoring services at the expense of taxpayers between 2010 and 2013, the SFO said.

"MORTIFIED, EMBARRASSED AND ANGRY"

Serco's Chief Executive Rupert Soames said the company's leaders were "mortified, embarrassed and angry".

"Serco apologized unreservedly at the time, and we do so again," he said, adding the Serco Group board and its management had been replaced since the offences occurred.

"The management and culture of Serco, and the transparency with which we conduct our affairs, have changed beyond all recognition, and we are pleased that this has been acknowledged by both the SFO and by the government," he added.

Jessica Parker, a partner at law firm Corker Binning, called the first DPA under SFO director Lisa Osofsky, a former Federal Bureau of Investigations lawyer who was appointed last August, a milestone. But she noted that the case for entering such deals had been "seriously weakened" by recent cases.

These included the collapse in December of a high-profile trial of former Tesco directors after a DPA between a subsidiary of the supermarket and the SFO relied on the assumption of their guilt. Defense lawyers questioned the fairness of the process.

The SFO said its latest DPA ensured accountability while recognizing SGL's voluntary self-reporting, substantial cooperation, extensive corporate reform and other remediation. This also helped Serco qualify for a 50% reduction in the fine.

Serco has already paid compensation to the MoJ as part of a 70 million pound civil settlement in 2013.

(editing by Kate Holton and Emelia Sithole-Matarise)