A deferred prosecution agreement (DPA) has been approved between the Serious Fraud Office (SFO) and G4S over the offender tagging scandal.
Under the DPA G4S Care and Justice Services (UK) (G4S C&J) has accepted responsibility for three offences of fraud against the Ministry of Justice (MoJ), under a “scheme to deceive the MoJ as to the true extent of G4S C&J’s profits” concerning contracts to provide electronic monitoring services.
“The scheme was designed to prevent the MoJ from attempting to decrease G4S C&J’s revenues under those contracts,” said the SFO.
Under the DPA G4S must pay a penalty of £38.5m and the SFO’s costs of £6m. Compensation has already been paid to the MoJ under a £121.3m civil settlement in 2014.
In his judgement Mr Justice William Davis said between 2005 and 2012 the costs of running the contracts reported by G4S to the MoJ and the actual running costs reported internally by the company differed by more than £70m.
“Since most of the dishonest reporting was motivated by a desire to conceal unanticipated cost efficiencies, the fraud led to the company retaining monies which otherwise it would have been obliged to share with the Home Office and the MoJ,” he said.
“The precise means by which the costs reported to the Home Office and the MoJ differed from the true costs varied. In some cases, the true cost of contract expenditure on field equipment, communications and vehicles was not provided.
“The financial models were based on the unit costs as set out in the company’s best and final offer made in July 2004, whereas the company had been able to make savings over the course of the contracts.
“In other cases, costs were reported which had not been incurred because they ‘always had been shown historically’. In yet other cases there was reported expenditure which was not and never had been incurred.”
The judge said G4S disputed the variance in reported costs and claimed £42.8m was incorrectly reported. Under the DPA it has been agreed the amount of unlawful profit was £21.4m.
The SFO said following an investigation there was insufficient evidence to support allegations that G4S had invoiced for monitoring where none had taken place.
Justice Davis said: “The company’s dishonest activity did not include charging for monitoring of non-existent people. Equally, the concealing of the true costs of the contract with the MoJ is bound to have a substantial adverse impact on the confidence in the process whereby public functions are contracted out by HM government.”
Under the DPA G4S is committed to obligations including periodic review and assessment and third-party reporting of internal controls, policies and procedures.
“These compliance obligations are a critical component of the DPA, offering substantial oversight and assurance regarding the future corporate conduct of a major UK government supplier,” said the SFO.
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