SERCO, G4S AND THE SERIOUS FRAUD OFFICE: WAITING FOR THE OTHER SHOE TO DROP

The  Serious Fraud Office’s six (!) year investigation of the electronic monitoring scandal that broke in 2013 took a smallish step forward this month, as regards SERCO – albeit a rather damp squib, the SFO having concluded that, while they were satisfied that  alleged fraud was organised by, and for the benefit of, the main company, there was no evidence of ‘a controlling mind’ (just sorta happened, I guess!). So only a couple of smallish fry were offered up.  

That leaves G4S. From the start, G4S were uncooperative with the inquiry, and were not offered the deal (Deferred Prosecution Agreement) such as  the SFO and SERCO agreed, that allowed SERCO to, in effect,  buy off a corporate prosecution (not that they needed to worry  - the SFO told the judge that SERCO were too important a supplier of public services to be prosecuted – too big to prosecute, one might say.)

There may be differences, of course. G4S’s equivalent of SERCO’s Geographix reported losses in 2010 and 2011 and only a 11% profit in 2012 – such rotten luck, at a time when SERCO’s Geographix, in the same business, with the same UK customer, was reporting a profit of 80%! However, the position is obscured by the fact that G4S was doing similar business outside the UK.

Any outcome with G4S will rather point up the contrast with SERCO – if G4S are charged corporately, why not SERCO? If G4S aren’t charged at all, why were the SERCO officers charged, and for that matter, how did the SFO manage to take 6 years working out that G4S should not be charged?

If an outsourcing company is charged corporately with fraud, that would be devastating. Except that G4S isn’t beholden to the UK Government to the extent that SERCO is. The UK still accounts for 40% of SERCO’s revenue, and its main customer is Government (central and local Government, including justice, defence and transport, healthcare and immigration). Hence the new Chairman’s preoccupation with its penitence, reform and helpful suggestions for a new start on outsourcing.

G4S, by contrast, is a truly global company, taking less than a sixth of its profits from the UK and Ireland, moreover its exposure within the UK to Government is far less – and rapidly reducing. It has been taking steps to rid itself of the UK Government as customer (1) – G4S already announced that it is exiting Secure Training Centres and Immigration Removal Centres, and while it has bid into the Prison Operators Services framework competition, I suspect that in the aftermath of the Birmingham prison fiasco, there will be no more appetite in G4S for these tight margined, operational difficult and reputationally hazardous contracts. G4S’s exposure to the UK Government is now minimal. That in itself is a headache for the MoJ, since 2 suppliers is not a competitive market. They must be relying on MITIE and others to take up the role, perhaps buying out the long term G4S PFI contracts. That would be a brave decision, in Sir Humphrey’s words, given the state of the prison system,  and the serial incompetence of the customer.

Thus, G4S could be far better positioned than SERCO to fight any charges. I hope they do. Because that is the only way, we, the public, will ever learn what actually happened, including, crucially, the multiple failures by the MoJ itself, that helped facilitate the loss of hundreds of millions of pounds of taxpayers' money.

NOTE

(1)  The UK Government. But curiously, the Scottish Government has only last month let the contract for EM in Scotland to G4S. Perhaps they know something we don't, or perhaps they just don't care what the English do!
 
 
 
 
lick here to edit.