Security group G4S received a smaller than average discount on a fine announced last week as it had been slow to co-operate with a Serious Fraud Office investigation.
The company last Friday agreed to pay a £44m fine to settle three instances of fraud in its prisoner tagging contract between 2011 and 2013, in which it repeatedly lied about the true extent of its profits.
Approving the plea deal a week later, Mr Justice William Davis applied a 40 per cent discount — only the second time that a discount of less than 50 per cent had been given to such a fine — because G4S was slow to co-operate with the SFO.
He said G4S’s co-operation had come “relatively late in the day”, leaving it with a penalty of £38.5m.
The deal draws to a close the bulk of the SFO’s seven-year investigation into G4S and Serco over tagging contracts, after Serco agreed to pay a £19.2m fine last year. The SFO could still prosecute G4S executives for the conduct. Serco had been praised for its “significant remedial efforts”.
The deferred prosecution agreement (DPA) relates only to the potential criminal liability of G4S and does not imply any criminality has been committed by company employees.
Signing the DPA means G4S will avoid criminal prosecution and remains eligible for more government work. It has already won significant contracts during the pandemic, including providing security at four of the emergency Nightingale hospitals and 15 drive-in test centres.
The extent of that work has resulted in G4S agreeing to more punitive measures, including an overhaul of its internal controls and extensive monitoring by a third party.
Mr Justice William Davis said: “The fraud practised by G4S C & J related to an important part of the criminal justice system. It involved a very substantial loss to the public purse.”
The company had originally filed a projected profit margin of 8.3 per cent for the life of the prisoner tagging project, when its true margin was estimated to be 17.9 per cent. G4S promised to give half of any unanticipated cost savings to the Home Office but in fact submitted cost reports that stated far higher costs than the company had incurred.
The difference between the costs reported to the Home Office and the Ministry of Justice and the costs G4S actually incurred exceeded £70m. The company said around £42m of that was reported incorrectly rather than dishonestly.
The company accepted responsibility for three cases of fraud.
Mr Justice Davis said the dishonest reporting was motivated by a “desire to conceal unanticipated cost efficiencies” and keep hold of cash that should have otherwise been returned to the government.
G4S had already paid £24m in 2013 after admitting to repeatedly overcharging taxpayers for the electronic tagging of offenders over a nine-year period. PwC and the spending watchdog uncovered evidence that G4S and rival Serco had electronically monitored the same offender multiple times, when the equipment was broken, and after the tagging process had finished.
The PwC audit revealed that overcharging had begun as far back as 2005 but could have dated to 1999. G4S had charged for tagging offenders who were back in prison, had left the country, and had never been tagged in the first place. Those details were referred to the SFO, which launched a criminal investigation the same year.