The UK’s eighth deferred prosecution agreement (DPA) has been approved in relation to the UK Serious Fraud Office’s (SFO) investigation into G4S Care & Justice (UK) Ltd (G4S).
The SFO’s investigation into G4S began in 2013 in relation to G4S’s provision of electronic monitoring services for the Ministry of Justice (MoJ) between 2005 and 2013, and allegations of fraudulent conduct by the systematic over-reporting of costs which enabled G4S to minimise its reported profits, avoiding sharing the benefit of cost-efficiencies with the MoJ.
On 17 July 2020, the President of the Queen’s Bench Division, Dame Elizabeth Sharp ratified the DPA signed between G4S and the SFO. Under the DPA, of the prosecution of three counts of fraud under section 2 of the Fraud Act 2006 if deferred and will be discontinued if G4S complies with the following conditions set out in the DPA that are to be in effect for three years from 17 July 2020:
- Payment of a financial penalty of £38,513,277;
- Payment of the SFO’s costs of £5,952,711; and
- The introduction of a corporate renewal programme which involves: (i) significant personnel changes; (ii) the creation of a Board Risk Committee to oversee the most sensitive and important contracts held by G4S and its constituent companies; (iii) changes to its reporting lines so that financial officers and auditors within a company are required to report to Group officers rather than the leadership of the individual company; (iv) the expansion of the Group audit function with an emphasis on risk assessment; (v) the introduction of a 360 degree review process of all contracts with HM Government; and (vi) the appointment of an external reviewer by the SFO (to be selected by the SFO from three candidates proposed by G4S) to oversee the implementation of the company’s renewal programme, thus providing the SFO with substantial oversight. This is a greater level of scrutiny than in any previous DPAs, which the Judge noted was as a result of the exposure of the company and its group to government contracts. The increased level of monitoring is a nod to the US model, in which monitors are more regularly put in place.
The selected reviewer will be required to submit a report and implementation plan to the SFO and continue to analyse and suggest improvements to the company’s corporate renewal programme for the duration of the DPA. The DPA makes no provision for payment of compensation to represent disgorgement of profits, due to a settlement agreement between the MoJ and G4S on 12 March 2014, in which G4S paid the MoJ £121,268,715 to settle claims against G4S in relation to the provision of electronic monitoring services.
For the majority of previous DPAs, financial penalties imposed have been reduced by up to 50 per cent where the company concerned has been able to demonstrate “extraordinary or otherwise exemplary co-operation”. However, G4S only received a 40 per cent reduction on the financial penalty as its co-operation in this case was deemed to have been “less than full at the outset”. The court held that until October 2019, G4S’s co-operation was not sufficient, as it was only at that stage that G4S provided access to documents from its internal investigation and a limited waiver of privilege over those documents. This demonstrates the readiness of the SFO to provide a discount even where cooperation is ‘less than full’, but also that a limited waiver of privilege over documents relating to a company’s internal investigation will generally be required to be deemed to have co-operated sufficiently.
An investigation into culpable individuals remains open and the Judge noted when approving the DPA that there was a “prospect of proceedings against individuals in the foreseeable future”.