On 28 April 2021, the SFO published the statement of facts relating to the DPA that it agreed with Serco Geografix Limited (SGL) back in July 2019. The publication was made possible as a result of the ending of the trial of two former Serco directors, which collapsed this week as a result of issues with disclosure (our blog is here).
In the statement of facts, SGL agreed that it had committed fraud through fraudulent reporting to the Ministry of Justice (MoJ) and related false accounting. SGL agreed that the purpose of the fraud was to dishonestly mislead the MoJ as to the true extent of the profits being made by Serco Limited (SL) under contracts for the provision of electronic monitoring services entered into by the Secretary of State for the Home Department and SL. Under the DPA, SGL agreed to pay a financial penalty to the SFO of £19.2m plus legal costs. This is in addition to the £12.8m compensation already paid by Serco to the MoJ as part of a £70m civil settlement in 2013.
The statement of facts details how SGL caused the reporting of false costs to the MoJ by SL, intending to ensure that the MoJ did not, on seeing high profit margins, attempt to limit any of SL’s future profits, recover any of SL’s previous profits, seek more favourable terms during renegotiations of contracts, or otherwise threaten the revenue stream SL obtained as a result of the continuing operation of the contract.
The statement of facts additionally details the extent of SGL’s co-operation with the SFO. The SFO credited SGL for:
- Refraining from, at the SFO’s request, interviewing witnesses or taking statements during the course of the criminal investigation;
- Instructing an external law firm to conduct a document-only review of the matters under investigation;
- Providing access to mailbox accounts of its employees and former employees and other data without first filtering their contents for privileged items (other than by reference to narrowly defined search terms); and
- Agreeing to a limited waiver of privilege over certain forensic accounting and first account material.
The SFO expects companies seeking a DPA to show extensive cooperation, as detailed in its Corporate Cooperation Guidance and its Guidance on DPAs.
SGL agreed that the illegitimate behaviour documented in the statement of facts was in part conducted by two directors, and that both were a ‘directing mind and will’ of SGL. However the two individuals who were subsequently prosecuted by the SFO were acquitted this week when it was identified that the SFO had failed to disclose key evidence in the case.
The SFO has failed to prosecute successfully any individuals following a DPA. Aside from the specific issue of disclosure in this case, it is becoming clear that while the SFO may be able to agree resolution of a criminal case with a cooperating company in the form of a DPA, it may not able to prosecute that case against an individual successfully. This raises the issue of whether the Courts are able to scrutinise DPAs sufficiently to ensure there is a proper prosecution to be deferred.