LONDON (AP) — The British government said Thursday it was calling in fraud investigators after auditors found security giant G4S had overcharged by millions of pounds on contracts to monitor offenders using electronic tags.
Justice Secretary Chris Grayling said he was asking the Serious Fraud Office to “consider whether an investigation is appropriate into what happened” after G4S refused to take part in a forensic audit of its contract.
He said an initial audit by accountants PwC had found that G4S — which ran into trouble providing security for the London Olympics — and another firm, Serco, had charged the government for people they were not actually monitoring. In a small number of cases, offenders they were supposedly monitoring were dead.
Grayling said the overcharging was in the “low tens of millions,” went at least as far back as the start of the current tagging contracts in 2005, and could have begun as long ago as 1999.
He said Serco had agreed to a forensic audit to determine whether dishonesty had been involved in the overcharging, but G4S had refused.
The detailed audit would include examining internal emails between company executives to determine what happened.
Grayling told lawmakers in the House of Commons he felt “astonishment that two of the government’s biggest suppliers would seek to charge in this way.”
“The billing practices in question were clearly unacceptable and the government will take all necessary steps to secure a refund for the taxpayer,” he said.
He said the government was reviewing all its existing contracts with Serco and with G4S, one of the world’s biggest private security firms. The government paid G4S more than 394 million pounds ($595 million) in the 2012-2013 financial year.
G4S said its own investigation had found no indications of “dishonesty or misconduct.” It said it had not seen the findings of the government’s original audit.
“We take very seriously the concerns expressed by the Ministry of Justice,” said Chief Executive Ashley Almanz in a statement. “We are determined to deal with these issues in a prompt and appropriate manner.”
Serco’s chief executive, Christopher Hyman, said the company was “taking this extremely seriously” and would repay any sum it was found to have overcharged.
Unions said the overcharging should make the government rethink its plans to turn large chunks of Britain’s probation service over to private companies.
“It beggars belief how many times these private companies are allowed to fail and rip off taxpayers and still be awarded government contracts,” said Mark Serwotka, general secretary of the Public and Commercial Services Union.
The fraud investigation is the latest bad news for G4S. Last year, Britain had to call in thousands of troops to help with security at the London Olympics after G4S acknowledged it couldn’t provide the 10,400 guards it had been contracted to deliver.
This week, prosecutors said they were considering criminal charges over an Angolan man who died after being restrained by G4S guards during deportation from Britain.
G4S shares ended the day down 5.6 percent at 2.13 pounds on the London Stock Exchange, while Serco shares fell 7.9 percent to 6.26 pounds.
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