G4S and Serco fraud investigation launched after reports of overcharging on electronic tagging contracts

Auditors say the firms overcharged the Ministry of Justice for electronically monitoring offenders

The Government’s Serious Fraud Office (SFO) has launched an investigation into reports that security giants G4S and Serco overcharged on private contracts to provide electronic tagging of criminals.

Over the summer it emerged that the two companies sent bills to the Ministry of Justice for tagging offenders who were found to be dead, back in prison or overseas.

Those examples only came to light following an audit by the accountancy firm PricewaterhouseCoopers, launched in May, which alleged that the Government had been overcharged at least as far back as the start of the current contracts in 2005.

A Government-wide review was launched into all contracts with the two firms, which combined are worth around £1.5 billion a year.

The Justice Secretary Chris Grayling had previously said an independent forensic audit into the two firms would be needed, looking at evidence such as the internal emails sent between executives.

G4S confirmed the news today, saying that it has “received notice that the director of the Serious Fraud Office has opened an investigation into the ‘contract for the provision of electronic monitoring services which commenced in April 2005 as amended and extended until the present day’.

“G4S has confirmed to the SFO that it will co-operate fully with the investigation.”

Serco similarly said in a statement: “Serco confirms that it will co-operate fully with the SFO investigation.”

Shadow justice secretary Sadiq Khan said the SFO probe was a “major development”, adding: “I hope that the time taken to launch this investigation hasn't resulted in the loss of important evidence.”

Mr Khan said: “With future Ministry of Justice contracts up for grabs, including more than £600 million of probation contracts, the Government must act swiftly and bar G4S from bidding for any more until the SFO has concluded its investigation.

“By failing to do so, David Cameron risks undermining public confidence in our justice system.”

Labour MP Keith Vaz, chair of the Home Affairs Select Committee, said: “I welcome the investigation into this contract. The revelations which led to the minister of justice's referral were very disturbing and it is important that we establish the full facts.”

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