Ray of light for Serco as investigation is dropped

The company's problems stem from its admission in July 2013 that it had charged the Government for tagging thousands of criminals who were dead

The scandal-struck outsourcer Serco took a vital step forward in its rehabilitation with the Government, its biggest customer, after City of London Police dropped their year-long investigation into its £285m prisoner transport contract.

Yesterday’s move is a boost for its chief executive, Rupert Soames, who joined in May, as he looks to revive the ailing outsourcer after a tumultuous 18 months.

Mr Soames told The Independent: “It’s little steps, but better for those steps to go forward than backwards. After the investigation by City of London Police, it’s a great relief to know that no evidence was found of misdoing ... I hope it makes people slightly less immediately critical of Serco and all of its work.”

The company’s problems stem from its admission in July 2013 that it had charged the Government for tagging thousands of criminals who were actually dead, imprisoned or non-existent, and misled the Ministry of Justice by recording prisoners as ready for court – one of the measures by which the outsourcer was paid – when they were not.

Last summer ministers called in the police to investigate claims of fraud at Serco, and whether there was criminal intent in the contract to transport prisoners between 24 crown courts, 43 magistrates’ courts, 24 prisons and 131 police stations. “The issue,” said analysts at Liberum, “was that there may have been ‘controlling minds’ – ie, corporate involvement in encouraging people to act fraudulently.”

At the time, Justice Secretary Chris Grayling said it had “become very clear there has been a culture within parts of Serco that has been totally unacceptable, and actions which need to be investigated”.

Yesterday, however, City of London Police said they had found “no evidence to support bringing charges against staff” on the prisoner escort contract, and the Crown Prosecution Service will not bring charges against Serco or its staff on this issue.

The company also pointed out: “There was no evidence of any corporate-wide conspiracy or an intention to falsify figures to meet the [prisoner transport] contract requirement by senior Serco management or at board level.”

That means Serco can continue running the contract until it ends in 2018, although it has already agreed to give up future profits on the contract, as well as to repay profits on the contract for transfers in London and East Anglia since 2011 – about £2m.

However, although Serco repaid almost £70m last year on the tagging contract, that matter was referred to the Serious Fraud Office and the investigation is still ongoing.

Last month the outsourcer lost £500m of its value in one day after it struck its fourth profit warning in 12 months.