Vicious Serco? UK public service company entwined in major fraud scandal

UK service company Serco has its fingers in numerous government pies, running British services from transport to prisons while staying invisible to the ‘man on the street.’ The global giant now faces investigation for fraud as it seeks new contracts.

Towards the end of September, the company was alleged in a government report to have charged for the service of tagging criminals who were dead, in prison, or were never tagged at all.

Serco and private security giant G4S overcharged the government by tens of millions of pounds for the practice, which, according to Big Four accountancy firm PricewaterhouseCoopers, could date back as far as 1999.

The expose prompted Britain’s Serious Fraud Office to confirm that they are assessing information on Serco provided by the Ministry of Justice.

“We are clear that new business can only be awarded where the integrity of the contracts and the conduct of suppliers can be assured,” the Ministry of Justice stated.

This could lead to an official investigation, and has thrown the company’s leadership into the spotlight as the global giant seeks new defense contracts.

On Friday, it emerged that Serco had been one of three main bidders filing proposals with the UK Ministry of Defence for the role of running a £400 million ($646 million) contract. While it can still bid, it cannot be chosen until present issues are resolved. The deal would run for ten years.

Serco, Telereal Trillium, and Capita-led groups submitted initial proposals in June, while the new bids were executed this week. The contract winner is expected to be chosen by the end of the year.

“Are they competent? Do they have the expertise? Can they really effectively manage the service? I think the answer is becoming clear that no they can’t,” Jane Lethbridge from Public Services International Research Unit told RT.

Meanwhile, Serco has apparently been attempting to rejuvenate its public image, particularly in Britain where its headquarters are based. Some 25 percent of its £4.9 billion ($7.9 billion) annual revenue is acquired through work with the UK government. Around 45 percent of its total revenue comes from the British public sector.

“We will embed quickly and effectively any changes needed into the way we do business, and we expect Serco to emerge stronger as a result,” the company stated.  

On Thursday, the Financial Times reported that Serco is predicted to be purging its senior UK management as part of the drive to improve its governmental relationship following its tumultuous year. However, the news left critics doubting whether a mere change in personnel could reform an entire company culture.

“You can’t change a culture in three months,” Andre Spicer, professor of organizational behavior at Cass Business School, told the paper. “The only times that might be possible is if there’s a severe external threat or emergency but I don’t think Serco is in that position at the moment.”

Lethbridge appeared to agree. “Their practices and their publicity are two different things,” she said. 

A view of the entrance of the British Ministry of Justice in London (Reuters / Alessia Pierdomenico)

Further commentators have urged caution on the part of Serco. “One of the reasons that these public service markets often go wrong is because the pace and scale of reform is causing significant problems. In the rush to develop public service markets, avoidable errors have been made in design and oversight,” Nechal Panchamia, a researcher at the Institute for Government, told RT.

“What we would urge the government is to slow down, learn quickly from mistakes, and correct them out of the system before another mistake grabs the headline,”
she said.

The incident marks the latest in a long line of controversies surrounding the company.

In August, the City of London police were called in by UK Justice Secretary Chris Grayling to probe alleged fraud by the company’s staff working on a £285 million ($460 million) prisoner escorting contract.

“It has become very clear there has been a culture within parts of Serco that has been totally unacceptable,” Grayling said upon launching the investigation.

Early in September, Serco was booted off the FTSE 100. Following the September fraud allegations, Serco's shares dropped 8p (13 cents) - nearly 1.5 percent - to 543p (942 cents) over the course of a day.

The fraud-related claims follow a list of allegations of detainees facing sexual abuse at Serco-run UK immigration center Yarl’s Wood in September. The reports were corroborated later in the month by further detainees, according to the Guardian.

Although companies like Serco, Capita, and G4S are behind public bicycle rental schemes, speed cameras, military and nuclear weapons contracts, ambulances, and the government’s work program for the jobless, it is apparent that the nation’s general public still remain relatively oblivious to the major role they play in modern society. An RT survey conducted on the streets of London indicated that the average ‘man on the street’ recognized very few of the company names mentioned.