Serco chiefs ‘hid £12m in profits’

Two former Serco chiefs accused of defrauding the Ministry of Justice over the private security firm’s electronic tagging contract concealed £12million in profits, a court heard.

Nicholas Woods, 51, and Simon Marshall, 59, allegedly encouraged a man, who cannot be named, to submit fictional costs to the MoJ between 2011 and 2013.

Woods is the former finance director of Serco Home Affairs and Marshall is the former operations director of field services.

Prosecutor Michael Bowes, QC, told jurors the fraud ran between 2011 and 2013 and concerned Serco’s electronic monitoring contract.

‘That contract was funded by the MoJ treasury so ultimately by the taxpayer.

‘The fraud was carried out by false financial reporting to the MoJ,’ said Mr Bowes.

‘The false representation is that costs were made up in order to conceal Serco’s high profit margin and so stop the MoJ from taking steps from recovering any of Serco’s profits or otherwise reduce the revenue stream that Serco obtained as as the result of the continued operation of the contracts.’

Jurors heard costs were falsely repeated on behalf of Serco, reducing the company’s true profits from £27million to £15million.

Woods and Marshall allegedly falsified expenses to their subsidiary Serco Geographix Limited only to reclaim the money later, the court heard.

Mr Bowes said the pair encouraged their co-conspirator to declare costs to the MoJ which never actually occurred.

As part of the contract, Serco was obliged to submit a regular financial report on the project to the ministry, the court heard.

‘The information in that financial model had to be given to the MoJ, under the contract, had to be true and accurate, not false, misleading or fictitious.

‘The prosecution’s case is that the submitted costs were not true and accurate and so were false, misleading and fictitious.

‘The prosecution’s case is that the defendants knew that and so acted dishonestly,’ said Mr Bowes.

‘The contract required Serco to provide, amongst other things, the actual revenue and actual costs to the MoJ in those financial models every six months.’

The court heard that those reports were important to the MoJ in order ascertain whether the contracted companies gave realistic reports of their costs.

‘Even more simply, what the financial model does is to give the MoJ confidence that the taxpayer does not pay too much for the tagging services supplied by Serco,’ said Mr Bowes.

Marshall, of Llanvair Drive, Ascot, Berkshire, and Woods of Worminghall Road, Ickford, Bucks, both deny fraud by false representation.

Marshall denies two additional counts of fraud by false representation.

The trial continues