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SFO targets government contracted corporates suspected of fraud

Author: Azizur Rahman  2 December 2013
5 min read

A number of A4E staff have been charged with forgery and fraud. At the same time, Serco has been referred to the Serious Fraud Office regarding overcharging for electronic tagging of offenders. Both incidents are a clear reminder that anyone, even a government, can fall victim to corporate wrongdoing. The issue is how you deal with it.

It doesn’t look good.

A recruitment agency contracted by the government to place people in work ends up with nine staff in the dock for forgery and fraud. Another company hired by the government could face a similar fate to the offenders it was electronically tagging and, allegedly, overcharging the taxpayer for.

In total, nine former A4E staff are facing a total of 60 fraud and forgery offences. They will all appear in court this month. The Crown Prosecution Service has said that the charges relate to the forging of documentation to support fraudulent claims to the Department of Work and Pensions (DWP) for reward payments. These payments were outlined under the terms of the contract A4E had with the DWP for placing previously unemployed people in work.

Meanwhile, the Serious Fraud Office (SFO) has been handed a dossier on the private security firm Serco after it was alleged that the taxpayer was overcharged by millions of pounds for the tagging of offenders. In an ironic twist, staff at the company that was supposed to make sure offenders did not reoffend are now at risk of becoming criminals themselves. The Ministry of Justice has said it has passed details of an internal audit to investigators who will then decide whether Serco should face criminal charges. The issue is a serious one for Serco which is already under investigation over the £285M contract it has to operate prison vans, due to allegations of falsification of documents to make it appear that defendants were brought to court on time. And its great rival G4S is also under investigation for the way it charged the government for tagging offenders. Earlier this year, Justice Secretary Chris Grayling revealed that both Serco and G4S had charged for tagging offenders who were dead, back in prison, had had their tags removed or had even left the country.

So how can such fraud be committed? And what can be done to prevent it or, at the very least, minimise its effect?

The Fraud Act 2006 created a single offence of fraud. This could be committed by false representation, by failure to disclose information or by abuse of position. It would need a detailed examination of the goings on at A4E, Serco and G4S to determine exactly which criteria are met when it comes to prosecuting each individual. But any investigation will look at the central issue of honesty and just what the motivation was of those under investigation. These, however, are not simply issues for the authorities carrying out the investigation. They are equally important for the company, organisation or individual that comes under investigation. Especially if they want to limit the damage to their business.

Any fraud investigation is damaging to a business, regardless of whether anyone is eventually charged and convicted. It becomes extremely difficult to keep existing clients and gain new ones while the cloud of investigation is hanging over a company. When you factor in the loss of working man hours, the drain on resources, negative publicity, disruption and the general threat to a company’s wellbeing, the impact of a fraud investigation can be enormously damaging. That is why the “prevention is better than cure’’ approach can be so important.

As a legal firm that works regularly with clients that have carried out work for governments and other agencies, we are familiar with the strain a fraud investigation can place on a company. We have never yet had a client who has been investigated turn around and tell us that if they had their time again they still wouldn’t make the effort to put in place measures that could have prevented the fraud being committed. Legislation such as the Bribery Act has forced companies to look at the impact of their activities. Taking steps to introduce robust, anti-fraud controls into a company’s day-to-day activities may seem like a pretty joyless way of spending time and money but as compliance experts we have seen the value to organisations of recognising the potential for fraud and acting to prevent it. Any company that comes under investigation for fraud is in a far stronger position if it can show it acted to prevent – at least as much as it is possible to prevent – fraud happening. In that way, any fraud stands a much greater chance of being viewed as the actions of a rogue employee or an associate acting independently. That will mean the authorities taking a far more lenient view of a company under investigation than it would if it believed there was a general culture and tolerance of wrongdoing in its workplace.

Advice from legal compliance experts will always bring added security to a company looking to avoid coming to the attention of the authorities. But in reality, companies can do a lot themselves to reduce the scope for fraud – or at least be able to show they did not condone or encourage it. Simply maintaining accurate records of all aspects of a company’s operation and making sure they are properly stored will go some way to being able to prove innocence. On a more proactive level, introducing a whistleblowing policy and encouraging people to use it is a way of trying to find out if there is any wrongdoing going on in the company’s name. Great care has to be taken in making sure the policy is not simply a piece of paper: anyone with suspicions about a colleague or associate has to feel that they can report them in confidence, safe in the knowledge that they will be investigated. Which is the key to the next aspect of fraud prevention and damage limitation – responding quickly and decisively to allegations.

If reports of wrongdoing do arise, whether they are from staff, customers or third parties, a company has to grasp the nettle, look into what is alleged and act accordingly. Sitting back, hoping it will go away or pretending nothing is wrong is simply inviting the next allegation…and the next and the next. An internal review or investigation that leads to a problem being corrected or disciplinary action being taken as soon as possible will be far less damaging for a company than a full-blown inquiry conducted by an external authority. Such authorities may have information that a company is unaware of, may have been told things by a disgruntled employee who realised there was no point in telling the boss as nothing would get done and may have the expertise to locate swiftly the evidence of wrongdoing. This is extremely unlikely to happen if a company has taken some or all of the steps that this article has touched upon.

If an internal or external investigation is carried out, it is important to determine who should be involved from within the company and just what information should be released to staff, customers and other company associates. All relevant documents have to be available – which should not be a problem if the measures we explained earlier have been taken – and any employees implicated in wrongdoing have to be notified of their position in terms of both the company and the law. Investigating authorities will take away large amounts of paper and digital material, which is why it may be necessary to have back up copies of everything.

In Britain, self-reporting gives companies the potential to flag up wrongdoing to the authorities. Such actions will minimise the potential penalties that they then have imposed on them. Next year will see the arrival of deferred prosecution agreements (DPA’s) in the UK. These will effectively give firms the opportunity to come clean about any wrongdoing and agree a course of action and a timescale with the authorities to put right the wrongs and, if all goes to plan, avoid prosecution. Such options do give companies more leeway than individuals charged with criminal offences. But the chances of either finding the wrongdoing to self report or convincing the authorities that you are worthy of a DPA will be extremely slim unless the company has already taken steps to prove it is serious about preventing crime.

We have represented companies contracted to do work for governments who have then fallen foul of the authorities. Spending a little time on prevention can be time wisely spent. It would be interesting to see if A4E, Serco and G4S agree.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

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