U.K. Promises to Charge Individuals Amid Plea Bargain Furore

(Bloomberg) -- U.K. prosecutors responded to criticism over their lack of convictions of company officials in cases where firms have pleaded guilty and paid fines by promising to target top executives.

The Serious Fraud Office won approval Thursday of a so-called Deferred Prosecution Agreement that allowed outsourcing company Serco Group Plc to pay 19.2 million pounds ($24.2 million) for defrauding the U.K. Ministry of Justice in connection with its prisoner-monitoring program. An SFO attorney said it wanted to charge individuals in the case by Dec. 18.

The deadline is an apparent response to criticism that a fraud case against former Tesco Plc executives got thrown out by a judge late last year, while the SFO decided not to go after individuals in an international bribery case against Rolls-Royce Holdings Plc soon afterwards. Both companies had previously agreed to pay millions in pounds in their settlement agreements.

“There may be cynicism in some quarters by which corporate entities can take advantage of DPAs," Judge William Davis said while approving the DPA as Serco Chief Executive Officer Rupert Soames watched in the courtroom. "In my opinion, this cynicism is not well founded. I'm satisfied that the interests of justice were satisfied."

SFO lawyer Michael Bowes said Serco had accepted its guilt as a corporation, because employees senior enough to be its "directing minds" were involved in the criminality. The company has changed its entire management and board since the wrongdoing stopped in 2013.

"DPAs are all well and good, but are they going to go after the individuals," Michael Potts, the senior partner at London-based Byrne and Partners, said by phone. "This will be a good test. There'll be scrutiny. Giving themselves a deadline is an indication that they know they have to make decisions promptly after doing a DPA."

Davis said that between 2011 and 2013, a Serco unit had been cooking its books to conceal the profits it was making from the government for prisoners it was no longer tracking, including some who had died.

Serco notified the SFO of the wrongdoing in November 2013, compensated the government a month later and replaced its management. These were factors in why the company, which makes nearly all its profits from government contracts, was offered a DPA, Bowes said. Judge Davis said he wouldn't have approved the DPA had it affected the status of Serco's future relationship with the government.

To contact the reporter on this story: Franz Wild in London at fwild@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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