A subsidiary of contracting giant Serco will pay a £19.2m fine after admitting lying to the Ministry of Justice about the true extent of profits from supplying electronic tags.

The Serious Fraud Office today announced the deferred prosecution agreement with Serco Geografix Limited, a wholly-owned subsidiary of Serco Group, after the company took responsibility for three offences of fraud and two of false accounting.

Investigators found that SGL created a scheme to mislead the government about profits made between 2010 and 2013 from its contract for the provision of electronic monitoring services.

This scheme was designed to prevent the MoJ from obtaining information to which it was entitled and from using this to decrease the company’s revenues under that contract. Serco has already paid the MoJ compensation as part of a £70m civil settlement in 2013.

In a statement, Lisa Osofsky, director of the Serious Fraud Office, said SGL ‘engaged in a concerted effort to lie to the Ministry of Justice in order to profit unlawfully at the expense of UK taxpayers’.

The conduct came to light in late 2013 in an investigation into Serco and its employees in respect of the tagging contract. Serco subsequently reported the matters subject to the deferred agreement to the SFO.

An investigation into whether SGL improperly invoiced for the electronic monitors will not result in any criminal charges being brought.

Osofsky noted that that agreement had provided ‘substantial assurances’ regarding the future corporate integrity of Serco Group, which is one of the UK government's largest contractors.

As part of the deal, the Serco Group must commit to ongoing cooperation with the SFO, to strengthen its ethics and compliance functions, and to provide the Cabinet Office with an annual report on its progress.

Credit was given in the deferred prosecution agreement for the prompt compensation payment to the MoJ, complete change of senior management and the agreement of Serco Group – despite not being a party to the DPA – to guarantee SGL’s performance.

The agreement is subject to approval before Mr Justice William Davis at Southwark Crown Court tomorrow. The full reasons for and the terms of the agreement will be given in open court at the public hearing of the application to approve the DPA.

The DPA concerns only the potential criminal liability of SGL. Whilst it brings to a close the SFO’s investigation into the conduct of SGL and all Serco Group companies, it does not address whether any liability of any sort attaches to any current or former employee or agent of SGL, SL or Serco Group. The investigation into individuals in respect of SL’s electronic monitoring contract continues.