Serco’s methodology of transferring earnings between its enterprise items for its prisoner tagging contract was “not very admirable” however “lawful . . . legit accounting”, in keeping with a lawyer for a former director charged with fraud.
Nicholas Woods and Simon Marshall, attorneys for ex-executives of the UK authorities contractor, instructed Southwark Crown Courtroom on Wednesday that monetary fashions submitted to the Ministry of Justice in 2011-13 contained true and legit fees and weren’t a part of a rip-off.
The Severe Fraud Workplace has accused the lads of defrauding the federal government in relation to Serco’s profitable contract for the digital tagging of offenders by confecting faux fees as a way to conceal earnings value some £12m.
The SFO alleges that Woods and Marshall, together with one other unnamed worker, devised a scheme wherein Geografix, a Serco unit that manufactured and leased prisoner tagging tools, would levy £500,000 a month in “utterly fictitious” fees towards the UK contractor.
The alleged purpose was to maintain Serco’s revenue margin low and keep away from elevating questions on whether or not it was delivering worth for cash to the ministry, in keeping with the SFO. Geografix allegedly paid again the complete quantity at a later date by the use of a dividend.
Barrister Neil Saunders instructed the jury that Woods, an accountant and former finance director at Serco’s dwelling affairs division, believed all the fees to be legit and had no motive to conduct a fraud on behalf of his employer.
He stated Serco’s methodology of paying fees to its subsidiary Geografix as a way to depress its revenue margin was legit and generally utilized by giant corporations as a way of shifting earnings inside a bunch. It was additionally sanctioned by Serco’s senior managers, Saunders stated.
“Giant corporations conduct enterprise by shifting earnings inside a bunch. It’s a legit and lawful apply,” he stated, later including: “The instruction from a few of the most senior executives within the firm . . . was to keep up Serco Restricted’s revenue margin at a specific stage utilizing the mechanism of fees levied by Geografix.”
Adrian Darbyshire QC, the barrister defending Marshall, previously Serco’s operations director of subject companies, stated: “For those who’re sitting there considering, this can be a bit off, sticking the cash in your subsidiary merely to scale back the earnings you’re making within the [prisoner tagging] contract, I do know not less than one one that would agree with you.
“The fact was, on this contract, that Serco was earning profits in two locations concurrently . . . I’m not right here defending the apply. I’m saying the apply is just not instructed to be unsuitable. It’s lawful, it’s legit accounting.”
He added: “it will not be very admirable or the correct solution to deal with your buyer . . . ”
Woods and Marshall are charged with one depend of fraud for dishonestly submitting a deceptive monetary mannequin to the ministry on August 11, 2011 together with one other particular person, who is just not named.
Marshall faces one other two counts of fraud referring to unfaithful or deceptive monetary fashions filed on June 6, 2012 and January 18, 2013. Each deny the fees towards them.
The case continues.