EM Contract Update
In June 2013, G4S plc engaged the international law firm Linklaters LLP, to perform an independent review into the conduct of G4S employees in relation to billing under the EM contract and to assess whether there was any evidence of dishonesty or criminal conduct.
As part of its on-going review, Linklaters has conducted an extensive search and review of emails and numerous interviews with relevant employees and has not identified any evidence of dishonesty or criminal conduct by any employee of G4S in relation to the billing arrangements under the EM contracts.
The review has confirmed that, in certain circumstances, G4SCJS wrongly considered itself to be contractually entitled to bill for monitoring services when equipment had not been fitted or after it had been removed.
This billing practice, which the company believes was confined to the EM contract for England and Wales, was not consistent with the contract or G4S’ values and the company has apologised to the Ministry of Justice (the Ministry) and issued credit notes totalling £23.3 million for amounts incorrectly billed between 2005 and May 2013.
A further credit note of £0.8 million will be issued for billings for the period from June 2013 to date. These credit notes are issued against outstanding sums on these contracts and are covered by an impairment provision made in the Group’s half year results. In addition, G4S has incurred external investigation costs of around £2 million.
The Ministry is conducting an audit in relation to EM billings and the Company’s assessment of these matters and the credit notes may not agree with the Ministry’s audit findings. Once those findings are available, G4S will work with the Ministry to resolve any outstanding matters.
G4S continues to provide close support for the reviews being conducted by the Cabinet Office and the Ministry into other G4S contracts with the UK Government and whilst these reviews are not yet complete, no evidence has been identified by the company or brought to the company’s attention which indicates that the billing procedures on the EM contract have been applied to any other G4S contracts.
G4S has taken action to renew management, reinforce its corporate values and strengthen risk management and controls. Since the 1st of June, the company has made important changes to its senior management team, including a new Chief Executive Officer, a new Chief Financial Officer, a new Regional Chief Executive for its UK businesses and has appointed an experienced Deloitte partner to the newly-created position of Group Head of Risk and Programme Assurance. The executive previously responsible for the UK businesses (including EM) is no longer working at G4S.
Further organisational and process changes are being implemented to strengthen customer focus, governance and contract management and control. Taken together with the significant changes to our board composition, G4S is well advanced in a programme of fundamental corporate renewal.
Commenting on Linklaters’ findings, Ashley Almanza, G4S Group Chief Executive said:
“Our announcement today follows months of intensive work by an independent law firm and external accountants and is an important step in setting this matter straight and restoring the trust which has been earned by our many thousands of committed and hard-working employees over many years.
The way in which this contract was managed was not consistent with our values or our approach to dealing with customers. Simply put, it was unacceptable and we have apologised to the Ministry of Justice.
As part of a wider programme of corporate renewal, we have changed the leadership of our UK business and we are putting in place enhanced risk management and contract controls. We remain committed to working with the Ministry and the UK Government to resolve this matter and to provide enhanced oversight of service delivery and contract performance."