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11 July 2013, 13:44 | Updated: 11 July 2013, 13:48
Justice Secretary Chris Grayling has asked the Serious Fraud Office (SFO) to consider investigating Crawley based G4S after the Government was left with bills worth tens of millions of pounds for electronic tags that were not being used.
Mr Grayling said in some cases private contractors charged the Government for years after tagging had stopped and cases included being charged for tags for dead people and people who were never tagged - ``a wholly indefensible and unacceptable state of affairs''.
Ministry of Justice staff were aware of the problem after discovering billing issues in 2008 and Serco, one of the other contractors supplying tags, have agreed to an independent forensic audit of what happened.
But G4S last night refused to co-operate, prompting Mr Grayling to say he would ask the SFO to look into whether an investigation is needed.
The irregularities were revealed in a Government-commissioned audit by PricewaterhouseCoopers.
Mr Grayling said: "This audit has now confirmed the circumstances in which the department was billed for services. This has included instances where our suppliers were not in fact providing electronic monitoring.
"It included charges for people who were back in prison and had had their tags removed, for people who had left the country and those who had never been tagged in the first place but who had instead been returned to court. There are a small number of cases where charging was known to have continued for a period where the subject was known to have died.
"In some instances charging continued for a period many months and indeed years after active monitoring had ceased. The House will share my view that this is a wholly indefensible and unacceptable state of affairs.
"The audit team is at present confirming its calculations but the current estimate is that the sums involved are significant and run into the low tens of millions in total for both companies since the contracts commenced in 2005.''
On G4S, Mr Grayling said: ``We put the same proposal (as to Serco) for a further detailed forensic audit to take place to G4S last night.
"They have rejected that proposal.
"I have given careful consideration as to how to respond, I should state that I have no information to confirm that dishonesty has taken place on the part of either supplier.
"But given the nature of the findings of the audit work that has taken place so far and the very clear legal advice that I have received, I am today asking the Serious Fraud Office to consider whether an investigation is appropriate into what happened at G4S and to confirm to me whether any of the actions of anyone in that company represent more than a contractual breach.''
The Government was being overcharged since at least 2005, when the current tagging contracts were agreed, and it could date back as far as the previous 1999 contracts.
Mr Grayling said the possibility that contractors had been dishonest had to be ruled out and so the forensic investigations will look at email trails between executives at the firms.
He said the Government would take "all necessary steps'' to get a refund for taxpayers.
Mr Grayling said: ``The audit also reveals that contract managers at the Ministry of Justice discovered some of the issues around billing practices following a routine inspection in 2008.
"Whilst it appears that these contract managers had only a limited idea of the scope and the scale of the problem nothing substantive was done at that time to address the issues.
"None of this however justifies the billing practices that have been followed by the suppliers.
"The House will share my astonishment that two of the Government's biggest suppliers would seek to charge in this way.
"The House will also be surprised and disappointed as was I to learn that staff in the Ministry of Justice were aware of a potential problem and yet did not take adequate steps to address it.
"The billing practices in question were clearly unacceptable and the Government will take all necessary steps to secure a refund for the taxpayer.
"However, in view of the seriousness of the issue and having taken full legal advice, I am clear that as Lord Chancellor I must not only take action in terms of financial recovery but I should also seek to rule out the possibility that what went on involves dishonesty by anyone involved in the contracts.''