Serco chief executive stands down after scandal

Serco is not being awarded new government contracts

The chief executive at Serco, a security firm at the centre of an overcharging scandal, has resigned.

Outgoing boss Chris Hyman said the best way for the company to move forward "is for me to step back".

Serco is being investigated by the Serious Fraud Office (SFO) after claims it had overcharged the government by "tens of millions" of pounds for electronic tags for criminals.

The government welcomed the news, describing it as a "positive move".

In July, Justice Secretary Chris Grayling said an audit had revealed a "significant anomaly in the billing practices" of both Serco and rival G4S.

Mr Grayling said that since 2005, the companies had in some cases been charging for tagging offenders who were in prison, had left the country or were even dead.

In September, the government handed information to the SFO for their assessment.

Closer monitoring

On Friday, Serco announced plans to reorganise the company.

The firm said it would split the government work into a separate business that could be more closely monitored.

For the moment, Mr Hyman's position will be taken over by Ed Casey, who runs the US division, while the company looks for an external full-time replacement.

A government statement said it would "take full account of all the changes Serco have made today".

"Whilst it is early days in their programme of renewal, this is a positive move by Serco and a step forward."

The statement added that its review of government contracts, announced in July by the Justice Secretary, was continuing and would "ensure government's contractual arrangements are robust and taxpayers' money is spent responsibly, in a vibrant, competitive market for public services".

Shadow justice secretary Sadiq Khan called for ministers to provide assurances that no confidentiality deals or "other arrangements that avoided justice" were being done.

Mr Khan also asked ministers to "publish immediately the PriceWaterhouseCooper report into the activities of G4S and Serco."

Home Affairs Committee chairman Keith Vaz said he was "surprised" by the resignation of Mr Hyman, because he "always maintained there is nothing untoward with the contracts Serco holds with the government".

He said Mr Hyman maintained the position "even after the company was referred by Secretary of State for Justice to the SFO".

'Drawing a line'

Shares in Serco, which has in excess of 120,000 staff in more than 30 countries, rose after the news.

It has lost more than 10% of its value since May - when the government first voiced its concerns over the tagging contract.

"They were always going to have to make some sort of major change," Cantor analyst Sam Thomas said.

"This is about transforming their recently damaged reputation and I think in appointing an external new chief executive they are hoping to draw a line under the previous issues."

Mr Hyman said he had "always put the interests of Serco first", adding that it was important the relationship with the government was rebuilt.

He said: "I have been fortunate enough to have had the privilege of working at a great company with extremely talented people. I wish everyone at Serco the very best for the future."

No new contracts are being awarded to either of the firms until the audit is completed, the government said in September.

The UK chief executive at G4S, Richard Morris, also stepped down on Thursday.

The latest development in the scandal is likely to fuel debate over the value to the government of outsourcing public services to private companies, after G4S failed to provide enough security staff for the 2012 Olympics.