Two former Serco executives have been cleared of hiding £12m in profits from the firm’s government electronic tagging contracts after the Serious Fraud Office (SFO) dropped the prosecution.

Former senior managers Nicholas Woods, 51, and Simon Marshall, 59, were on trial at Southwark Crown Court accused of fraud against the Ministry of Justice (MoJ) between 2011 and 2013.

But on Monday, judge Mrs Justice Tipples directed jurors to acquit Mr Woods – ex-finance director for Serco home affairs – and Mr Marshall – former operations director of field services – of a joint charge of fraud on or about 11 August 2011.

Mr Marshall was also cleared of two further counts of fraud on or about 6 June 2012 and on or about 18 January 2013.

It comes after the SFO offered no further evidence following a failed application to adjourn the case after problems with the disclosure process, where prosecutors are expected to make relevant documents available to the defence.

The judge told jurors the SFO took the view that issues identified had “undermined the process of disclosure in this case to the extent that the trial cannot safely and fairly proceed”.

It brings an end to an investigation launched in October 2013, which saw Serco hit with a fine of more than £19m in 2019 as part of a Deferred Prosecution Agreement (DPA).

That was in addition to the £12.8m compensation already paid to the MoJ as part of a £70m civil settlement in 2013.

Serco Geografix, the company’s UK subsidiary, took responsibility for three offences of fraud and two of false accounting committed between 2010 and 2013, relating to the understating of profits from contracts with the MoJ.

Andrew Katzen, representing Mr Woods, said: “Although the SFO’s decision to drop its prosecution is a welcome vindication of my client, the fact that it has done this after an eight-year-long criminal investigation – and three weeks into a trial – should be a matter of profound concern to everyone concerned with justice.”

He added: “It is notable that in this case – just as in other similar recent failed fraud prosecutions – the SFO signed a DPA with Serco in which the company, in return for avoiding corporate prosecution, admitted wrongdoing and co-operated with the investigation.

“A narrative was thus created in which the responsibility of Serco and its senior officials were marginalised, and blame was instead cast on Mr Woods, a small cog in a big wheel.”

At the start of the case, prosecutor Michael Bowes QC told jurors that between October 2010 and September 2012, Serco allegedly reduced its apparent profits from £27m to £15m, concealing an extra £12m.

Marshall’s lawyer Neil Swift, who is a partner at Peters & Peters Solicitors, said: “Mr Marshall is of course very relieved that he is vindicated.

But there is also a sense of indignation that the SFO’s case should fold in this manner, after putting our client through eight years of unfounded criminal allegations.”

Marshall said: “I am extremely relieved to have been acquitted of all charges following the collapse of the SFO’s case this morning.

“Over the last eight years, I have made clear that I acted properly and honestly in all my work at Serco.

“These proceedings took place following a Deferred Prosecution Agreement concluded between Serco and the SFO, a process in which I had no involvement. Whilst that agreement was no doubt convenient for the SFO, Serco and the government, it did not reflect the reality of what occurred.”

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