Security Giant Admits $38 Million Fraud
G4S, which bills itself as “the world’s largest security company,” has encountered rough going in the carceral marketplace in recent weeks. The latest episode in the troubles of this British-Danish security giant came with its public admission on November 18 that the firm had overbilled the British government roughly $38 million dollars (£24 million) for electronic monitoring services in the criminal justice system. This admission came after authorities had begun an investigation of G4S and the UK’s other large scale monitoring provider, Serco, for alleged wrongdoing. The investigation was slated to come to a head this week with the release of a report by the National Auditing Office (NAO) as well as a public hearing before the powerful parliamentary public accounts committee.
Ultimately, G4S admitted to billing the government for monitors that didn’t exist. In some cases, the clients for whom the Ministry of Justice was charged included people who had returned to prison, those who had been taken off of the monitor, and even a few who had passed away. In one instance the justice ministry paid £3,000 ($4830) for 612 days monitoring of a man who had been sent to prison for two years 20 months earlier. G4S removed the tagging equipment but supposedly kept on billing because the court had not provided the relevant paperwork.
Once the parliamentary investigation commenced, G4S commissioned the Linklater law firm to do an investigation of the company’s execution of this contract. The Linklater team failed to find any evidence of “criminal conduct,” just overbilling on a grand scale. After the submission of the Linklater report, a statement from G4S, while admitting the billing errors, claimed the security company essentially made only an error of judgment when it had “wrongly considered itself to be contractually entitled to bill for monitoring services when equipment had not been fitted or after it had been removed.”
G4S’ admission of guilt was accompanied by an apology and the re-payment of the money in the form of two credit notes valued at just over £24 million (approx. $38 million). Because of the investigation, G4S withdrew its bid to extend the existing monitoring contract for people on parole but still plans to provide services for the probation department, worth about £450 million ($724 m).
This scandal follows on the heels of two other setbacks for this transnational mega-firm. In October, the South African Minister of Justice, Sbu Ndebele, took over the reins of the 2,900 bed Mangaung prison that G4S operates in Bloemfontein. G4S has run the facility under contract to the government since 2002. However, a recent investigation by a university-based think tank, the Wits Justice Project, revealed widespread abuse of prisoners including the systematic use of electroshock torture and forced administration of powerful psychotropic drugs. The researchers gained access to internal videos which showed members of a cohort of guards known as the Emergency Security Team (EST), assaulting men incarcerated at Mangaung. Allegedly the EST even had a space known as the “dark room,” dedicated to the application of electroshock and other types of assault.
G4S’s second major scandal also involved the firm’s global reach. In the midst of the company’s bid for security contracts at two major British universities, students organized a protest, targeting G4S’s links to the Israeli police apparatus. The protestors alleged that G4S was profiting both from operating security at the checkpoints where Palestinians are routinely harassed as they travel in and out of “Israel” as well as providing security for illegal settlements in the West Bank. According to the Palestinian solidarity group BDS (Boycott, Divest, Sanctions) G4S has also had contracts with Israeli prisons since 2007, including connections to the Ketziot and Megiddo facilities which hold Palestinian political prisoners. BDS also reports G4S involvement in two detention centers where systematic torture of Palestinian political prisoners has been alleged, including the detaining of children. A 2010 hearing by the Russell Tribunal pointed to yet another dimension of the corporation’s collusion with the Israelis, claiming that G4S and other companies “all acknowledge and actively boast in their promotional material about the use of their equipment during the Gaza conflict, which unlawfully inflicted loss of life and extensive and serious damage on Palestinian civilians and their property.”
In the US, G4S’s prison operations have been dwarfed by Corrections Corporation of America (CCA) and the GEO Group. However, G4S has a much larger, more diversified global presence than their US counterparts. G4S has 657,000 employees in 120 countries, making it the world’s third largest private sector employer behind WalMart and FoxConn. They employ 59,000 people in North America, with a high concentration of their activity focused on complex security systems and operation of 19 youth detention facilities. They also have an international technology division which claims to have deployed more than two million miles of fiber in more than 200 metropolitan and rural areas since 1988. Their revenue in 2012 was £7.5 billion ($12 bn), about four times that of CCA and the GEO Group combined.
The firm’s recent scandals, while serious, are not unprecedented. Numerous cases of brutality on the part of their officers have surfaced, including the 2010 death of Angolan Jimmy Mubenga, while being detained by G4S immigration staff in the UK. Unions, including the US-based Service Employees International Union (SEIU), have also directed campaigns at G4S for poor labor standards. However, G4S’s highest profile debacle was during the 2012 London Olympics when they failed to employ enough security guards to fulfill their contract to cover the games. Only a last minute mass deployment of 3,500 British soldiers filled the required posts. At the time Labour MP Keith Vaz claimed that, “G4S has let the country down and we have literally had to send in the troops.” The company’s stock plummeted nearly 10% in response.
Not surprisingly, earlier this year G4S garnered a nomination for the Public Eye Award, an annual NGO accolade for the world’s worst company. However, G4S failed to secure the prize, not quite measuring up to the standards set by the two winners: Shell and Goldman Sachs. There’s always next year.
James Kilgore is a researcher, writer and social justice activist in Champaign IL. He spent six weeks in a South African prison in 2002, before completing six and a half years in US prisons. He writes frequently on criminal justice issues and has published three novels, all drafted during his time in prison. His article on mass incarceration in America is featured in the November issue of CounterPunch magazine. He can be reached at firstname.lastname@example.org