£75 million rip off investigation at Severn Trent
Water giant Severn Trent is under criminal investigation by the Serious Fraud Office following accusations of a multi-million pound accounting fudge.
While she was unable to comment on details of the case for legal reasons Ms Roe stressed that the SFO did not take on cases lightly and would only consider accusations concerning sums of over £1 million and that were a matter of widespread public concern.
The investigation follows allegations made by Severn Trent employee David Donnelly in a Sunday newspaper last year.
The whistleblower, described by the paper as Severn Trent's income and debt reporter, leaked information on leakage data, claiming the company had deliberately deceived Ofwat to conceal the fact the books were out by £75 million, due in no small part to customers being overcharged to the tune of £50 million (see related story).
In a statement prepared for edie Severn Trent said the accusations concerned alleged reporting irregularities made to Ofwat by Severn Trent Water Ltd between 2000 and 2003.
"Ofwat has been conducting its own investigation following allegations made by an employee of Severn Trent Water," said the statement.
"Ofwat began its investigation into the allegations in January 2005.
"Severn Trent is supporting Ofwat in its review of these allegations and will co-operate fully with the Serious Fraud Office."
Outlining the history of the case from the company's point of view, the statement said that once the allegations had been made it appointed forensic accountants from PricewaterhouseCoopers to carry out an independent investigation.
In November last year Severn Trent's board of directors announced that the PwC review had led them to the view that customers had not been overcharged and the matters raised had no effect upon the integrity of the accounts.
This remains the company's position.
However, the PwC review did lead to a disciplinary investigation of employees at Severn Trent which is still ongoing
The statement denied any institutional wrong doing, saying: "the board has taken and will continue to take such actions as it thinks appropriate to ensure the maintenance of both high ethical and professional standards."
Explaining its referral of the case to the SFO a spokesman for Ofwat said: "It is very important that information which companies submit to Ofwat is reliable.
"Ofwat takes very seriously instances where this may not be the case.
"It therefore referred its findings to the SFO in May this year.
"The SFO has concluded that the matter is sufficiently serious to warrant a separate investigation by them.
"Ofwat's investigation is not yet complete and depends in part on the parallel enquiries that the SFO is now undertaking.
"However, Ofwat obtained an assurance from Severn Trent Water at the start of its investigations that customers would be compensated if it were found as a result of these allegations that they had been overcharged."
The SFO's Ms Roe told edie the case was still at the investigative stage, nobody has been charged and obviously not all investigations lead to prosecutions.
She said it was impossible to predict the duration of the investigation or how it would develop.
By Sam Bond
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