Serco’s Checkered History
Red flags have gone up concerning operations of the giant company around the world.


The CEO of Serco, a British-based company whose North American division received one of the largest contracts to work on the Obamacare insurance exchanges,[1] resigned Friday amid allegations that the company had defrauded the British government of millions of pounds.

Even as myriad other allegations emerged about its work around the globe, Serco spent heavily on lobbying in Washington, D.C., and secured a multi-year contract potentially worth $1.249 billion to handle paper applications for the Obamacare exchanges. Serco did not respond to e-mail and voice-mail requests for comment.

Public records demonstrate Serco’s concentrated effort to woo the U.S. government. In recent years, it has spent more than a million dollars[2] on lobbying and political activities, including $6,450 donated to President Obama’s election campaign, according to the Sunlight Foundation.[3] This year, as the Centers for Medicare & Medicaid Services (CMS) was considering proposals for insurance-exchange work, Serco spent $100,000[4] to hire Greenberg Traurig, former home of Jack Abramoff, to lobby regarding the “implementation of [the] Patient Protection and Affordable Care Act,” according to January registration papers.[5]

Among the Greenberg Traurig lobbyists working on the Serco account was Mark Hayes,[6] a former Senate health-policy aide.[7] During his time on Capitol Hill, Hayes “was instrumental in the key coverage, financing and delivery system reform provisions of the Patient Protection and Affordable Care Act,” according to his Greenberg Traurig bio, and “acted as lead Republican staff negotiator for the ‘Group of Six’ health-care reform negotiations.”[8] Less than a year after the ACA was signed, Hayes left Capitol Hill to become a lobbyist, representing several health-sector clients.[9]

Earlier this year, Hayes became a central subject of a federal insider-trading investigation.[10] The Washington Post reported that Hayes had sent information on April 1 about a significant Medicare policy change to an analyst at Height Securities. The analyst then “sent out an alert to Height’s hundreds of investor clients — ahead of the administration’s public announcement — and trading in Humana, Aetna, and other health-care stocks immediately soared.”[11] Hayes could not be reached for comment, and it’s unclear whether the investigation is continuing. Papers filed in May, after the incident, stated that Hayes was expected to cease lobbying for Serco.[12]

Regardless of the recent federal scrutiny of Hayes, Serco’s big spending seems to have paid off. In early July, the Obama administration awarded Serco a contract worth up to $1.249 billion[13] to manage paper applications for the new insurance exchanges. The company will determine eligibility for tax credits, Medicaid,[14] and exemptions from tax penalties.[15] Privacy concerns have already arisen, because in 2011, a data breach at the U.S. Thrift Savings Plan for federal employees – managed by Serco — jeopardized the Social Security numbers and confidential information of more than 120,000 participants.[16]

Just weeks after the Obama administration announced Serco’s contract award, news broke that Britain’s Serious Fraud Office had opened an investigation into the corporation, which had government contracts to electronically monitor criminals released from prison. An audit discovered that Serco and another company may have been overbilling the government by as much as $80.8 million. As many as one in six criminals whose monitoring was being paid for by the British government were reportedly either dead, back behind bars, no longer under supervision, or no longer living in the U.K.[17]

Furthermore, although U.S. companies that are part of a foreign company are obligated to report any billing wrongdoings abroad, Serco did not give CMS such notice, Reuters reported in July.[18] Nevertheless, the Obama administration defended its decision to award the $1.249 billion contract to Serco, claiming it was a “highly skilled company” with “a proven track record in providing cost-effective services to numerous other federal agencies.”[19]

Shortly after that, more red flags went up. In August, the London police opened an investigation into Serco after allegations that it had falsified documents for another government contract for transporting defendants from confinement to court. Serco had repeatedly delivered prisoners late, and after it received a warning last summer, evidence emerged of “potentially fraudulent behavior,” according to the U.K. secretary of state for justice.[20] Shortly thereafter, Serco said it had “identified misreporting” among its employees.[21]

Even so, in late September, the U.S. amended Serco’s CMS contract, adding $87 million in value,[22], though it’s unclear what work that will entail or whether it will add to the $1.249 billion potential worth of the original contract. As of this writing, contract officers and media spokespeople from CMS had not responded to National Review Online’s requests for more details.

Serco’s big role in the Obamacare exchanges is even more disturbing in the light of its record with the British National Health Service.

In 2006, Serco won a contract to provide out-of-hours physician service in Cornwall, England. Guardian reporter Felicity Lawrence reported that the quality of service promptly declined, as Serco cut costs by cutting staff. Reportedly, there were sometimes more than 90 patients at a time waiting on the telephone help line. And according to whistleblowers, Serco on at least one occasion, had only one general practitioner available overnight for the entire county.[23] Furthermore, “in 2010,” Lawrence wrote, “a Cornish boy, Ethan Kerrigan, six, died as a result of a burst appendix when the Serco out-of-hours service advised putting him to bed rather than sending a [general practitioner] to examine him.”[24]


Sign up for free NRO e-mails today:

NRO Polls on LockerDome

Subscribe to National Review