UK: Severn Trent hit with criminal charges

Publisher Name: 
The Guardian (UK)

Severn Trent Water has been charged with three criminal offences of
supplying water regulator Ofwat with inaccurate data on water leakages
over several years.

Britain's second-largest water company faces the charges under the
Water Industry Act, following a two-year investigation by the Serious
Fraud Office and West Midlands Police. It focuses on the leakage data
supplied to Ofwat in 2000, 2001 and 2002.

No individuals are being charged but, if convicted, the company could
be fined.

"We believe it was a corporate offence. There's no suggestion
that any individual gained any personal benefit from it," said an
SFO spokesman this morning.

A date for the first court hearing in the criminal proceedings has not
yet been fixed.

The SFO launched its probe in September 2005 after a Severn Trent
employee, David Donnelly, told Ofwat there were discrepancies with
various data supplied by the company. Donnelly claimed this was an
attempt by Severn Trent to win permission to raise prices.

Ofwat has not ruled on the issue of leakage because of the SFO
investigation. In March 2006 it forced Severn Trent to hand back
£42m to customers in lower bills after concluding that it had supplied
other false information.

Severn Trent admitted today that the regulator may insist on further
compensation once the charges announced today by the SFO have been

The company, which has around eight million customers, said it could
not comment on the details of the charges at this stage.

But chief executive Tony Wray said that there had been "a
comprehensive review" of the company since he took over this

"I and my new management team are determined to continue to drive
improvements in all our activities for the benefit of all our
customers and other stakeholders," said Wray, who joined the firm
as managing director in 2005.

Leakage data is used by Ofwat when assessing a water company's
performance and deciding how much they can charge customers.

Ofwat has recently fined several water companies for supplying
inaccurate data. Southern Water was hit with a £20.3m penalty last
month - Ofwat's biggest ever - for misreporting and poor service
over several years. The SFO dropped an investigation into Southern
Water in April.

While Southern's shareholders have accepted Ofwat's ruling, Thames
Water is fighting a £12.5m fine which the regulator imposed in
September for supplying inaccurate information and providing a poor
service to customers.

United Utilities was fined £8.5m this year for paying inflated
prices to its sister companies. By increasing its costs in this
manner, the company was able to argue that customer bills should be

And Severn Trent itself also faces a separate fine from Ofwat for
failing to meet customer service standards.

Shares in Severn Trent
were up 5p at £13.74 by lunchtime.
AMP Section Name:Regulation