Severn Trent in SFO criminal investigation

Severn Trent, the FTSE100 utility group, is facing a criminal investigation
after Ofwat, the water and sewage regulator, referred allegations of reporting
irregularities to the Serious Fraud Office.

Ofwat had been investigating the group since January 2005 following
allegations by a Severn Trent Water employee, and has now asked the SFO to probe
data on leakage.

The employee made the allegations in May 2004, claiming that Severn Trent
Water was involved in accounting inaccuracies and regulatory returns.

The group then hired PwC forensic services to conduct an independent
investigation into the matter. After the Big Four firm’s investigation was
complete, the group announced in November 2004 that the integrity of its
accounts were not affected and that its customers had not been overcharged.

A disciplinary investigation, however, was implemented. This is likely to
continue until Ofwat’s review is complete.

Severn Trent said it was ‘supporting Ofwat in its review of these
allegations’ and would co-operate fully with the SFO.

The group added that it was still of the view that the matters raised would
not affect its accounts or customers.

It said the board would continue to ‘ensure the maintenance of both high
ethical and professional standards’.

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