Severn Trent will face fine of £35m

Water regulator Ofwat today confirmed it was fining Shropshire’s water supplier Severn Trent a total of £35.8 million for deliberately providing false information and poor customer service.It comes just a day after the company was ordered to pay a further £2 million by a judge at the Old Bailey for lying about water leakage figures. The regulator’s £35.8 million fine was proposed in April, and formally confirmed today after three months of consultation.

Ofwat chief executive Regina Finn said: “Severn Trent Water’s behaviour was unacceptable. The size of the fine reflects how seriously Ofwat takes the deliberate misreporting of information.

“This sends a clear message to the company and to the rest of the water sector - Ofwat will protect consumers and companies must comply with their legal obligations or pay the price.”

Severn Trent bosses were today coming to terms with the double financial blow - which the regulator insists must be borne by shareholders, and not passed on to the company’s eight million customers.

The Serious Fraud Office, which prosecuted yesterday’s leakage figures case, had hoped for a fine in the region of £70 million to add to Ofwat’s £35.8 million charge.

But Judge Jeremy Roberts, who handed out the £2 million fine, said he had to compare the case to Metropolitan Police’s £175,000 fine for the shooting of Jean Charles de Menezes, and £4 million against Network Rail following the Paddington train crash.

The court was told Severn Trent reported an estimated yearly water loss of 340 million litres per day to meet targets, while the true figure was about 514 million litres. This was to stave off having to carry out millions of pounds-worth of repairs until they could be covered by future water bills, and to avoid bad publicity.

The investigation into Severn Trent’s leakage figures was sparked by Shropshire “whistleblower” David Donnelly, from Chelmarsh, near Bridgnorth, who worked in the company’s finance department.

Mr Donnelly claimed the company was falsifying figures to overcharge customers in 2004.

Tony Wray, the current chief executive, said Severn Trent “deeply regretted” its mistakes and had apologised to customers.

He said the guilty parties had since left the company, and added: “There were indefensible shortcomings in Severn Trent’s previous management and control systems during the 2000 to 2004 era.”

But Brian Duckworth, who was managing director during that time and one of three senior executives named by the Serious Fraud Office in the leakage reporting investigation, criticised the handling of the case, saying he had been denied the chance to put his side of the story.

“I am deeply saddened that after a career of 30 years devoted to the water industry, mistakes have been laid at my door without affording me the opportunity of a defence,” he said.

By Carl Jones