The ex-chief executive of Southern Water has been charged with three others over an alleged plan to manipulate water quality tests to avoid paying financial penalties of about £45m, it can now be reported.
Matthew Wright is accused of conspiring to defraud the Environment Agency (EA) and water regulator Ofwat between 2012 and 2017, along with Philip Barker, Clive Massey and Mark Gregory, who also worked at the firm.
Wright’s solicitor says he “denies all wrongdoing and has co-operated fully” with the EA’s investigation.
Southern Water said the charges related to “a historic set of failures” uncovered in an internal investigation. It said it was a “completely different” company to a decade ago.
The EA asked a judge to issue a summons against the four, charging them with the offence, last year, but Wright launched a legal challenge, dismissed by two senior judges on Wednesday.
Massey, Gregory and Barker did not appear at the hearing in London and were not represented.
According to court documents, the allegations include arranging for wastewater to be removed from facilities by tankers in order to create “no flow” results.
This had been “with a view to covering up pollution and deceiving those whose function is to protect the public from such harm”, prosecutors allege.
In his legal challenge, Wright’s lawyers argued at the High Court in June that the EA did not have the power to issue the summons and it should be thrown out.
But the judges dismissed his claim and ruled restrictions previously preventing reporting of the legal challenge should be lifted.
Separate court listings showed the case against 60-year-old Wright, of Haslemere, Surrey; Barker, 57, of West Chiltington, West Sussex; Massey, 64, of Brandhill, Shropshire; and Gregory, 63, of Southampton, were scheduled to be heard at Medway Magistrates’ Court on 14 July.
The four are accused of conspiring between 2012 and 2017 to defraud those conducting the environmental and financial regulation duties of Southern Water, including the EA and Ofwat, by “the implementation of artificial no-flow events at wastewater treatment works”.
Image source, PA
A Southern Water spokesperson said the four no longer worked for the firm, and the charges related to “a historic set of failures” that were “uncovered through an internal company investigation” in 2017.
“As soon as they were identified, Southern Water reported them to regulators, including the Environment Agency,” the spokesperson said.
“Southern Water is a completely different company now than it was a decade ago.
“We’re serious about further change and improvement, and are investing in our largest ever programme to protect the environment.”
Southern Water charged separately
Court listings also show that Southern Water has separately been charged with dozens of offences of failing to comply with or contravening an environmental permit condition between 2013 and 2017 at multiple wastewater treatment works.
This follows a previous Ofwat investigation, which resulted in a customer rebate and penalties being imposed in 2019.
The Southern Water spokesperson added: “We apologised in full at that time and repeat that apology again today.”
Wastewater treatment works can only be run with an environmental permit issued by the EA.
Treated effluent discharge from the works is tested under an “operator self-monitoring” (OSM) scheme, introduced in 2009, with discharges tested annually in unannounced visits.
The tests are carried out by sampling teams, which operate separately from teams that run the works.
The results of the tests are shared with the EA and Ofwat, and can lead to penalties if the works do not comply with the terms of their permits.
What is a ‘no flow’ result?
If the discharge flow at the time of the test is insufficient to take a sample, it is not regarded as a fail, and no samples are taken for the rest of the testing period.
Rules around OSM have been tightened in the past year, including that samples must be rescheduled in the event that the flow is insufficient.
Issuing the summons against the four men last year, District Judge Stephen Leake said the EA alleged there had been “a deliberate plan by officers of the company to manipulate the OSM regime”.
This was done by “contriving operational circumstances” so there was no flow when it was believed the site might fail the OSM test, “in order to avoid the consequences of the true OSM result being provided to the agency and Ofwat”.
Lawyers for Wright previously argued the EA only had the power to bring private prosecutions for environmental offences, not fraud or conspiracy.
But EA barristers said it had a general power to bring private prosecutions, and alternatively that allegations of conspiracy to defraud were connected to its functions.
Lord Justice Popplewell, sitting with Mr Justice Hilliard, ruled on Wednesday that the EA only being able to prosecute environmental offences would “produce unreasonable and anomalous results”.
He said the law “enables the EA to prosecute for any offence of any nature in circumstances in which such a prosecution is capable of being calculated to facilitate, or conducive or incidental to, the carrying out of any of its functions”.
‘Very serious allegations’
In the 48-page judgment, he said the charge against Wright involves “very serious allegations of criminal misconduct”.
He said: “What is alleged… involves carefully planned and extensive fraud and dishonesty at a high level within the company and on a large scale, including, for example, arranging for wastewater to be removed from facilities by tankers in order to create no flow results, with a view to covering up pollution and deceiving those whose function is to protect the public from such harm.
“The EA says that by the company’s own assessment, it avoided penalties of the order of £45m, and on the EA’s assessment the figure is higher.”
Following the judgment, an EA spokesperson said: “We can confirm that we are taking criminal proceedings against Southern Water Services Limited and a number of former employees.
“We take our responsibility to protect the environment very seriously and will always pursue and prosecute those alleged to have committed serious offending against the environment. We welcome this important judgment.”
Wright’s Southern Water pay analysed
The BBC has been analysing the pay of Matthew Wright between 2011 to 2016, and found that, in his final full year at Southern Water, he was paid £715,900.
But, in the year prior to this, 2014-15, Wright earned close to £2m thanks to a one-off £1.25m payment as part of the water company’s long-term incentive plan.
This was in addition to a bonus of £226,000 in that same year.
Alongside Wright, Barker, Massey and Gregory, three additional people have also been charged with failing to comply with or contravening an environmental permit condition.
Terry Stephens, 68, of Waterlooville, Hampshire, is charged with one count, alleged to have taken place in 2015.
David James, 60, of Worthing, West Sussex, is also charged with one count, alleged to have taken place in 2016.
Mark Butler, 47, of Hassocks, West Sussex, is charged with eight counts, alleged to have taken place between 2015 and 2024.
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