The trial of two former executives at Serco has collapsed after the Serious Fraud Office (SFO) failed to disclose evidence to the defendants, in a major blow to the UK’s anti-corruption agency. A judge at Southwark crown court on Monday instructed jurors to return a verdict of not guilty for Nicholas Woods and Simon Marshall, two former directors of the Serco subsidiary Serco Geografix Ltd, after the SFO offered no evidence following its identification of its error. The executives had been charged with using fraud and false accounting to artificially reduce Serco’s profit margins on a contract for the electronic monitoring of offenders on behalf of the Ministry of Justice. The SFO found a mistake this month which meant that material had not been disclosed to the defence. The SFO had sought an adjournment to seek a retrial, but the judge refused the application. In a statement, the SFO said: “We are considering how best to undertake an assessment to prevent this from happening in the future.” Serco, an outsourcing company that runs part of the government’s coronavirus test and trace system, in 2019 paid £22.9m in fines and costs after taking responsibility for three offences of fraud and two of false accounting on electronic monitoring contracts. Serco agreed a deferred prosecution agreement (DPA), which allowed it to avoid criminal charges. Serco had already paid another £12.8m in compensation to the MoJ as part of a £70m civil settlement made in 2013. In a written statement after his acquittal, Marshall said he was “extremely relieved”. “Over the last eight years I have made clear that I acted properly and honestly in all my work at Serco,” he said. “The allegations against me were entirely without substance, as is now clear.” Marshall said the DPA between Serco and the SFO was “no doubt convenient” for the company and the government, but “did not reflect the reality of what occurred”. “It is clear to me that I was prosecuted, not as a result of a fair assessment of the evidence, but because I was collateral damage in the deal that was done by Serco with the SFO,” Marshall added. Woods’s lawyer, Andrew Katzen of Hickman & Rose, said the SFO’s decision to drop the prosecution was “a welcome vindication of my client” but that the eight-year investigation was a “matter of profound concern to everyone concerned with justice”. “The evidence in this case clearly showed these charges were, in fact, company policy,” Katzen said in a statement. “Mr Woods was directed by senior management to implement them, and trusted his bosses, believing the practice to be completely legitimate.” Katzen said the defendants “were singled out for prosecution”. The trial’s collapse is a blow to the SFO, which has been led since June 2018 by the former FBI lawyer Lisa Osofsky. The case will probably heighten scrutiny of DPAs, an innovation introduced in 2014 to mimic similar deals used regularly by US authorities. The SFO has made numerous DPAs with large companies, including separate deals with Tesco, the jet engine maker Rolls-Royce, and the plane manufacturer Airbus. However, 11 individuals charged in cases involving DPAs have been acquitted. Susan Hawley, the executive director of Spotlight on Corruption, a campaign group that tracked the trial, said it was “a disaster for the SFO and for the UK’s deferred prosecution agreement regime”. “The UK has yet to successfully prosecute any individuals where a DPA has been agreed with a company,” she said. “We need an urgent review of why this is.” Serco declined to comment.