Southern Water boss charged with water quality fraud

The former chief executive of Southern Water has been charged with conspiracy to defraud, alongside three other former employees of the company.

Matthew Wright is alleged to have been involved in a plot to manipulate water quality tests to avoid millions of pounds in penalties, it can now be reported.

Wright was accused of perpetrating the fraud on the Environment Agency (EA) and the water regulator Ofwat.

The Environment Agency previously asked a judge to issue a summons against Wright, as well as Philip Barker, Clive Massey and Mark Gregory, who also worked at the company, charging them with the offence.

The summons was issued last year but Wright challenged the move in court. His lawyers told the High Court last month that the agency did not have the power to issue it and that it should be thrown out as a “nullity”.

Today (Wednesday 22 July), two senior judges dismissed Wright’s claim and ruled that restrictions previously preventing reporting of the legal challenge should be lifted.

Separate court listings show that the case against 60-year-old Wright, of Haslemere, Surrey, Barker, 57, of Chiltington, West Sussex, 64-year-old Massey, of Brandhill, Shropshire, and 63-year-old Gregory, of Southampton, were due to be heard at Medway Magistrates’ Court on Tuesday 14 July.

The four are accused of conspiring between dates in 2012 and 2017 to “defraud persons performing public duties in respect of environmental and financial regulation” of Southern Water, including the Environment Agency and Ofwat, by “the implementation of artificial no-flow events at waste water treatment works”.

The 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 dates in 2013 and 2017 at several wastewater treatment works.

Three individuals have also been charged with failing to comply with or contravening an environmental permit condition.

Terry Stephens, 67, of Waterlooville, Hampshire, is charged with one count, alleged to have taken place in 2015.

David James, 58, of Worthing, is also charged with one count, alleged to have taken place in 2016.

Mark Butler, 45, of Hassocks, is charged with eight counts, alleged to have taken place between dates in 2015 and 2024.

Wastewater treatment works can only be run with an environmental permit issued by the Environment Agency.

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 Environment Agency and water regulator Ofwat and can lead to penalties if the works do not comply with the terms of their permits.

If the discharge flow at the time of the test is insufficient to take a sample, this is not regarded as a fail and no samples are taken for the rest of the testing period.

The rules around operator self-monitoring have been tightened in the past year. Sampling must now be rescheduled in the event that the flow is insufficient. The government has pledged to end the practice.

In his ruling issuing the summons against the four men last year, District Judge Stephen Leake said: “The agency alleges, in the present case, that there was a deliberate plan by officers of the company to manipulate the OSM regime by contriving operational circumstances so that there was no flow through the relevant site at times when it was believed that the site would or might fail the OSM test in order to avoid the consequences of the true OSM result being provided to the agency and Ofwat.”

But lawyers for Wright told the High Court that the Environment Agency only had the power to bring private prosecutions for environmental offences, not those such as fraud or conspiracy.

Barristers for the Environment Agency said that the body had a general power to bring private prosecutions and, alternatively, that allegations of conspiracy to defraud were connected to its functions.

Massey, Gregory and Barker did not appear at the hearing in London and were not represented.

Sir Andrew Popplewell, known as Lord Justice Popplewell, sitting with Sir Nicholas Hilliard, known as Mr Justice Hilliard, ruled today that the Environment Agency only being able to prosecute environmental offences would “produce unreasonable and anomalous results”.

He said that 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”.

In the 48-page judgment, the senior judge continued that the charge against Wright involved “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 £45 million, and on the EA’s assessment the figure is higher.”

After the judgment, the Environment Agency 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.”