Redflex’s US fraud legacy is almost over
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Traffic enforcer Redflex has closed the door on fraud investigations in the US and Australia.
The Australian Federal Police (AFP) have closed their investigation into the company (ASX:RDF), and a two-year non-prosecution agreement with the US Department of Justice is over.
The charges stem from red light camera contracts won in the US in 2003.
But allegations that Redflex has since admitted to – that the contract was secured through bribes – crippled the American business.
In 2016 Redflex settled a case with the US Department of Justice, agreeing to pay the City of Columbus Ohio $100,000.
Redflex’s America CEO Karen Finley pleaded guilty to bribery charges in the cities of Columbus and Cincinnati between 2005 and 2013, when the misconduct was discovered.
Finley was sentenced to 30 months in prison and $US2 million in restitution for paying bribes to a city official.
City Hall manager John Bills was sentenced to a prison term for accepting bribes of $2000 per camera.
In February 2017, Redflex settled a case with the City of Chicago, agreeing to pay $20 million in annual instalments until 2023 with $10 million coming this year. In 2012, services by its US subsidiary to Chicago were worth 13 per cent of the company’s earnings.
The AFP also opened an investigation into the company’s US operations in 2016.
Redflex no longer expects any financial liability to arise from either party, but still owes the City of Chicago $US9 million as part of those annual settlements. The next instalment is due before December 31, 2019.
Climbing back up the mountain
After the allegations were made Redflex’s fortunes took a turn for the worse, as several of its biggest clients in the US barred it from providing traffic light services.
The company is pulling back some of those losses, however.
Redflex does not regularly report quarterly results but did so for the last two periods, and the numbers show marked improvement.
Total contract value rose 18 per cent to $11.7m over the first quarter of 2019 and new project orders grew by 55 per cent.
Extra orders were made by entities in Europe, Australia and the Middle East, but the company is also starting to win new business in the US as well, picking up a contract for Pasco in Washington State.
It said retention rates were up around 90 per cent, with $15.1m of contracts renewed.
Redflex shares opened flat at 42c.