WELLINGTON, Dec 9 (Reuters) - British outsourcing group Serco SRP.L has lost a contract to run one of New Zealand's largest prisons following violence and safety lapses at the troubled detention centre.
New Zealand's Department of Corrections said on Wednesday that it would not renew Serco's NZ$300 million (about $199 million) contract to run the Mount Eden Corrections Facility in Auckland when it expires in early 2017.
The department has been managing the prison at Serco's expense since July, when it used a clause in the contract to take back control of running the prison, while keeping Serco staff on the site. At the same time, the department launched an investigation into Serco's management of the detention centre.
"I made the decision to step in following serious allegations involving the safety of prisoners and staff and the emergence of 'fight club' videos and the use of contraband," Ray Smith, chief executive of the corrections department, said in a statement.
"For some time I have been considering whether the current contract is the best way to deliver services for this prison."
Serco said it expected the contract would not be renewed, adding that the prison had "fundamentally changed" since it started the contract.
Videos of organised fights by gang members inside the prison that emerged on social media earlier this year and allegations that a staff member had taken part in fighting sessions, had prompted the government investigation.
The results of the probe have not been released yet after Serco filed a court case last month challenging the report.
Serco has had a series of problems with government contracts and on Monday warned that its revenue and trading profit would fall in 2016, sending its UK-listed shares down more than 10 percent. urn:newsml:reuters.com:*:nL8N13W0PT
Riots broke out last month at a Serco-run Australian detention centre on Christmas Island after the death of an asylum seeker who had escaped from the centre. The riots caused A$10 million in damages and prompted the Australian immigration department to investigate the centre's management.
The Australian government last month also renegotiated a patrol boat contract with Serco so that it ends in 2017 instead of 2022 after the maintenance and repairs for worn-out boats caused costs to swell. urn:newsml:reuters.com:*:nL8N1341EC ($1 = 1.5078 New Zealand dollars)