Staff at private security giant Serco face a police investigation after the Government uncovered potentially fraudulent behaviour in the management of its £285 million prison escorting contract.
Serco employees allegedly recorded prisoners as having been delivered ready for court - a key performance measure for the contract - when in fact they were not, the Ministry of Justice (MoJ) said.
The contract, which covers prison transfer services in London and East Anglia, has been put under administrative supervision with immediate effect.
Justice Secretary Chris Grayling said: "It's become very clear there has been a culture within parts of Serco that has been totally unacceptable, and actions which need to be investigated by the police.
"We have not seen evidence of systemic malpractice up to board level, but we have been clear with the company - unless it undertakes a rapid process of major change, and becomes completely open with Government about the work it is doing for us, then it will not win public contracts in future.
"The taxpayer must know that their money is being properly used."
Both the MoJ and Serco's directors have asked City of London police to investigate the actions of the staff working on the prison escorting contract.
The Government department said differences between Serco's records of contract performance and the actual situation on the ground has been subject to investigation for some months.
Evidence of potentially fraudulent behaviour emerged as part of the audit work announced by Mr Grayling in July in the wake of an electronic tagging scandal, in which G4S and Serco were both accused of overcharging the Government for monitoring offenders.
In light of the new findings, Serco have agreed to repay all past profits made on the prison escorting contract and to forgo any future profits. The FTSE 100 giant has told the MoJ that no member of the board had knowledge of the allegedly fraudulent practice.