12 April 2024 – Alan Cook and Adam Crozier
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(9.30 am)
Mr Stevens: Good morning, sir, can you see and hear me?
Sir Wyn Williams: Yes, thank you very much.
Mr Stevens: We’re to hear from Mr Cook this morning, sir.
Sir Wyn Williams: Yes, before Mr Cook is sworn, can I thank him for agreeing to appear at 9.30 at very short notice. It’s of help to the Inquiry, Mr Cook, so thank you very much.
The Witness: You’re more than welcome. Thank you, sir.
Alan Cook
ALAN RONALD COOK (affirmed).
Questioned by Mr Stevens
Mr Stevens: Mr Cook, my name is Sam Stevens and I ask questions on behalf of the Inquiry. Could I ask you to state your full name please?
Alan Cook: Alan Ronald Cook.
Mr Stevens: Thank you for giving evidence to the Inquiry today. In front of you there should be a witness statement –
Alan Cook: Yes.
Mr Stevens: – that runs to 106 paragraphs. Do you have that in front of you?
Alan Cook: I do.
Mr Stevens: For the record, the document reference number is WITN00190100. Before I ask you to turn to your signature, could we please turn to paragraph 89, which is on page 30 of the statement.
Alan Cook: Yes.
Mr Stevens: I understand there’s a point of clarification you wish to make in respect of that paragraph?
Alan Cook: There is, indeed, but I wonder, Mr Smith (sic), before we get started, I’d like to put on record most strongly my personal apology and sympathies with all subpostmasters, their families, and those affected by this. As we get into the conversation, obviously there will be an opportunity for me to elaborate but it just felt to me that was an important thing for me to say upfront.
In terms of paragraph 89, it cites a couple of letters that I had received from MPs, which was correct at the time, or I believed to be correct at the time I wrote this, but since the document was submitted, some further documents have been released by the Inquiry which show that there were three more cases. So that – it was correct at the time and I’m just seeking to clarify that, you know, that there’s nothing wrong with the statement as it stood then but there have been three cases identified since.
Mr Stevens: So at the time you signed the statement you believed paragraph 89 to be true?
Alan Cook: Correct.
Mr Stevens: But you’ve since received further documents that show that there were further letters sent?
Alan Cook: Correct, correct.
Mr Stevens: Subject to well – no, before we do that, can I ask you, please, to turn to page 36.
Alan Cook: Yes.
Mr Stevens: Is that your signature?
Alan Cook: It is.
Mr Stevens: Are the facts stated in that witness statement true to the best of your knowledge and belief.
Alan Cook: They are.
Mr Stevens: Thank you. That stands as your evidence in the Inquiry, and I’m going to can you some questions about it.
Very briefly, in terms of your background, you were appointed as a Non-Executive Director of Post Office Limited on 23 February 2005?
Alan Cook: Mm-hm.
Mr Stevens: You nodded yes.
Alan Cook: Yes, sorry.
Mr Stevens: In your statement, you describe having a long and varied career in public and private sectors – another nod?
Alan Cook: Yes, indeed.
Mr Stevens: You were Chief Executive Officer of National Savings and Investments from September 2002?
Alan Cook: Correct.
Mr Stevens: Now, you held that role whilst you were a Non-Executive Director of Post Office Limited; is that right?
Alan Cook: Correct.
Mr Stevens: But in March 2006, you were appointed as Managing Director of Post Office Limited?
Alan Cook: Correct.
Mr Stevens: At that point, you stepped down from National Savings and Investment Bank?
Alan Cook: Correct.
Mr Stevens: We don’t need to turn it up but in your witness statement you refer to the role of Non-Executive Director and you say that you had a duty to challenge management on any aspect of the business and their proposed approach to both the running of the business and the direction in which Post Office Limited was being taken; and you still agree with that?
Alan Cook: I do.
Mr Stevens: In order to carry out that duty effectively, you would need to know, broadly, what the Post Office’s operations were, wouldn’t you?
Alan Cook: Correct.
Mr Stevens: How were you introduced or inducted to the business when you became a Non-Executive Director?
Alan Cook: So, as I have explained in my statement, I had quite a bit of dealings with Post Office to becoming a Non-Executive Director because the Post Office was the primary distribution channel for the National Savings and Investments products, so that’s how I got to know some of the people at the Post Office. However, it’s a different order of magnitude if you become a board member. So they’ve set up a programme for me, going around visiting a number of branches, visiting heads of different functions inside the building, and so that it – I mean, it lasted for several months, to be honest, on and off.
Obviously, this was not a full-time role, because I had a full-time role with National Savings, who were happy to allow me to do this but – so it was a reasonably comprehensive induction.
Mr Stevens: Do you remember getting any talks or induction sessions from the Legal Department at Post Office Limited?
Alan Cook: I can’t remember, I can’t remember a particular event or a particular person that I saw. I would probably have been updated by that area from the Finance Director, Peter Corbett, would be my recollection.
Mr Stevens: When you sat as a Non-Executive Director, did you apply or take into account any codes relevant to corporate governance and management?
Alan Cook: This is the first time I had been a Non-Executive Director; I had been on boards that had Non-Executive Directors on them. The corporate governance code – I’ve gone on in later life to spend a lot of time working on boards, so I would confess much more expert now than I was then. But, certainly, I was well aware of my overall responsibilities in terms of challenging management. I was aware that I was not the decision maker and that I had to contribute to the conversation and, you know, express reservations, if I felt so inclined, or supportive comments, if it felt to be the right thing to do.
Mr Stevens: Just to clarify your evidence, when you were Non-Executive Director do you think you would have applied the Financial Reporting Council Corporate Code or not?
Alan Cook: Oh, yes, yes.
Mr Stevens: In your view, were your expectations for the standards of corporate governance in a publicly owned company like Post Office Limited different to your expectations for a publicly listed company?
Alan Cook: Well, they were – it is different. It was different. I had a board at National Savings and Investments, which I sat on as the Chief Executive, rather than a Non-Executive Director. But, on that National Savings and Investments board, I was outnumbered by the non-executives, deliberately, that would be a typical feature. So there were more people in the room that were independent than were employed.
This – the Post Office Board was the other way round. So the – it was primarily the senior management team, Sir Mike Hodgkinson, who you saw yesterday, who was the Chairman, was a non-executive. There was Brian Goggin, who was the Chief Exec of Bank of Ireland, and then myself. So both of us, both of the two independent directors, had also business relationships with the Post Office, if you see what I mean.
Mr Stevens: What you refer to it as being outnumbered and it being the other way around on Post Office Limited Board –
Alan Cook: Yeah.
Mr Stevens: – to what extent did that affect the adequacy of the corporate governance or oversight?
Alan Cook: I think corporate governance is better performed if the non-executives are greater in number than the executives, if you see what I mean. That doesn’t mean to say it’s no good but I think it would be of a higher standard with more independents on the board.
Mr Stevens: Why weren’t there more independents on Post Office Limited Board?
Alan Cook: Not known to me. What I would say is that that Board was a subsidiary to the Royal Mail Holdings Board where, yes, indeed, the independents were in the majority. So, you know, I think, technically, if you looked at it, it was okay because the Royal Mail parent had that independence.
Mr Stevens: To what extent were you involved with the Royal Mail business whilst you were a Non-Executive Director?
Alan Cook: Very little, really. Well, I would go – as part of my induction, I might have gone to the some of the functions that sat in Royal Mail working for the Post Office, for example, but in terms of the business activities of Royal Mail, then I didn’t get very involved in that at all.
Mr Stevens: Looking at responsibilities, would you agree that the Post Office Limited Board was responsible for oversight of the operations of the Post Office business?
Alan Cook: Correct, yes.
Mr Stevens: Do you agree with this: that the identification, analysis and management of risk is very important to running a company?
Alan Cook: Indeed.
Mr Stevens: Do you accept that Post Office Limited or the Board of Post Office Limited was responsible for overseeing how the Executive Team identified, analysed and managed risk?
Alan Cook: Correct, yes.
Mr Stevens: Let’s go to your appointment as Managing Director, March 2006, and please could we bring up the witness statement at page 16, paragraph 46. You set out the background to you becoming or being appointed as Managing Director and you say at the bottom half:
“I therefore accepted the role of Managing Director with the understanding that I would have full accountability and responsibility for the Post Office Limited business but that I would be dependent on Royal Mail Group for delivery or oversight of certain functions. For example, HR, legal, finance and IT.”
Are you effectively saying you have ultimate executive accountability for the operations of the Post Office Limited company but you’re not responsible for the services provided by Royal Mail Group?
Alan Cook: I have accountability, yes, but the responsibility wasn’t direct.
Mr Stevens: What do you mean by that?
Alan Cook: The people that were doing that work did not work for me or somebody that worked for me.
Mr Stevens: Which people are you referring to?
Alan Cook: In those shared service functions: HR, Legal, Finance and IT.
Mr Stevens: So where Royal Mail Group are providing it, you’re not responsible for those people; is that what you’re saying?
Alan Cook: Yes, that’s right, yes. I’m not saying I’m not responsible for the issues but the people were –
Mr Stevens: Yes, the people, yes.
Alan Cook: – not paying rations(?), Post Office employees, if you see what I mean.
Mr Stevens: What was your view on Legal being a group function?
Alan Cook: In large groups, it’s not uncommon because, if you centralise, you know, a specialist expertise, you can probably get a higher standard group by having them central and building a career for lawyers or HR or Finance, or whatever it is.
I was a little reluctant when I was being offered the job because I would prefer to have had my arms around everything. On the other hand, as I say in my witness statement, it was sort of an – I understood the aspiration from a Royal Mail Group perspective why it would be sensible to achieve those synergies by having specialist functions centralised and, in the conversations I was having about being appointed, when I was offered the role, I was sort of exercised – this may sound like ego and it’s not meant to be at all – I was exercised by the fact that David Mills, my predecessor, was the Chief Executive of the Post Office and I was being offered the job of Managing Director.
And so my suspicion was: was I going to have the same level of accountability that David had had? And I was persuaded during these conversations, in the build up, that it would work. I felt rather embarrassed that I’d sort of confessed any ego over a job title. It wasn’t about the job title, it was about the accountability.
Mr Stevens: And accountability you accepted?
Alan Cook: Yes, yes.
Mr Stevens: You earlier referred to – when asked about legal being a group function – legal being centralised in other group companies?
Alan Cook: Mm.
Mr Stevens: Are you aware of another group of companies where legal is centralised, at the group level or the parent level, and the subsidiary carries out or is responsible for prosecuting members of its own workforce?
Alan Cook: No, I’m sure not.
Mr Stevens: Do you think Post Office Limited would have benefited from its own legal team?
Alan Cook: Well, I would have liked its own legal team, I would have felt happier, I would have felt more accountable. I’m not saying to you that the problems would have been unearthed massively quicker as a result but I would have been closer to the issue.
Mr Stevens: What was stopping you from having your own legal team?
Alan Cook: Well, it was not the proposed organisational structure, so it wasn’t – it was a non-negotiable when I was being appointed.
Mr Stevens: When you were on – as Managing Director, you sat on the Royal Mail Board.
Alan Cook: Correct.
Mr Stevens: Did that mean you had some oversight of Royal Mail’s Legal Department?
Alan Cook: And that’s how I got my head round this structure being okay, was, at the end of the day, it’s not like I wasn’t going to be on the board of Royal Mail Holdings, which I was. Obviously, that’s high up, but the Board, as I’d said earlier, was in the majority of non-execs and then there were four business unit heads effectively, the Royal Mail Letters business, Parcelforce, GLS – which was a European parcels business – and Post Office. So I was one of four.
Mr Stevens: Can we turn, please, in your statement, page 7, paragraph 24. You say in the middle:
“However, over time, I came to realise that the Board’s [and you’re referring to the Post Office Limited Board] scope was not as broad as I would have expected.”
How did the Board’s scope not match with your expectations?
Alan Cook: Well, an example would be that the Audit Committee that existed was the Royal Mail Holdings Audit Committee, and hung off the Royal Mail Holdings Board. There was no audit committee for the Post Office Limited Board. So that’s just an example of the scope that reliance was placed on Royal Mail Holdings governance, as well as Post Office Limited governance. Otherwise, for example, producing the annual results and having the accounts audited was a process that would have been run through an Audit Committee and that Audit Committee was at the Royal Mail Holdings level, which I freely accept I was on the board of Royal Mail Holdings but I’m just saying it’s – from a Post Office Limited Board’s perspective, they were – they weren’t the accountable party.
Mr Stevens: You’re talking about the Audit Committee there but, in terms of how you could oversee the operations of the business on a day-to-day level, were you satisfied that the Post Office Board had sufficient scope to do that that task adequately?
Alan Cook: Yes, yes.
Mr Stevens: You say in your witness statement – we don’t need to turn it up – that there was a Risk and Compliance Committee?
Alan Cook: Mm-hm.
Mr Stevens: Now, as I understand it, the Risk and Compliance Committee sat below the Post Office Limited Board?
Alan Cook: Correct.
Mr Stevens: Was it a formal subcommittee of the Board or an Executive Committee?
Alan Cook: Well, it was a formal subcommittee of the Board but it was primarily comprising of executives, as I explained earlier, yeah.
Mr Stevens: So, in those circumstances, would you accept that it’s good governance for the minutes of those committee meetings to be submitted and reviewed by the Board?
Alan Cook: It would be, yes.
Mr Stevens: I want to turn now to Post Office prosecutorial role.
Alan Cook: Mm-hm.
Mr Stevens: Now, obviously, one of the issues the Inquiry is examining is how that role was overseen. Now, your evidence, which we will come to shortly, is that you were unaware that Post Office was involved in the prosecution of subpostmasters until May 2009?
Alan Cook: No, that’s not quite right. I was unaware that the Post Office were the prosecuting authority, if you see what I mean. I knew there were court cases but I didn’t realise that Post Office, in about two-thirds of the cases, had initiated the prosecution as opposed to, you know, the DPP or the police or whatever, just to clarify –
Mr Stevens: So to clarify that, you’re saying that you were aware that the business investigated theft, fraud and false accounting –
Alan Cook: Yeah.
Mr Stevens: – but you thought that it went to another agency for the prosecution of the –
Alan Cook: The expressions that you would typically see were things like the case went to court, and it was – you know, and I now know, because I’ve pored all over this and checked all the figures, that about a third went down that route but two-thirds were the Post Office taking the decision to prosecute themselves.
Mr Stevens: We’re going to come to that part of your evidence shortly.
Alan Cook: Yeah.
Mr Stevens: You now know that, whilst you were a Non-Executive Director and Managing Director, that the Post Office alleged to be the victim of crimes, it investigated those crimes itself and decided whether to prosecute?
Alan Cook: I too, yes.
Mr Stevens: Do you accept that a company’s involvement in prosecutions such as that inherently creates risk for the company?
Alan Cook: Yes, I think it must.
Mr Stevens: What do you think those risks are?
Alan Cook: Well, I think, if somewhere that is not the organisation in question is making the call to – it’s all about independence. It’s making the call to prosecute, then one would go into that with a greater degree of comfort. It doesn’t mean that the case would be won or lost. It just means that there was probably a higher bar to be cleared before a prosecution was initiated.
Now, a lot of the evidence in these cases was on the face of it quite compelling. But that’s not really the point. The point is how much independence is there in the thought process?
Mr Stevens: You say you weren’t aware of Post Office’s position as making decisions on whether to prosecute. Assuming you had been, while you were Managing Director, the risks you’ve described, would you have foreseen those at the time?
Alan Cook: I would have been uncomfortable because I would not have encountered that before. So I would have probed the principle and, you know, it would be hypothetical for me to say what might have happened but it’s an area that I might have gone down to say “Well, how then – how then do we – are we comfortable that we’re doing this and, if the power is the power, what level of independence could we build into that decision-making process inside the Post Office?”
So, you know, the Post Office had many strands to it. I don’t know whether this was the case but I would have, at the very least, looked for line manager sign-off, you know, in the Operations area rather than the Legal area, so it wouldn’t be something that just legal would do. But that’s all hypothetical, probably not helpful, to be honest.
Mr Stevens: Yes, well, let’s turn to look at your actual knowledge and what you say in your witness statement. Can we go to page 21, please, of the statement, and paragraph 59. It talks about the Risk and Compliance Committee and, about five lines down, you say:
“To the best of my knowledge, the Risk and Compliance Committee was not given any information or reporting, nor did it have any oversight of the prosecution of SPMs. As a result, I did not take any steps, as a member of the Risk and Compliance Committee, to ensure that POL was acting in compliance with its legal obligations in relation to those prosecutions and civil proceedings against SPMs. I was not aware that they were taking place.”
Alan Cook: Correct.
Mr Stevens: So where you say you were not aware they were taking place, what precisely do you mean?
Alan Cook: It’s probably not sufficiently precise. I knew there were prosecutions but prosecutions by the Post Office, as opposed to from somewhere else, was what I was talking about.
Mr Stevens: So what did you think happened in terms of – who did you think did the investigation?
Alan Cook: Oh, Post Office, there was an Investigation Team. They did the investigation. As I said, expressions were used like “This is going to court”. I had assumed that the police/DPP had been involved – I mean, I shouldn’t have presumed but I did presume, sadly – and that we were then – it had gone to court, was the expression used.
I had not encountered the notion of an organisation that could make that decision on its own and I suppose I had too much assumed knowledge and, you know, when you see the words that were written, I can see why I still – that view still perpetuated in my mind because it didn’t overtly say, “We have taken the decision to prosecute”.
So one of my regrets, that I didn’t pick up on that earlier.
Sir Wyn Williams: As I understand it, it follows from what you’re saying that, when you became the Managing Director, no one within the company, Post Office Limited, thought it necessary to tell you “And by the way, we prosecute people in the sense that we don’t just investigate them but we initiate and conduct the prosecution”; is that it?
Alan Cook: That is correct, and it may be that they assumed I knew that.
Sir Wyn Williams: Well, there may have been many assumptions, but that’s the state of –
Alan Cook: That was –
Sir Wyn Williams: – play, as far as your evidence is concerned?
Alan Cook: Yes, that’s right. That was the point I was trying to get across. It’s quite subtle but it’s very important.
Mr Stevens: Can we look, please, at the – well, POL00021418. This is a note of the Risk and Compliance Committee meeting on 29 September 2005. You’ll see at the bottom your apologies, which means you weren’t in attendance.
Alan Cook: Correct.
Mr Stevens: Do you remember reading these minutes?
Alan Cook: I don’t. I mean, this was 18 years ago, whatever, I don’t remember. I’m sure I would have been sent them. I did not typically – while I was a non-exec, I did not typically attend this Risk and Compliance meeting and I didn’t realise I was – I mean, obviously, I must have had the minutes but I didn’t realise I was being recorded as not in attendance but I would have received the papers, I’m sure.
Mr Stevens: Would you have read them?
Alan Cook: Yes. I’m a voracious reader.
Mr Stevens: Could you please turn to page 6, and the bottom of the page, please. Under “Updates on major incidents”, it says:
“Post Office Limited has a principle of undertaking criminal prosecutions for all cases where it is in the public interest, but noting that likelihood of recovery and circumstances of the defendants and the victims may be relevant to that decision.”
That’s saying in terms that the Post Office made decisions to prosecute, isn’t it?
Alan Cook: It does. It’s not how I read it. This is my regret. I mean, there was a sort of, I don’t know, a sort of high and mighty, tone sometimes there, and people, I don’t know, it fed a sense of self-importance. It never occurred to me, reading that, that the Post Office was the sole arbiter of whether or not that criminal prosecution would proceed. I felt what they were saying was “We agree it’s proceeding” but somewhere else had to agree to it going ahead.
Mr Stevens: Where did you get that assumption from, that it was somewhere else?
Alan Cook: I had never come across a situation before where a trading entity could initiate criminal prosecutions themselves, so I am not blaming others for this. It’s my misunderstanding but I just had not encountered that type of situation, and I would have just read those in the vein of “We agree it should be done”.
Mr Stevens: Do you think you should have known that Post Office was making those decisions?
Alan Cook: I think I should, yes, and that’s – clearly there are many regrets on many aspects of this but that is one of mine, that I didn’t understand – I was going to call it a subtlety, that would be an insult, it’s not a subtlety, it’s really important – but it was a different nuance on it.
Mr Stevens: Could we, please, turn to POL00021421. This is another Risk and Compliance Committee meeting on 6 September 2006. At this point, we see that you’re in attendance as a member?
Alan Cook: Because I was then the Managing Director, yeah. I think Sir Mike Hodgkinson talked yesterday about the debate about the appropriateness of me being there or not as an executive but I felt quite strongly that this would be a committee that I should attend as Managing Director.
Mr Stevens: Why was that?
Alan Cook: It’s something I’ve done in all the companies that I’ve chaired or been involved in since I always go to the Risk and Compliance Committee, because that’s where a lot of the detail is and, putting it crudely, that’s where the risks lie. And I’ve always worked in regulated businesses, so the word “compliance” is quite important because you’re working to a set of statutory rules for many of the different products that we were selling, so compliance with those rules feels like a really important thing for the boss to have his head round.
Mr Stevens: Could we turn, please, to page 4 and go to the bottom of the document, and it says, “Investigation Activity Period 5 Report”, and it refers to Dave Pardoe presenting the key points from the monthly Investigation Team. Do you recall who Dave Pardoe was?
Alan Cook: Well, I assume he was a member of the investigation – I recognise the name but I can’t see him in my mind’s eye and I assume he was on the Investigation Team, I don’t know.
Mr Stevens: What do you think the Investigation Team did?
Alan Cook: Well, they investigated all aspects of fraud and, just to make it plain, more cash went through the Post Office organisation than any other organisation, you know, 80 billion a year. The potential for fraud was endless. But the fraud I’m talking about is what the customers were up to, not particularly about what staff were up to. So there was a constant stream, these investigation reports would have a whole range of issues, you know, for example, I don’t know, travel money cards or we were issuing cash on plastic, which seemed a very innovative thing at the time, believe it or not, considering how we all behave today, but there was a lot of potential fraud to investigate.
Mr Stevens: But you knew that they investigated allegations of fraud within sub post offices?
Alan Cook: Yes, yes, or even in Crown Offices or franchise offices, yeah.
Mr Stevens: Did you know that was part of the Security Team?
Alan Cook: Yes.
Mr Stevens: In terms of reporting lines, what was your relationship to the Security Team?
Alan Cook: They reported through the Operations Director. I can’t remember how many layers but, ultimately, the Operations Director was responsible for that and the Operations Director reported to me.
Mr Stevens: Did you ever have discussions with members of the Security Team outside of the Risk and Compliance meetings?
Alan Cook: I would have thought so. If you’re going to follow up with a question of what was one of those meetings, I would struggle to remember, to be honest. But I was quite a visible boss, I think, and so I would make it my business, if it was possible. If somebody had written me something from inside the organisation, my tendency would be to get up and go and find that person and talk to them about it, and that visibility, I think, was good that I was always walking round the building on the days that I wasn’t out in the network, and then you connect better with people. So I’m sure I had contact but couldn’t give you an example, to be frank.
Mr Stevens: But with that visibility and the likelihood of talking to them, your evidence is still that, at no point in the years that you were a Managing Director, anyone in the Security or Investigation Team raised the fact that they made decision to prosecute?
Alan Cook: I – well, that is my position, definitely. I think it’s sometimes what’s said and what’s heard, and the problem that I was bringing to the piece was I just had a presumption and I didn’t hear something sufficiently categoric to say “What, you mean we decide on our own and no one can stop us?” I never asked that question. Well, when I say I never asked, I did obviously when we got to the Computer Weekly article, which we’ll get to but, prior to that point, I had gone through not picking up that. And I’m not blaming them for not spelling it out enough; to be frank, I’m blaming me for not picking up on it.
So people can say things and they feel that’s okay, he was okay with that. Well, I wasn’t okay with it; I just didn’t really appreciate what was meant.
Mr Stevens: Can we bring the same document back up, please. Still on page 4, please. It goes on to say what was in the report. It says:
“In particular, the report focused on the Accrington DMB …”
That’s directly managed branch, is it?
Alan Cook: Yes.
Mr Stevens: “… £600,000 fraud, successes using Proceeds of Crime Act …”
What does that mean to you?
Alan Cook: I don’t really know, to be honest.
Mr Stevens: Was it the case that you were discussing the Post Office Limited using the Proceeds of Crime Act to –
Alan Cook: Yes, so if that’s coded speak for Post Office making prosecutions, then so be it. That’s not necessarily what I read it as.
Mr Stevens: That’s not what I’m putting to you.
Alan Cook: Okay.
Mr Stevens: I’m putting to you had that refers to a discussion of Post Office Limited using the Proceeds of Crime Act to recover funds from persons it accuses of theft or fraud.
Alan Cook: Okay, yeah.
Mr Stevens: Would that have happened; would that conversation have happened?
Alan Cook: Well, it’s in a report that I would have received.
Mr Stevens: Well, you were at this meeting.
Alan Cook: Yeah.
Mr Stevens: Yeah.
Alan Cook: I can’t remember the conversation, obviously, all that time ago, but –
Mr Stevens: It says:
“… and the better targeting of audit resource on dishonest branches.”
Dishonest branches, that’s referring to subpostmasters accused of theft, fraud and false accounting, isn’t it?
Alan Cook: Yes, it is, yes. Well, I don’t think it’s just subpostmasters. But, you know, if there’s – if there were problems with a branch, there were many different types of branches. I mean, a significant quantity of the branches were franchised to supermarket chains and high street retails, you know, so there were – there was a group of directly managed branches where the staff in them worked for me. There was a large tranche of branches that were partnerships with other retail organisations, and then there were subpostmasters.
Mr Stevens: Yes. Before we move on, the second paragraph on 3.2 refers to concerns about checks and appropriate method of payment, and it says:
“Likewise, issues were raised with the … Instant Access Saver Account and travel cards offers, in themselves solid offers that are spoilt by branch non-conformance.”
It says:
“Alan voiced an opinion that he was against modifying an offer (to the detriment of the customer) in order to force branch conformance and would rather expect steps to be taken to drive conformance – by sanction if necessary.”
Alan Cook: Yes.
Mr Stevens: What sanction is that referring to?
Alan Cook: That doesn’t really sound like me but, yeah, it would be – if we were just – if we had to stop – and don’t forget cheques were still a big thing back then – if we had to stop taking cheques because we had people who couldn’t handle the cheque correctly, that seemed disadvantageous to customers. So what we needed to do was to find a way of making sure that we followed the right procedures.
Now, very often, I have to say, the challenge was the procedure was cumbersome in the first place. So it is harder to conform if the process is complicated. So I spent many years in customer operations, it’s the line I grew up in, and you can engineer these problems out by changing processes and procedures, and you can’t make them foolproof, but you can design, if you’re not careful, processes that make it more likely that people will make mistakes.
And I did – one of the things I did, as part of my induction when I became Managing Director, rather than Chief Exec was, I did the Horizon, the fast version of the Horizon training course, and I went and worked at my okay Crown Office for a day, which was probably one of my most stressful days at the Post Office but it showed to me that it was a complicated thing to do.
Mr Stevens: Okay. I want to show you another document, please. It’s POL00048361. This was a document that was given to you this morning.
Alan Cook: Oh, right, yes.
Mr Stevens: So this is “Investigation Team Report Period 9, December 2006”. In the top left it says, “POL ET”. That’s the Post Office Limited Executive Team, isn’t it?
Alan Cook: Yes, yes.
Mr Stevens: These are the types of reports we were referring to in the last set of minutes –
Alan Cook: Correct.
Mr Stevens: – which would be sent to you?
Alan Cook: Yeah, yeah.
Mr Stevens: You see in the top right, it says it’s from Tony Utting with the job title National Investigation Manager?
Alan Cook: Mm-hm.
Mr Stevens: Do you remember working with Mr Utting?
Alan Cook: I don’t, to be honest. I recognise the name. It depends what you mean by remembering working with him, I knew the name but I can’t place him now after all these years.
Mr Stevens: When Mr Utting gave evidence to the Inquiry, he said that he had acted as Designated Prosecution Authority to make decisions on prosecutions?
Alan Cook: Right.
Mr Stevens: I assume you can’t agree or disagree with that?
Alan Cook: No, that’s the first I’ve heard of it. Yeah.
Mr Stevens: If we look down below what the investigation – it says, “Investigation Team Report”, the title there, and it says beneath that:
“The principle [sic] aims of the Investigation Team are to stop criminal offences taking place, apprehend and prosecute those who commit offences against us in order to maximise our recovery and reduce loss to [Post Office Limited] and its clients through the identification of areas of weakness”, and it goes on.
Alan Cook: Yeah.
Mr Stevens: Again, this is saying in terms that Post Office Limited prosecuted people, isn’t it?
Alan Cook: Yes. No, no, it’s the same point. I do understand and accept the point. I still didn’t take out of it that we were the final decider in so many cases to prosecute. This report, I saw it this morning, it just reminds me of the scale of activity in an organisation that handles so much cash. So there’s so many things, if you look, here about the different types of product, the risk of fraud and, primarily to me, when I was hearing the word “fraud”, I was thinking it was we or the Bank of Ireland was being defrauded by customers. And, you know, very often it was but there was another dimension which was staff as well.
Mr Stevens: If we turn to page 3, please, and the second paragraph.
Sir, I’m sure I’m going to get this wrong, I think it’s Gaerwen Post Office branch. I can see a wry smile, I probably have got that wrong, but anyway.
But this refers to the prosecution of Noel Thomas, a Core Participant in these proceedings, and it said:
“The subpostmaster pleaded guilty to false accounting by inflating his cash account by approximately £48,000.”
It goes on to describe the case.
You would have seen this at the time, wouldn’t you?
Alan Cook: Yes. Sorry, the screen has gone blank, actually.
Mr Stevens: Yes, it’s just –
Alan Cook: Okay, right.
Mr Stevens: £48,000, that’s a significant loss to the business, isn’t it?
Alan Cook: Yes.
Mr Stevens: The idea of these investigation reps is that you get them on a monthly basis; is that right?
Alan Cook: Mm-hm, yeah, yeah.
Mr Stevens: It enables the Executive Team to trace through from the point of a loss is, found right through to the outcome of the case; correct?
Alan Cook: Mm-hm, yes. Sorry.
Mr Stevens: Is it not the case that whilst this case was going through when you received updates on it, at some point, you would have been told that a decision had been made to prosecute?
Alan Cook: Well, I think not, really. I don’t think that’s the case. These cases were reported on, and if they went – as I said, the terminology, and it’s even used in that particular paper, “went to court” –
Mr Stevens: Well, they went to court –
Alan Cook: Yes.
Mr Stevens: Even if the Post Office made the decision, the case went to court?
Alan Cook: Well, those two things don’t quite go together. So it went to court. I had not assumed that we had made – we might have wanted it to go to court but I didn’t realise that we had the power, back then, to take it to court, regardless of what anybody else might think.
Mr Stevens: If Post Office Limited had been dealing with the CPS or the police to handle these types of cases, would that have been described within the CPS that was a stakeholder?
Alan Cook: Well, about 30 per cent of them went down that route, I understand. I never saw a differentiation, nobody ever – you know, it wasn’t who decided as it went to court. And, as I say, I now understand, I sat and worked it out the other evening, just under 30 per cent meant that route, so the majority were the Post Office making that call. But I had not appreciated that at the time, until late in 2009.
Mr Stevens: Well, we’ll come to late in 2009 shortly.
How do you think that prosecutions were overseen in Post Office?
Alan Cook: By the Investigation Team.
Mr Stevens: So is it effectively that what – is your evidence, effectively that the Investigation Team and the Security Team maybe ran the investigations but at board level. There was no oversight –
Alan Cook: Well, it reported up through the Operations Director. But we wouldn’t have been progressing each case at board level because the organisation was just too large, it just wouldn’t be looking at individual cases. If something notable happened, and that Welsh one was notable, I guess, and it got its whole paragraph. But when I would have read that, I would have seen that the postmaster pleaded guilty.
My concern now, I understand it, is that postmasters were being advised to plead guilty even if they thought they weren’t, in order to reduce –
Mr Stevens: We’re looking at the decision on prosecution.
Alan Cook: Yeah, okay. Sorry, I digress.
Mr Stevens: Let’s look at things in another way.
Alan Cook: Yes.
Mr Stevens: Are you aware that the central legal department in Royal Mail Group provided legal advice on the prosecutions?
Alan Cook: I assumed they did, yes. I took comfort from the fact they were there.
Mr Stevens: So you knew that Royal Mail Legal had some involvement?
Alan Cook: Yes.
Mr Stevens: What did you think they were doing?
Alan Cook: Well, it’s not an unusual governance structure to have a large central support function that’s providing a service to two or three different business units in a group, and one of the – and, for one of those business units, there would be a more senior person, lawyer or accountant or whatever, that would establish a close relationship with the business unit. But their main boss would be the central function.
Now, if you’re in that business unit, you take some comfort from the fact that there’s a more high power individual in Royal Mail Group that is exercising technical oversight over what those people are doing.
Mr Stevens: What did you think they were taking oversight of, for you to gain any comfort?
Alan Cook: The quality of the legal decisions being made.
Mr Stevens: What were the legal decisions being made?
Alan Cook: Well, there was a whole variety of things, we had, you know, fraud on Post Office Card Account. There was loads of activity going on that was nothing to do with the Horizon issues and subpostmasters.
Mr Stevens: Right. So let’s focus purely on the decision to prosecute. Did you realise that – sorry, let’s make it broader than that – the investigation of subpostmasters for theft, fraud and false accounting and the subsequent prosecution, did you think that the Royal Mail Group Legal Department had any involvement in that?
Alan Cook: I would have thought they’d had oversight, yes.
Mr Stevens: Why did you think that?
Alan Cook: Because they were responsible for the legal function.
Mr Stevens: I’m going to go back to the hypothetical where we started earlier. If you were aware, assume you were aware, that Post Office Limited were making the decisions to prosecute, yes –
Alan Cook: Yes.
Mr Stevens: – would you have sought to get a legal function within Post Office Limited?
Alan Cook: Well, the latter wasn’t an option because that had been debated when I first was offered the role. But I would have – if I had discovered that back then, as I think I’ve already said, I would have then looked at how we could put safety checks in, and whatever, but it would be something that I would have reviewed with the Group Legal Director.
Mr Stevens: With hindsight, do you think relying on the Group Legal Department was effectively putting that advice too high up the chain?
Alan Cook: Well, I think it was a mistake on my part. You know, I’d – I shouldn’t have allowed the organisational structure to give me any sense of less of an accountability because I was accountable. But no, I don’t think – this was quite a big deal. I think it would be right and justifiable for me to be talking to the Group Legal Director and seeking personal assurance from him that he was comfortable with what they were doing.
Mr Stevens: Sir, I’m going to move on to another topic, I know it’s slightly early, but I wonder thought if it might be more sensible to have a break there and then have a longer break until we swap.
Sir Wyn Williams: Yes, however you wish to pursue it, Mr Stevens. What time shall we start again?
Mr Stevens: 10.35?
Sir Wyn Williams: Fine.
(10.22 am)
(A short break)
(10.38 am)
Mr Stevens: Sir, can you see and hear me?
Sir Wyn Williams: Yes, thank you, yes.
Mr Stevens: I’m apologise, I’m going to have to go back to the topic I was just covering. We’ve given a new document to Mr Cook, which he hasn’t, I don’t think, seen before, at least not – I shouldn’t say that: he hadn’t seen recently. Can I turn that up now, please, it’s WITN01820101. Can we go to page 6, please.
Mr Cook, this is a letter dated 3 September 2008, to Mr Sabet. Have you seen this recently?
Alan Cook: Five minutes ago, yeah.
Mr Stevens: If we can go to the end of the letter, please, on the other page. It says, “Yours sincerely” and then we’ve redacted that but it says, “Alan Cook”. Did you sign this letter?
Alan Cook: I would assume so, yeah.
Mr Stevens: Could we go, please, back to page 1 – I’m so sorry, page 6; I meant page 1 of the letter. That’s very misleading of me. Can we go to the bottom, please. Thank you.
So it’s referring to previous correspondence about disputed accounting errors. It refers to audits and identified shortages totalling £50,000 – sorry, £50,619.17, and an outstanding recovery.
The last paragraph says:
“In terms of the decision to issue court proceedings, the investigations undertaken by the Post Office Security Team are to decide whether there is a criminal case to answer. This is independent from any action that may be taken by the Contracts team, whose role is to focus on contractual related issues only. I believe that Carol Ballan, Contracts Manager, has made this differentiation quite clear during one of the several conversations she has had with you over the past few months.
“It gives me no pleasure to write a letter such as this and I am truly sorry for any impact this situation may have had on your family. At the same time, I am mindful that the cash and stock we are accountable for are public funds. The decision to issue legal proceedings is never taken lightly. The alleged offences of fraud against you are, however, of a sufficiently serious nature to support that this is the correct course of action to take. That decision, therefore, remains unchanged.”
Therefore, this shows, doesn’t it, that you were aware that it was the Post Office Security Team that made decisions on whether or not there was a criminal case to answer.
Alan Cook: Well, this is another example of the same thing. That is not how I read it and we – clearly, we wouldn’t have wanted anyone prosecuted where we didn’t believe we wanted to prosecute but I didn’t believe that we were the only party that made that possible, if you see what I mean.
Mr Stevens: Mr Cook, before you sign letters you presumably satisfy yourself that they’re accurate?
Alan Cook: Yeah, well, it’s how I read it at the time, yes.
Mr Stevens: You say you satisfy yourself that they’re accurate –
Alan Cook: Yes.
Mr Stevens: – then how would you have done that in this case?
Alan Cook: There would have been a file of papers with this, typically, so there would have been – I forget the beginning. Was this responding to a letter from Mr Sabet? I can’t remember.
Mr Stevens: Yes.
Alan Cook: Yes, so there would have been his letter, a report from the relevant part of the organisation and this letter to sign, and they would have drafted the letter.
Mr Stevens: Over the course of working there for number of years, in responding to this letter, you would have known, wouldn’t you, that Post Office Limited made the decision to prosecute in some cases?
Alan Cook: I didn’t appreciate it was their sole decision. Clearly, we would have had to have decided it wanted to happen but I still felt that it wasn’t the Post Office’s power to do so. So it’s the same point that I was making before the break.
Mr Stevens: I’ll move on. I want to look at knowledge of Horizon, please. Could we take your witness statement at page 8, paragraph 27. Paragraph 27 talks about knowledge of Horizon as a Non-Executive Director and I think it’s about roughly eight lines down, you say:
“I recall asking about reliability in terms of system availability and accuracy.”
What do you mean by system availability and accuracy?
Alan Cook: In terms of was it there when it was meant to be there, if you see what I mean. So when the day started, if you turned the thing on, was it available? And, in fact, later on in my time there, that did become an issue, where the system wasn’t available, and a lot of the work of the subsequent development of Horizon was to make it run faster, more efficiently and definitely finish all its overnight processing before it needed to come up in the morning. So that’s availability and then that it all worked and the screens didn’t lock and all that sort of stuff.
Mr Stevens: And it produced accurate accounts?
Alan Cook: Sorry?
Mr Stevens: And it produced accurate accounts?
Alan Cook: Yes, yes. But accuracy was a much broader term than just the accounts. It was obviously, you know, did it perform correctly? If I’m doing a road tax disc, when I press this button, does it produce the right road tax disc, for example?
Mr Stevens: You go on to say:
“Availability seemed to be good and I was assured at the time that there were no critical bugs or defects.”
Who assured you?
Alan Cook: Well, I can’t name individuals but, when I was doing my rounds, I was in – walked – not walked but met with people in the Operations area and got demonstrations, certainly one of the two David Smiths would have been one of the people that I sat down with, the IT guy, to talk me through the system, its history, its current level of performance. This was in an environment where the accuracy of the system was not really in question but there were issues about, as I say, its oversight performance and its available.
Mr Stevens: Can we just jog on to page 15, please, and paragraph 42. There you say:
“I have been asked whether I was ever told that there were no systemic issues with the Horizon or problem with integrity prior to February 2009.”
You say:
“I do not recall being told at any time, whilst a [Non-Executive Director], that there were or were not systemic issues with Horizon or problems with integrity.”
So are you talking about something different here to when you said earlier you were assured on its accuracy?
Alan Cook: Well, no, this is – this was about while I was a NED, so it was the first 12 months that I was involved in the Post Office, and the level of briefing I got as a non-exec was less than I received when I became Managing Director and I think this paragraph is talking about was I told whether or not there were systemic issues. It was a problem that didn’t come up in my briefing.
Mr Stevens: So you were told it was accurate; is that right?
Alan Cook: Well, what I was saying there was that accuracy was not flagged as an issue.
Mr Stevens: Right.
Alan Cook: Yeah.
Mr Stevens: So, effectively, accuracy and integrity, when you were a NED, were a non-issue?
Alan Cook: Assumed to be okay, yes.
Mr Stevens: That document can come down. Thank you. Could we please bring up POL00021487. This is a minute of the Board meeting of Post Office Limited on 23 February 2005. That was your first Board meeting you attended as a Non-Executive Director, wasn’t it?
Alan Cook: Yes, it must have been, yeah.
Mr Stevens: Looking at the attendance list, who there was responsible or had expertise in IT?
Alan Cook: Well, it would be Ric Francis as the Operations –
Mr Stevens: Ric Francis?
Alan Cook: Yeah. So people like David Smith, that I referred to a moment ago, worked for Ric Francis.
Mr Stevens: On the meeting was David Miller, as well, Chief Operating Officer. What it did you know of his background?
Alan Cook: Well, I’d never met him before I joined and he had been at the Post Office for many, many years and seemed to be the font of all knowledge, if you see what I mean. Seemed a respected guy. When I arrived – sorry, this when I’m a non-exec, that’s right. So he was the Chief Operating Officer. By the time I was approached to join, he had indicated his decision to retire, so I didn’t really work with him as an executive but I did work with him.
Mr Stevens: You said he was the font of all knowledge –
Alan Cook: Yeah.
Mr Stevens: – did that include on Horizon?
Alan Cook: Well, I don’t think he was an IT specialist but he would have had all the history, yeah, he was a knowledgeable guy.
Mr Stevens: Were you aware he was heavily involved in the pilot of Horizon?
Alan Cook: I wasn’t specifically, no. It wouldn’t surprise me but I didn’t know that.
Mr Stevens: Can we turn, please, to page 6, and if we could go down so that – that’s perfect, thank you.
Now, this is a discussion on Horizon Next Generation which we’ve been calling Horizon Online. I don’t want to cover Horizon Online now. I want to look at (f), where it says:
“Assurance was provided to the Board that the new system would have at least a similar standard of current capability.”
Do you recall there being any discussion on the adequacy of what’s called Legacy Horizon, the model of Horizon that was running at the time.
Alan Cook: No, my – obviously, this was my first meeting but my impression was there was a level of contentment with the functionality of the system but not its running cost and, occasionally, its availability. So I believe this Next Generation proposal was about making it cheaper and faster to run. You make it faster, you make it cheaper, but – and so the guarantee that was being given was that it wouldn’t reduce the level of capability. There would be no point making it run faster and cheaper if, in fact, there were things that we used to be able to do that we couldn’t do any more.
Mr Stevens: Was there anyone on the board asking probing questions as to the capability or the adequacy of the systems?
Alan Cook: Well, my impression, attending this board meeting – my very first one – was that we were treading ground that everybody in the room had already discussed, apart from me, because the vast majority of people on that meeting were the management team. So I’m sure they would have debated it before it came in. So if there was challenge within the management team, I didn’t see it. That didn’t mean it didn’t happen at an earlier meeting. But the only people I suspect that were looking at this at that meeting for the first time would have been, I assume – I can’t remember the attendees – but Mike Hodgkinson, I assume, would have been there, myself and Brian Goggin, if he was there, would have been there would have been the only people that were seeing it for the first time, if you see what I mean.
Mr Stevens: Was it not precisely your role as a Non-Executive Director to challenge –
Alan Cook: It was, it was.
Mr Stevens: The –
Alan Cook: It was my first meeting. I can’t remember what I asked but I remember and I’ve commented in my witness statement that one of the things I would have imagined I would have commented on is that, if you’re trying to make the system run faster and more slickly, it is quite dangerous to try to start changing the functionality at the same time, right, because the way you test it is to produce “Does this run faster, cheaper and quicker, and does it give you the same answer?” If you start changing the functionality at the same time it makes interpreting the test results more difficult.
Now, of course, the problem is that relies on the fact that you are comfortable with the functionality that is already in place. So any counsel I would have offered would have been on the assumption that the system functionality was sufficient, was that we should try not to change the system functionality and focus on the real objective which, was to get the thing to run faster and cheaper.
Mr Stevens: Please can we turn to POL00021420. It’s another Risk and Compliance meeting, 22 March 2006. So you would have been Managing Director at that point?
Alan Cook: By a few days, yes. The conversation about me being a regular attender took place between this meeting and the next one; and the next one is the one you’ve already showed us as me being present. But, yes, I was not present at this one.
Mr Stevens: So you were not present but, again, you missing read the minutes?
Alan Cook: I’m sure, yeah. Well, definitely, because I was in post by then.
Mr Stevens: Could we turn to page 8, please, I believe. Yeah, page 8. There’s an appendix to this concerning the IMPACT Programme, which the Inquiry has heard significant amounts of evidence on. It says:
“IMPACT and the POLFS accounting system has moved on significantly since the last report to the Risk and Compliance Committee.
“The system is not yet processing all transactions correctly and so the end state of POLFS ledgers which automatically interface to the main business account has not yet been achieved.”
Do you recall reading that and can you tell us what your views on it were?
Alan Cook: I don’t remember specifically. I can’t interpret from that, is that something that’s in a testing phase or is it something that’s meant to be in production?
Mr Stevens: Well, do you remember what your views –
Alan Cook: No, what I’m saying is I don’t remember what I might have said – well, I didn’t say anything because obviously I wasn’t at the meeting but, if I read that, I would be – my first question would be “I can’t tell from that paragraph whether this is something that’s in production and being used or it’s results of testing that they’re working on”. Because it talks about – it’s “moved on significantly since the last report” sort of implies that these are test results but I don’t know.
Mr Stevens: So you would have needed to follow up a bit further?
Alan Cook: Yeah, I wouldn’t have understood that.
Mr Stevens: We’ll move on to a different topic, please. POL00081928. If we could turn to page 13, please. If we could go to the email at the bottom, please. Thank you. It’s there. That’s perfect, thanks, because we see –
It’s one of these very unhelpful email print-offs where we see that it’s to Shaun Turner on the 11 January 2006, subject “Callendar Square”.
Over the page –
Alan Cook: Oh, I see. Sorry, yeah.
Mr Stevens: It says that:
“The [subpostmaster] has reported that he is again experiencing problems with transfers, [5 January 2006] which resulted in a loss of around £43,000 which has subsequently rectified itself. I know that the [subpostmaster] has reported this to Horizon Support, who have come up back to them stating that they cannot find any problem.”
If we could then turn to page 6, please. If we can go down to the second email in the chain, thank you. This is an email the Inquiry has seen before. It’s from Anne Chambers to Mike Stewart, both within Fujitsu, and it refers to the same issue, Callendar Square. Second paragraph says:
“Haven’t looked at the recent evidence, but I know in the past this site had hit the Riposte lock problem 2 or 3 times within a few weeks. This problem has been around for years and affects a number of sites most weeks, and finally Escher say they have done something about it. I am interested in whether they really have fixed it which is why I left the call open – to remind me to check over the whole estate once S90 is live.”
So this is a problem that appears to have caused a discrepancy, a significant discrepancy?
Alan Cook: Mm-hm, and these are both Fujitsu people, you say?
Mr Stevens: These are Fujitsu people, yes.
Alan Cook: Yes.
Mr Stevens: Do you accept it’s a problem that caused a significant discrepancy?
Alan Cook: Well, I don’t know. I’ve only – I’m just reading this. I assume it must have done. I’ve never heard of the Riposte lock problem before.
Mr Stevens: Well, let me put it this way: if there was a problem, which had the potential to cause discrepancy of over £40,000 –
Alan Cook: Oh, I see, because it relates to the email – yes, okay, yeah.
Mr Stevens: – and it had been around for years, affects a number of sites most weeks, that’s a significant concern, isn’t it?
Alan Cook: Yeah. I don’t know if that problem is the same as the discrepancy, but –
Mr Stevens: It’s the same email, as I say – you see at the top Callendar Square?
Alan Cook: All I’m saying is I don’t know if that has produced –
Mr Stevens: I see.
Alan Cook: – the discrepancy.
Mr Stevens: If we can go up in the chain, please. Sorry, just to the top, if you can go down a little bit, please. There’s perfect, thank you.
That email is forwarded by Mike Stewart to Lynne Fallowfield, who is at the Post Office. It says:
“Lynne, I was waiting for an update on … Callendar Square. See the email chain below.”
It goes on to say:
“I think I am inclined as per this issue to wait and see if all these branches are ok after the S90 counter roll starts 4th after the pilot this week.”
That document can come down for the moment.
You said you weren’t aware of the Riposte lock issue.
Alan Cook: Yeah.
Mr Stevens: Were you ever aware of an issue at Callendar Square when you were Managing Director?
Alan Cook: No, I don’t – well, I don’t recall. I don’t recall.
Mr Stevens: Could we please bring up POL00032210. It’s a Board meeting on 20 April 2006. If you can just get the entire attendance list in there, please.
Looking down that, in terms of IT people, you earlier identified Ric Francis.
Alan Cook: Mm-hm.
Mr Stevens: Is there anyone else who had an IT background there?
Alan Cook: Not – there doesn’t seem to be anybody that works for Ric – that worked for Ric, that is in the attendance list so, no, I don’t think so.
Mr Stevens: Can we go to page 10, please, and down to the “Operations Report” section. It says, “Horizon S90 release”.
So do you remember we saw in the last email it says that the problem would be fixed with S90.
Alan Cook: Yeah, yeah.
Mr Stevens: It says “This release would”, and it lists a number to things it would do: (i) transfer Bureau debit/credit card transactions; more to do with debit and credit cards; some generic payments; and then (iv):
“Provide for a plethora of change requests across a variety of existing capabilities.”
Did the board interrogate what those changes would be?
Alan Cook: Well, I can’t remember but that would be something I would normally challenge. You know, a plethora of change requests is – you get great detail on the first three and I’m sure they’re bigger, and I’m sure those things will be individually smaller but, if it’s a plethora of them, to use the word then, that suggests it would require probing. But I don’t recall the conversation I’m just reading it cold here.
Mr Stevens: Based on how the minutes were created at Post Office Limited, if there had been challenges, would they have been recorded in the minutes?
Alan Cook: I’d have hoped so.
Mr Stevens: So do I take it from that – well, what is your evidence: do you think it was challenged or it wasn’t?
Alan Cook: Well, there’s no evidence of it being challenged. That’s –
Mr Stevens: Why wouldn’t it have been challenged?
Alan Cook: I don’t know. There could have been some reassuring words when the thing was presented that saw off challenge and this is how the person doing the minutes chose to summarise the conversation. But, I mean, I literally do not remember the conversation. But there is clearly no documentary evidence that that fourth bullet point was probed.
Mr Stevens: Do you think if there was a non-exec on the board with IT experience, that might have been challenged –
Alan Cook: Yes.
Mr Stevens: – or is more likely to have been challenged?
Alan Cook: Yes, and, interestingly, in roles more recently, it’s become much more common for IT, senior or sort of – or recently retired senior IT people to join boards of all sorts of businesses. So I chaired a small bank and we had an IT professional on the board. It was always a struggle for him because he wasn’t a banker. But actually he was there because he was an IT person and provided useful, independent challenge. But there was no such person on the board at this time, other than employees.
Mr Stevens: Executive members?
Alan Cook: Yes, executives, that’s right, yes.
Mr Stevens: Did you feel sufficiently able to challenge the executive?
Alan Cook: I felt able to challenge the executive to a level that was comparable with my experience but I wasn’t purporting to be an expert in every functional activity. So I had a bias in my personal background which said I was an operations-type guy in my early years, not IT, but, you know, processing, operations. I spent all my time in Financial Services and they were all the reasons why people felt I would be worth having on the board. But I wouldn’t be able to – and I did actually, for a period, at the Prudential, run – responsible for IT, but I had an IT Director supplied by Accenture that reported to me, so I wouldn’t have been a detailed specialist.
Mr Stevens: At any point did you ask for more support with IT to be able to challenge the executive in a more adequate way?
Alan Cook: Well, the point was that the – there wasn’t an appetite to have other non-execs on the Post Office Limited Board, and we did have the Group IT Director sitting on the Royal Mail Holdings Board and, as I said, what was happening was these things were going up to Royal Mail Holdings Board, and there was more challenge available there, there was a Group legal director, there was a Group IT Director and, whilst they were employees, they weren’t branded just Post Office. So there was a level of independence in their interrogation.
And I don’t think – I have to say I didn’t ask but I didn’t ask because I didn’t expect the organisation would want me to be looking for independent non-execs to go on the Post Office Limited Board.
Mr Stevens: Let’s stand back a bit. Horizon obviously records transactions for the Post Office business, yes?
Alan Cook: Say that again.
Mr Stevens: Horizon records transactions for the Post Office business?
Alan Cook: Yes.
Mr Stevens: It provided the data from which the statutory and management accounts would be compiled?
Alan Cook: Yeah.
Mr Stevens: As a director, you had to have confidence in that data to be able to sign off on the management and statutory accounts?
Alan Cook: Yeah.
Mr Stevens: So it follows, does it not, that you needed to be in a position to satisfy yourself that the IT system that generated the data was sufficiently robust and reliable?
Alan Cook: Correct, and one of the ways any board would get that level of comfort is from the external auditors, and the external auditors would come in and they would run software against the system that was, you know, the primary driver of the business, and would run their own reconciliations to make sure does it add up this way, dare I say it, and does it add up that way, and does the answer come the same and they’d have run – and it’s sort of propriety software that’s used by auditing firms to validate the financial integrity of the system they are auditing.
Mr Stevens: That type of audit has the concept of materiality, doesn’t it?
Alan Cook: Yes, it would.
Mr Stevens: Can you just explain what that is?
Alan Cook: So it wouldn’t have to reconcile to the penny but it would have to, you know – but we’re not told about the penny in these instances here, are we? We’re, you know, it’s – so, so you would – you should – it’s a pretty reliable way of proving whether or not a system is reconciling.
Mr Stevens: That works, as you say, for statutory accounts –
Alan Cook: Yeah.
Mr Stevens: – in terms of the subpostmaster who may be facing a –
Alan Cook: No, I was just asking your question on accounts.
Mr Stevens: And I am asking another one.
Alan Cook: Okay, yes, I agree, yes.
Mr Stevens: It doesn’t help the subpostmaster who –
Alan Cook: If you’re the rounding error, right, that’s no joke. So every single one needs to work, because there could be compensating errors, for example.
Mr Stevens: Was anyone on the board thinking of the reliability of the Horizon IT System from that perspective, the subpostmaster’s perspective?
Alan Cook: I think Ric Francis was focused on his user community. He wouldn’t have been thinking just about subpostmasters; he’d have been thinking about all people, all types of branch that used Horizon to process transactions. There were two audiences, really. What did Horizon feel like for the person on the counter that was performing the transaction, who might actually work for a subpostmaster? But also what did it feel like for the customer, who is the other side of the counter, receiving whatever, you know, it is they’re purchasing?
Mr Stevens: So that’s Ric Francis.
Alan Cook: Yeah.
Mr Stevens: In terms of you as a Managing Director, did you think about it from the subpostmaster’s perspective of how –
Alan Cook: Yes, I did, yeah. I had – it’s only slight digression but certainly when I arrived, I felt the – that the subpostmaster community felt unloved, to a degree, by Post Office Limited, and one of the – one of my early objectives was to try to get close to the subpostmaster community and try and resolve that. One of the first things I did was establish a strong relationship with the chap who was then the Federation’s top guy, and the top team, and I started –
Mr Stevens: Can you just say for clarity – can you give a name, please?
Alan Cook: Colin Baker his name was, sorry. And then I started a programme of visits – which, in the end, I did for the entire three years and ten months that I was there – of going out, and I would – on a Friday, and I would pick a part of the country and then I would say to the Fed and I would say to the regional manager in the area, “I’ve got time to visit five branches, give me a list of branches that I can go and visit”, and I went randomly and visited them.
That was the biggest source of information. Oh, and, just to be plain, it wasn’t just subpostmasters; I visited Crown Offices and franchise branches as well. But that was my attempt to keep my feet on the ground as to what the organisation was thinking and worrying about, and, for those subpostmasters in the room, you’ll guess, I got plenty of feedback, right, and –
Mr Stevens: On that, if I may –
Alan Cook: Sorry.
Mr Stevens: – you say in your statement you think you visited about 250 branches over a period of years.
Alan Cook: Yeah, yeah.
Mr Stevens: Without criticising – I’m not criticising the effort – but, in terms of getting feedback from how users found the Horizon IT System, that was a very, very small proportion of the number of users using it, wasn’t it?
Alan Cook: Well, all the numbers in the Post Office are very large, right, so you do what you can do. All I can say is that I found the visits illuminating. I can remember being in one village that will be nameless and the subpostmistress took me back into her kitchen behind the shop and went through the process of how car insurance was sold and why she couldn’t be bothered to sell it because of the torturous process that was followed, following which we changed it.
Mr Stevens: Well, let – so those are individual – was there anything else you did, other than those visits, to try to understand how subpostmasters found the Horizon IT System?
Alan Cook: Well, I wasn’t just talking about the Horizon IT System; I was talking about the business as a whole.
Mr Stevens: No, but my question is about just the Horizon IT System.
Alan Cook: Well, my primary focus was on the Federation, so I used the Federation as, you know, the mouthpiece of subpostmasters to provide input, and then there was a– there was – on the staff, there was someone that ran the Crown Offices. So I looked at the Federation, the Crown Offices and the franchise branches.
Mr Stevens: Just so I’ve got this clear, during your period as Managing Director, you had your 250 or so visits to branches themselves and then, in terms of further subpostmaster feedback, that was effectively filtered through the NFSP?
Alan Cook: Yes, yes, filtered sounds a bit harsh, but yes.
Mr Stevens: Well, sorry, it came through the NFSP?
Alan Cook: It came through the NFSP. They were – you know, they were always forthright, vociferous, friendly, it wasn’t antagonistic. Colin Baker, in particular, went out of his way to welcome me into the family, if you see what I mean. My wife and I used to go to Federation dinners and all this sort of stuff. It was important to me to get close to the community that was servicing our customers.
Mr Stevens: While we are on this, I want to come to what the Inquiry’s termed as “responding to the emerging scandal”. Can we please look at POL00027890.
This a letter, in your statement you’ve described it as the Porteous Letter. It’s sent, we see at the top right – it’s Pat McFadden MP, then Minister for Employment Relations and Postal Affairs.
Alan Cook: Yeah.
Mr Stevens: It includes correspondence from Brian Binley MP, who, in turn, includes an email from Rebecca Thomson.
Alan Cook: Yeah.
Mr Stevens: Can we look at the email, please. It’s page 3 I believe. This is an email dated 10 February 2009 but, as I said before, you only received it on 7 May –
Alan Cook: Yeah.
Mr Stevens: – according to the stamp. It refers to speaking to:
“… several current and former subpostmasters, who say that random flaws in the IT are causing deficits in their weekly accounts, sometimes thousands of pounds at a time. The complaint is that, instead of listening to their problems and investigating the software or equipment, the Post Office is making them pay back this money without any investigation into what is going wrong.”
It continues as such.
Do you recall receiving this and reading it?
Alan Cook: Yes, well, this was the moment, right. Now, strangely, I saw the article from Computer Weekly before I saw this, only because, as you remarked, the letter was date stamped in 7 May. It went out with a deadline – if anything came in from Pat McFadden, it was dealt with quick – for me to reply about a week later but, in that week, the Computer Weekly article came out so we’re only talking about a couple of days but the reality is I saw the Computer Weekly article before I saw this correspondence and, actually, I didn’t particularly put the two together because my head was full of the Computer Weekly article.
Mr Stevens: Yes, we’ll come to that shortly.
Alan Cook: Yes.
Mr Stevens: That email can come down. At paragraph 79, page 27 of your witness statement – it doesn’t need to be turned up – you say that, when you received that letter, you indicated to Michele Graves, Executive Correspondence Manager, that you would like the matter thoroughly investigated?
Alan Cook: Yeah.
Mr Stevens: Okay. Can we look then at the Computer Weekly article now, please. That is POL00041564. As you say, the article is by Rebecca Thomson in Computer Weekly. If we could go down slightly, please. Thank you. It refers to the case of Lee Castleton, and – I’ll ask this first: were you aware of Lee Castleton before reading this article?
Alan Cook: No.
Mr Stevens: It states that:
“[He] was declared bankrupt after he refused to pay the Post Office £27,000 …
“Castleton insists he did not owe the money – although it showed as a loss on the Post Office’s Horizon system, which is used by postmasters to do their accounting. He is one of several postmasters to come across losses they could not explain.”
If you could turn over the page, please. The second paragraph says:
“Having lost the case, Castleton was left with costs of £321,000. In 2007, he filed for bankruptcy. ‘I was in too deep – I see that now. The whole thing has been heartbreaking’, he says.”
The Castleton trial, the Post Office v Castleton, was heard while you were Managing Director.
Alan Cook: Apparently so.
Mr Stevens: You say you were unaware of it?
Alan Cook: I was unaware.
Mr Stevens: £321,000 or money – that amounted to significant debt to be owed, isn’t it? So, in other words, the legal costs that Post Office spent in pursuing that claim was significant?
Alan Cook: Sorry, just to be clear, when I say I was unaware about this particular case, but we have seen earlier the reports that were being issued but they were summarised reports with totals on them. So I’m sure this case would have been in there but it may not have been separately identifiable.
Mr Stevens: So you might not have known the name Lee Castleton?
Alan Cook: That’s right, yeah.
Mr Stevens: But you –
Alan Cook: I can’t remember, but there was reporting. So I, you know, which we’ve seen already this morning.
Mr Stevens: Did you not think to ask why there was such a significant legal spend on one case?
Alan Cook: I just don’t recall. I can’t –
Mr Stevens: Do you think why you wouldn’t ask that?
Alan Cook: I can’t think why I wouldn’t, and so either it was a mistake on my part or it wasn’t in the report. I don’t know. Put it this way: this article was a shock to me. Should it have been a shock to me? No, it shouldn’t have been. But it was.
Mr Stevens: That can come down. Thank you.
That’s 11th May. You say in your statement, and you’ve already alluded to it, in fact make can bring it up. Please can we go to page 28, paragraph 85 of the statement. At the bottom, you say:
“… at the time, I did not connect the Computer Weekly Article to the complaint raised in the Porteous Letter.”
Alan Cook: Yes, if I could just expand it, when I wrote that, I hadn’t worked out that overlap. I hadn’t spotted the date stamp on the letter, so the reason I didn’t connect it was the Computer Weekly article was the first thing I read, not the complaint, if you see what I mean.
Mr Stevens: It is your evidence now that you did connect the two?
Alan Cook: Well, I connected it afterwards, what I’m saying is when I saw the Computer Weekly article, I hadn’t seen the complaint case.
Mr Stevens: So do you think when you read the complaint after the Computer Weekly article, you would have connected the two?
Alan Cook: I can’t remember, I mustn’t claim things I can’t actually remember, but it seems likely. But …
Mr Stevens: Can we turn, please, to POL00141142. If we can go to page 2, please, and to the bottom.
This is an email from Dave Posnett. Now, we see there that the email looks to be dated 05/10/2009.
Alan Cook: Yeah.
Mr Stevens: Immediately above, it’s 20/10/2009 and, if we can go – just go up slightly, please, there should be a date stamp. It might be on the other page, sorry. Can we go to the bottom of page 1, please. It gets quite confusing because you’ve got 05/10 and then, further up, 02/10. The question I have is, in October 2009, are you aware of any investigation that was requested into Horizon integrity issues?
Alan Cook: Yes, because it post-dates the Computer Weekly article.
Mr Stevens: So you think this all leads from the Computer Weekly –
Alan Cook: Yes, I would have thought so, yeah. I don’t equally understand the dates because they appear to be in the wrong order but it’s October. It sort of doesn’t really matter, I suspect.
Mr Stevens: If we can now please turn to POL00158368. Could we go to page 23, please. Down to the bottom, please, thank you. It’s an email from Michael Rudkin. Do you remember Michael Rudkin?
Alan Cook: Yes, I recognise the name, yes. Although, obviously, I’ve read this stuff but, before that, I recognised his name. I think he was Federation connected in some way.
Mr Stevens: It says:
“See attachment!!!
“I presume you have already seen the article in the convenience store magazine.”
Then there’s a bullet point, and the next paragraph goes on to say:
“This should also minimise adverse publicity to our industry which is already receiving enough bad press at the moment. Currently, the BBC, Panorama and Watch Dog researches are digging the dirt here in Leicestershire.”
If we can then go up to see the forwarding email, please, I think it’s on the beginning of the next page. Thank you. Yes, the Alan Cook email, thank you. So this is 15 October. You send an email to Mary Fagan. Do you remember who Mary Fagan was?
Alan Cook: I definitely do, I definitely remember this email.
Mr Stevens: Who is Mary Fagan?
Alan Cook: She was the – well, the PR Officer for the Royal Mail Group.
Mr Stevens: It says in the second paragraph:
“For some strange reason there is a steadily building nervousness about the accuracy of the Horizon system and the press are on it as well now.”
Were you seeing this as a significant and escalating issue?
Alan Cook: I was then, yes. Hence my – well, I then expressed in the next sentence my confusion as to why but, yes, I accepted that we had an issue.
Mr Stevens: Were you connecting the various Horizon challenges at that point, so the Porteous Letter, the Computer Weekly –
Alan Cook: Yeah, that’s right, yeah, this is – this was around that time that it came to the fore for me, if you see what I mean.
Mr Stevens: You go on to say:
“My instincts tell that, in a recession, subbies with their hand in the till choose to blame the technology when they are found to be short of cash.”
Why was your instinct to think that subpostmasters who alleged that Horizon caused shortfalls were stealing from the Post Office?
Alan Cook: Well, that’s an expression I’ll regret for the rest of my life, so it was an inappropriate thing to put in an email, not in line with my view of subpostmasters. But one of the often cited problems was, at this time, Mike Hodgkinson talked sort of quite eloquently about the challenges that Post Office had faced in – financial challenges and the danger is that we only think about the profit or not that Post Office Limited were making but I always used to say “We haven’t got one bottom line here, we’ve got 12,001 bottom lines”, and, if the Post Office isn’t working, then it isn’t working for subpostmasters.
You know, they’ve probably got a shop with a sub post office in it, that sub post office needs to produce enough profit for them to make it worth having it there at all. And so, getting the business profitable again meant getting it profitable again for subpostmasters. We had been through a few years when I joined when I don’t think the Post Office earnings for subpostmasters were worth the effort they had been putting in, and so that was – and so I think a number of them were struggling and, when we ran the branch closure programme, was an aim to reduce the number of offices, such that – and then the same traffic would come through a smaller number of post offices and they would be more profitable, which, of course, is what happened.
Mr Stevens: You’re talking in a different context there –
Alan Cook: Yes, I sort of digressed, I’m sorry.
Mr Stevens: Because what’s happened here is you’ve faced challenges by subpostmasters –
Alan Cook: Yeah.
Mr Stevens: – saying that the system is faulty, and saying that it’s caused shortages, correct?
Alan Cook: (No audible answer)
Mr Stevens: In perhaps an unguarded comment, you’ve put that the instincts were for it to effectively be that the subpostmasters were stealing and then blaming the technology. Does that represent your actual views at the time?
Alan Cook: No, but it was said, it was –
Mr Stevens: Why did you say it if it wasn’t your views?
Alan Cook: Well, I had a friendly informal relationship with Mary Fagan and, it was just an email, I shouldn’t have – it’s just an email I shouldn’t have written but it was important to me that she understood exactly where we were at. But she was a Royal Mail person and it was one of the areas where I was very, very happy with the support got it from Royal Mail, so she was very helpful to me, she was a sounding board and I was probably more open and frank with what I was thinking with her, than many other people.
She was also in a different building, which meant that we swapped emails a lot. And so, as I say, I – that sentiment was expressed, what I wrote in that email was unacceptable.
Sir Wyn Williams: It wasn’t just to her, was it? It was to Mr David Smith as well?
Alan Cook: Yeah, quite. Yes.
Sir Wyn Williams: Was it your view at the time that he would have shared your view?
Alan Cook: I don’t know, to be honest. It was regrettable, I was – it was like I was just chatting to her in the corridor but, as you say, sir, it was actually – there were other people on the copy list.
Mr Stevens: You said earlier that you were very shocked when you read the Computer Weekly article, correct?
Alan Cook: Yes, yes.
Mr Stevens: You’d received several letters from MPs, making the same complaints?
Alan Cook: Afterwards, yes.
Mr Stevens: Yes?
Alan Cook: Yes, yes.
Mr Stevens: But there was, I think, a body of opinion growing here –
Alan Cook: Yeah.
Mr Stevens: – or at least a body of complaints, I should say –
Alan Cook: Yes.
Mr Stevens: – and you say at this point you saw it as escalating and significant?
Alan Cook: Yes.
Mr Stevens: Why didn’t you arrange for an independent investigation at this point into the allegations?
Alan Cook: Well, I – the first step seemed to be to investigate it ourselves. So that was what we did and we referred to the correspondence a few minutes ago where that process of, I forget the expression, integrity or whatever it was, was used, was – you know, we needed to examine it ourselves and ask ourselves what could be wrong.
Mr Stevens: Well, what steps did you take to oversee that investigation?
Alan Cook: Well, I asked for the investigation to be done, I was keen to know who would do it.
Mr Stevens: Who did it?
Alan Cook: Andy McLean, who reported to Ric Francis. The reason I wanted to know who to do it was what did I think of the person that was going to do it and Andy was a, you know, no nonsense, knowledgeable guy who, to my mind, would, you know, speak out if he needed to.
I suspect – one of the problems, I think, is that we were still, I think, investigating the cases that had been highlighted, as opposed to the whole thing, if you see what I mean. So there – I still thought we’ve got these cases that have got wrong, we’ve got to find out the answer.
Mr Stevens: But what stopped you from getting an external body in to do that?
Alan Cook: Well, nothing stopped me. I felt we should do the internal review first. Now, it is complicated by the fact that I left the business a few months afterwards but, at that stage, it – you know, you wouldn’t get in, an external review until you’d asked your own people to investigate.
Mr Stevens: So was your thinking that the – you’d do an internal review first and then, from there, determine whether an external review was necessary?
Alan Cook: Yes, but I had no particular expectation of what would be found, because, at that stage I thought we were talking about a handful of cases, and it could have been a different problem for each one. Now, I have to be honest, by the time it all came out, I don’t know what the problem was, but it was clearly wider than the cases that had been highlighted to me.
Mr Stevens: Could we bring back up, please, POL00141142. Thank you. That’s an email from Dave Posnett on 20 October 2009, so five days after your email which we were just at. You’re not in copy.
Alan Cook: No.
Mr Stevens: It refers to some conference calls. It says:
“David Smith phoned me last week – asked me a few questions, and indicated that Alan Cook is asking for more robust defence of Horizon.”
Were you asking for a defence of Horizon, rather than an investigation into its integrity.
Alan Cook: Definitely not looking for a robust defence. Just looking for answers.
One of the perils of being the boss is that people use your name to get things done and, you know, it – I would have responded to that if I’d been copied and said “That’s not what we’re after”.
Mr Stevens: Dave Posnett could have used your name and said, “Alan Cook is asking for an independent review of Horizon” or “Alan Cook is asking for a review into its integrity”; what was put was, “Alan Cook is asking for a more” –
Alan Cook: Yes, I know.
Mr Stevens: – “robust defence of Horizon”.
Are you saying those words didn’t come from you?
Alan Cook: I wouldn’t have said that, I’d have said – “Robust” was a word I used, which I meant thorough and vigorous, but “defence” wouldn’t have been a word I’d use.
Mr Stevens: You’d use “robust” to mean thorough?
Alan Cook: Yes, but defence is a different point. At this stage, there was the Computer Weekly article and a few complaints on specific cases, and I was more than prepared to believe that the answer would be different to each of them and that the answer wasn’t that there’s nothing wrong. But, obviously, that’s the stance that the organisation took in the event.
Mr Stevens: The manner of the investigation or how you chose to respond to these allegations, was that influenced by your instinctive view which we went to earlier about the subpostmasters raising –
Alan Cook: No, it wasn’t, actually. My belief would be that we would find things that were wrong. I’ll put it another way: we would find things that were not the fault of the people running those Post Office branches. Now, it could have been the procedures they were required to follow, it wouldn’t necessarily have to be the technology, but it seemed to me unlikely to have – I know it wasn’t loads – but that many cases – what was it, seven, nine or ten cases – that are all coming to my attention at the same time; sounded like there was a problem.
Mr Stevens: So what happened to the review?
Alan Cook: Well, I have difficulty in remembering. I think it went on past my departure.
Mr Stevens: Sorry, I missed that.
Alan Cook: I think it went on past my departure.
Mr Stevens: Can we go back then please to POL000158368. I think it’s page 22. No, sorry. The next page. My apologies. So we’ve got the Michael Rudkin email we went to at the start at the bottom there. Then, if we go, if we can go up, please. That was the response, the end of the response which we referred to, and you’re forwarding it saying:
“We should therefore be careful of approaching him for further info without talking to Paula first.”
Who are you referring to there?
Alan Cook: Paula Vennells.
Mr Stevens: Paula Vennells?
Alan Cook: Yeah.
Mr Stevens: Why did you need to talk to Paula Vennells first?
Alan Cook: I’m not sure, really. I obviously thought it was a good idea at the time, but this was a network issue, and she was responsible for the network. So I didn’t want to – there were two lines I could go down. I could go down the Operations Director line, responsible for the technology, or I could go down the network line, which was Paula. And we were focusing, I was focusing too much on the Operations line and Paula needed to be brought into the picture.
Mr Stevens: Could we go to the page before, please, just to see the email chain. Thank you. Just carry on going up please. So that email, which was on 15 October, is forwarded by Ruth Barker to Paula Vennells on 5 November. We then see the next day Paula Vennells replies to Ruth Barker and you’re in copy.
Alan Cook: Yeah.
Mr Stevens: It says:
“Ruth, the attachment needs to be in email format, please – Alan and I are out of the office and so need to view it on BlackBerrys.
“Also, we need the original email; what was attached looked more like a PowerPoint of a press cutting.”
Do you recall what conversation you had with Paula Vennells about this email?
Alan Cook: I don’t, actually, no, sorry.
Mr Stevens: Do you remember discussing anything to do with an investigation into these issues with Paula Vennells?
Alan Cook: I issued the investigation request down the sort of Operations line, if you see what I mean. So – because, because I was seeing it as a technology issue. It was the reference to the Federation which meant I felt Paula should be in the loop, plus it was her branches, if you like, that we were dealing with questions from.
Mr Stevens: In your statement, you say at paragraph 101 that:
“I gave notice of my resignation to Adam Crozier around late October or early November of 2009, and it was accepted.”
Alan Cook: Yeah.
Mr Stevens: So around the time that you forwarded this email – or sorry not you – the email was forwarded to Paula Vennells?
Alan Cook: Yes, it would have been that sort of –
Mr Stevens: So do you think at that time you were – you had resigned or were thinking about it?
Alan Cook: Well, it’s embarrassing that I can’t tell you the actual date but, I mean, I kept all the correspondence but I kept it for the seven years for the tax purposes and then binned it all. So I can’t remember the exact date, but I would have said it was – well, I can’t say more than what I put in the statement, really. It was late October or early November that I went to see Adam, and said, “I’d like to resign”. I said “I’d like to see out the financial year, because one of my criteria for success was would the business get back into profit, and we wanted the end of the year, and he asked me to not say anything until the New Year.
Now, following that, I then realised that, if I said something at the beginning of the New Year, that Parliament would be in recess and Pat McFadden, who was the Minister, I was very supportive of, he’d worked quite closely with me so I rang Adam and said, “Can I tell Pat before Parliament recesses?” So I rang Pat McFadden in December and told him and then I told my top team on 4 January, so –
Mr Stevens: That was the public position, effectively, or am I misunderstanding you?
Alan Cook: Yes, so it – so it went public after – I told the top team, then there was an internal communication, and we told the world, as it were, that I was going.
Mr Stevens: Standing back, why do you think you were on the 6 November speaking about your email of 15 October with Paula Vennells?
Alan Cook: Why do I – sorry, say that again?
Mr Stevens: Let’s bring the email back up. POL00158368.
Alan Cook: I wasn’t planning on leaving until the end of March, that’s not how it transpired. So I – me resigning wouldn’t change my behaviour.
Mr Stevens: Can we go to page – I think it’s page 22. So we have the email at the bottom on 15 October 2009.
Alan Cook: Mm-hm.
Mr Stevens: Then at the top is Paula Vennells, 6 November, in which you’re copied.
Alan Cook: Yeah.
Mr Stevens: It says:
“Ruth, the attachment needs to in email format please – Alan and I are out of the office …”
Alan Cook: Yeah.
Mr Stevens: So it’s implied the two of you are together?
Alan Cook: No, not necessarily. We didn’t go out together much at all. No, we’d be in different parts of the network would be my guess.
Mr Stevens: But does it imply that you were – because she’s requested this email with you in copy, does it imply that you were working on it together or discussing it together?
Alan Cook: Yes, I’m sure we would have done, but it –
Mr Stevens: So my question is, why, at this stage, were you discussing it with Paula Vennells?
Alan Cook: Well, for the reasons I said: this was an important issue and she needed to be aware of it.
Mr Stevens: I’ll leave that.
I’ll move on. I’m going to go back in the chronology slightly as my last topic, on the IMPACT Programme. Do you recall what the IMPACT Programme was?
Alan Cook: Yes, yes.
Mr Stevens: So it was a major change to the accounting procedures, effectively?
Alan Cook: Correct, yeah.
Mr Stevens: Before the IMPACT Programme, subpostmasters would balance a cash account, correct?
Alan Cook: Yes.
Mr Stevens: Yes. That cash account would be completed at the end – well, not at the end, on a Wednesday on a weekly basis, yes?
Alan Cook: I couldn’t have told you that, but it sounds right, yes.
Mr Stevens: Do you remember the change that came about because of the IMPACT Programme?
Alan Cook: I probably don’t, to be honest. You have a point, but I’ll –
Mr Stevens: Well, before the IMPACT Programme, if a subpostmaster balanced their books and had a discrepancy which they couldn’t explain –
Alan Cook: Oh, this is the rolling forward the discrepancy?
Mr Stevens: – they were able to ask for authorisation to put it in a suspense account?
Alan Cook: Yeah.
Mr Stevens: Correct –
Alan Cook: I’ve learnt this since, yes. I’ve learnt this by reading all the correspondence, yeah.
Mr Stevens: – and then roll over into the next –
Alan Cook: Yeah.
Mr Stevens: – trading period while it was investigated. Following the IMPACT Programme, rather than weekly, the subpostmasters had to balance every four or five weeks, yes?
Alan Cook: Yes.
Mr Stevens: If there was a discrepancy that they couldn’t explain they no longer could keep it in a suspense account and roll into the next trading period, correct?
They had to – Post Office sought debt recovery from them at the end of the trading period or it could be settled essentially and paid off in due course?
Alan Cook: Mm, mm.
Mr Stevens: Could we turn please to POL00032147. This is a meeting on the – board meeting, sorry, on 17th August. You’ll see third line down, you’re there as a Non-Executive Director?
Alan Cook: Yeah.
Mr Stevens: If we turn to page 7, please, if we could go down to the “IMPACT Programme”, thank you. (b), it says:
“The objective of the programme was to save costs, replace obsolete back office systems, improve branch and client accounting, improve debt recovery …”
When it says “debt recovery”, from whom were those debts being recovered?
Alan Cook: From subpostmasters, Crown Offices, franchisees. I assume that’s what it meant. I mean, this was – we had a finance function in Chesterfield and, in my head, when we were in this meeting, this was new technology for Chesterfield which flowed out into the branches.
Mr Stevens: Yes, but the Board is effectively discussing how it can get improved debt recovery from maybe others, but from subpostmasters?
Alan Cook: Amongst other things, yes.
Mr Stevens: And –
Alan Cook: No, it is to save time in branches, as well, it was a very labour intensive process, so this was –
Mr Stevens: But this was for the benefit of Post Office Limited?
Alan Cook: And saves time in branches, which is of benefit to all branches. But it –
Mr Stevens: At (e), Mr Corbett speaks, it says, “The rollout was not expected to be ‘noise free’”, and one of the risks was concern regarding debt recovery. Do you remember what that concern was?
Alan Cook: No, I don’t. I remember the higher call volumes. As I said, this was about the Chesterfield operation and that new procedures would generate a lot more phone calls from people coming to terms with, you know, the different procedures. As is often the case with these things, you introduce a labour saving device but there’s a bump to get through when people are coming to terms with new procedures or different buttons to press on the system or whatever, that produces more activity, more mistakes for a while, and then things settle down.
So I think what Peter was highlighting in general is this was quite material change, and there would be a disruption, as a result of it, and he then goes on to outline what risk mitigants he’d got in place to counter it.
Mr Stevens: If we can turn over the page, please, thank you. At the top, in (f), it says:
“Planned completion of the new finance system was 24 August 2005. A branch trading pilot would commence 14 September, and full branch rollout was planned for 30 November …”
Those words “branch trading pilot”, branch trading, that’s the specific terminology used for balancing and trading periods, isn’t it?
Alan Cook: I would assume so, yes. Yes, it’s probably – there’s probably a word missing. It might have been branch trading statement or something, I don’t know, but –
Mr Stevens: In your statement – we don’t need to turn it up, but it’s page 13, the top paragraph – you refer to the IMPACT Programme. My understanding of your evidence is you weren’t – or your evidence is you weren’t told that the ability to put discrepancies into the suspense account was taken away; is that –
Alan Cook: No, I didn’t know that then, no.
Mr Stevens: Is your evidence it wasn’t discussed at that Board meeting?
Alan Cook: Yes, I certainly don’t recall it. I mean, I was then, in quotes, “just” a non-exec, so it was an item of detail which they probably felt they didn’t need to share. Subsequent knowledge indicates that that was quite an important development, really.
Mr Stevens: Could we look, please, at POL00021419. It’s a Risk and Compliance note. It’s your apologies, because you’re not in attendance?
Alan Cook: This the non-exec period yes, that’s right.
Mr Stevens: Yes.
Alan Cook: Yes.
Mr Stevens: But you would have read the minutes?
Alan Cook: Yes, I would have hoped so.
Mr Stevens: Can we turn to page 5, please. It talks about the IMPACT – the programme status, “several problems but workarounds are in place for servicing clients”, and there were issues with system response times, mapping and systems.
If we go down, please, to “3.4 Branch Audit findings”, you’ve got:
“Positive action has been taken through Branch Control since last year. This has reduced the incidence of ‘suspense accounts’ being abused to conceal fraud. However, there is an increase in the number of losses covered up by inflating cash figures. IMPACT will in the longer term improve MI here …”
What does “MI” stand for?
Alan Cook: Management information.
Mr Stevens: “… but short-term action is needed between teams involved in cash to improve the analysis and ‘clean up’ of data.”
Was the board implementing the IMPACT Programme precisely to avoid subpostmasters using the suspense account?
Alan Cook: No. That would be – this was a major piece of expenditure. This was about upgrading the financial – I mean, obviously it was all initiated before I joined but it was about equipping Chesterfield correctly to do the finances and how that flowed through, you know, into the branches of all types. So there was, there was nothing – that would have not been the motive.
Mr Stevens: Did anyone, whenever you were in any discussion about the IMPACT Programme, question how it would affect subpostmasters?
Alan Cook: I don’t recall a conversation like that and, you know, interestingly, the way I’m talking, I had this impression it was more about computerising Chesterfield, but not without consequence in branches because that’s where the money was coming from, but it wasn’t the objective, if you see what I mean.
Mr Stevens: Sir, that’s my questions. If I may just take a moment to confer with Ms Price on a matter?
Sir Wyn Williams: Yes. (Pause)
Mr Stevens: Thank you, sir. I understand that two sets of Core Participants wish to ask some questions. I’m told that they will be five minutes each.
Sir Wyn Williams: Okay, let them ask their questions, then.
Questioned by Mr Stein
Mr Stein: Mr Cook, my name is Sam Stein I represent a large number of subpostmasters and mistresses, I am instructed by Howe+Co.
Did you watch the evidence of Sir Michael Hodgkinson yesterday?
Alan Cook: I did, yes.
Mr Stein: You seemed to use the term “prosecuting authority”, which I assume you took from the evidence of Sir Michael yesterday?
Alan Cook: I did, yes.
Mr Stein: You understood the word prosecuting authority from his evidence yesterday –
Alan Cook: Yes.
Mr Stein: – the term you used?
Alan Cook: Yes.
Mr Stein: You are aware that later on in your term, as Managing Director, that you were the Prosecution Authority for the Post Office; is that correct?
Alan Cook: Well, as I’ve already explained, but my view of that changed during my time.
Mr Stein: Right. Well, let’s have a quick look at that then, please. Can we go to the document which is POL00048361. First page, please. Thank you. If we look, please, at the very top of that document, we see it says:
“Post Office Limited Investigation Team Monthly Report.”
We get from that that you got these monthly.
Alan Cook: Mm-hm.
Mr Stein: It says “Confidential”, and it then goes on to say to who it was written: POL ET – let’s move on from that for the moment; Director Security Corporate; Head of Investigations Corporate; Head of Criminal Law; Head of Security Post Office Limited.
Let’s just go through that. At that time, the Head of Criminal Law was Rob Wilson, a solicitor; do you remember him?
Alan Cook: No, I don’t, I’m afraid.
Mr Stein: No? What did you think the Criminal Law Team did within the Post Office?
Alan Cook: Well, it looks like it’s at Royal Mail, isn’t it? It says Corporate Head.
Mr Stein: What do you think the Criminal Law Team did, Royal Mail or Post Office?
Alan Cook: Well, they would have been involved with these prosecutions, I guess.
Mr Stein: Involved with the prosecutions?
Alan Cook: Yes.
Mr Stein: Yes?
Alan Cook: Yes.
Mr Stein: Right. So this document in 2006, in reference to you, because you were part of looking at this sort of material; head of Criminal Law, Rob Wilson, still doesn’t ring a bell?
Alan Cook: No, it doesn’t, I’m afraid. Sorry.
Mr Stein: Okay. The Investigation Team that clearly this is in relation to, this monthly report, shall we have a quick look at what’s going on with that? Middle of the page there, you see in the document we’ve got on the screen, “Investigation Team Report Period 9 – December 2006”:
“The [principal] aims of the Investigation Team are to stop criminal offences taking place, apprehend and prosecute those who commit offences against us in order to maximise our recovery and reduce loss to POL and its clients through the identification of areas of weakness throughout the business both operationally and within our product offerings.”
It does appear, on the face of this document, that you’ve got information that there’s a Criminal Law Team that’s operating within the business and, secondly, an Investigation Team, with aims of stopping criminal offences taking place, apprehending and prosecuting people.
Alan Cook: Yeah, well look at item 1, it’s all about postal order cashback offers and the fraud losses that we were experienced, as a result. That was nothing to do with subpostmasters. This –
Mr Stein: What did you think when it refers –
Alan Cook: It’s customer fraud.
Mr Stein: What do you think –
Alan Cook: We call them “scams” today but, you know, this is what it was there for. There was – there’s always going to be lots of criminal activity around an organisation that creates a lot of money. That doesn’t mean it’s the subpostmaster’s fault.
Mr Stein: So you had reports in relation to subpostmasters that were being prosecuted –
Alan Cook: Mm-hm.
Mr Stein: – and that there was the involvement of an Investigation Team; is that correct?
Alan Cook: Yeah.
Mr Stein: So you had oversight of an Investigation Team that investigated subpostmasters; is that correct?
Alan Cook: It is.
Mr Stein: Right, and we can now see that there was a Criminal Law Team engaged as well, yes?
Alan Cook: Yes.
Mr Stein: Right.
Alan Cook: But it’s broader than just subpostmasters.
Mr Stein: Well, let’s just stay with subpostmasters for the moment because you may have noticed that this Inquiry is about subpostmasters.
Alan Cook: Yes, I have noticed that.
Mr Stein: All right?
Alan Cook: I have noticed that.
Mr Stein: Right, well let’s then move on and have a look and think about what was happening to subpostmasters being investigated by the Investigation Team operating under your Managing Director directorial responsibilities, yes?
Alan Cook: Mm.
Mr Stein: Okay? Did you, as an example, consider the numbers of cases that were being prosecuted?
Alan Cook: I didn’t have the total number that was being pursued no.
Mr Stein: Okay, let’s go to the bottom of page 2, please, of the same document. Look, please, at 2.0.
Alan Cook: Yeah.
Mr Stein: “Investigation Operations: This month’s recovery figure is £63,000. Period 9 case raise figures for deficiencies at audit alone were £140K.”
Where it says “raise figures for deficiencies at audit”, what did you think that meant?
Alan Cook: Yeah, you’re right, you’re right, we did have the numbers in that report, yeah.
Mr Stein: Then it goes on to say:
“In total, 31 new investigation cases were raised during the period, with a current loss of £245,000.”
That’s not the same as prosecutions, obviously but there were cases that were being looked at.
Mr Stein: Next:
“At present, the team is dealing with 248 ongoing investigations with a loss value of in excess of [£9 million] of these 80 are currently going through the courts.”
Alan Cook: Yeah.
Mr Stein: So you’re getting these sorts of reports monthly, there were discussions involving the investigation operation, and discussions and information regarding cases being prosecuted and losses. You had all of the information that was possible to have, to actually have governance over this area, didn’t you, Mr Cook?
Alan Cook: I had the relevant information there. I certainly – well, I’ve already said that I could have done more, but –
Mr Stein: Well, then let’s go over the page. We can see, at the bottom of page 2, it says:
“Also provided is a summary of major enquiries ongoing.”
Top of page 3, please, same document.
We can see across there it looks like Excel documents that are being referred to, ignore the first one, “Over 100K Live cases”, which appears to be no doubt a list of the cases worth over £100,000, all right?
Then underneath that, you have then got references to 4.0, “Financial Investigations”, as regards two Post Office branches.
So the information you were getting was pretty comprehensive regarding the ongoing investigation and conduct of prosecutions as they’ve been going onwards under your time at the Post Office, wasn’t it, Mr Cook.
Alan Cook: It was, but I – I don’t wish to let the impression be created that this was there to chase subpostmasters. This was there to chase fraud in general.
Mr Stein: Okay, well, let’s just say, as I’ve said before, we’ll stick with subpostmasters, if you don’t mind.
Alan Cook: Yes, but I need to make sure that context is understood.
Mr Stein: Paragraph 59 of your statement –
Alan Cook: Thank you.
Mr Stein: Yes, Mr Cook?
Alan Cook: I said thank you for acknowledging my comment.
Mr Stein: Paragraph 59 of your statement, you say this:
“To the best of my knowledge, the Risk and Compliance Committee was not given any information or reporting, nor did I have any oversight of the prosecution of SPMs. As a result, I did not take any steps as a member of the Risk and Compliance Committee to ensure that POL was acting in compliance with its legal obligations in relation to those prosecutions and civil proceedings against SPMs. I was not aware they were taking place.”
It is just a straight out lie, isn’t it, Mr Cook?
Alan Cook: The point I was trying to make was about the initiation of prosecutions. I have – I have had repeatedly acknowledged that there were cases under investigation and that I was aware there were cases under investigation.
Mr Stein: What you’re saying in your statement is this: you did not take any steps as a member of the Risk and Compliance Committee to ensure that POL was acting in compliance with its legal obligations in relation to those prosecutions and civil proceedings against SPMs, “I was not aware they were taking place”.
Well, first of all you do agree you were aware they were taking place –
Alan Cook: Mm.
Mr Stein: – and, secondly, in your statement you’re pretending that you weren’t aware to avoid the implication, which you needed oversight of the things?
Alan Cook: No –
Mr Stein: That’s simply not true, is it –
Alan Cook: That was not my intention.
Mr Stein: Then why did you write that in your statement, Mr Cook?
Alan Cook: Well, I believed it at the time, certainly.
Sir Wyn Williams: Is that it, Mr –
Mr Stein: One moment.
Thank you, sir.
Sir Wyn Williams: Right. Who is next?
Mr Henry: I am, sir. Mr Henry.
Questioned by Mr Henry
Mr Henry: Hello, Mr Cook, 17 years ago on 12 April 2007, you were the Managing Director of the Post Office, weren’t you?
Alan Cook: I was.
Mr Henry: You probably have no idea what you were doing that day, I suppose?
Alan Cook: No, I’m sure not.
Mr Henry: But Mrs Janet Skinner, who sits to my right, whom you can see here, knows exactly what was happening to her that day because on 12 April 2007 she was being released from prison, having served a nine-month sentence for false accounting.
Alan Cook: Mm.
Mr Henry: She’d been jailed on the lie, Mr Cook, that Horizon was infallible. But you say you had no idea that these prosecutions were being instituted in your name; is that right?
Alan Cook: No, well, I knew there were prosecutions.
Mr Henry: She pleaded guilty to false accounting only because she’d been told that, if she did not, the Post Office would prosecute and pursue her for theft.
Alan Cook: Mm.
Mr Henry: She hadn’t stolen a penny, Mr Cook. All of this was being done in your name and yet you claim you didn’t know?
Alan Cook: I just can’t be more apologetic. It is – it’s –
Mr Henry: Mrs Skinner was the mother of two young children. Wrongly accused of theft, she was told that if she pleaded to false accounting as an alternative to that baseless theft charge, she wouldn’t go to prison. Now, this was common practice by the Post Office: charge theft and accept a plea to false accounting. Were you aware of that stratagem, Mr Cook?
Alan Cook: No, in fact worse than that, I – when I had reports about them and the individual had pleaded guilty, then I thought we must have been in the right. I did not appreciate that what was going on.
Mr Henry: So this stratagem was reinforcing your ignorance and the general prejudice that these subpostmasters had their hand in the till; is that right?
Alan Cook: In the particular cases where the individual pleaded guilty, I had assumed that they believed they were guilty. It didn’t occur to me at the time that that was recommended to them by their lawyers for want of a –
Mr Henry: It was the most profound structural injustice.
Alan Cook: Yeah, I agree.
Mr Henry: An unmeritorious charge of theft was being used as a jemmy or sledge-hammer to force a plea or to crush subpostmasters into submission.
Alan Cook: I don’t know if that was a deliberate strategy by the Post Office but that’s how it manifested itself and it’s unacceptable.
Mr Henry: It was a strategy and you ought to have been aware of that strategy; do you accept that now, not with hindsight, but what you ought to have known at the time?
Alan Cook: I did not know that at the time – I –
Mr Henry: Well, you ought to have known it at the time, Mr Cook; do you accept that?
Alan Cook: Yes, I do accept I ought to have known it. I didn’t know it. It would be nothing that I would ever willingly want to do.
Mr Henry: Now, of course, it didn’t do Mrs Skinner any good because she was sent to custody all the same, nine months’ imprisonment. But before she was imprisoned, like so many subpostmasters, she’d suffered fictional Horizon shortfalls and had made 116 calls to the National Business Support Centre helpline complaining about balancing faults in the 18 months before she was dismissed, wrongly dismissed, Mr Cook –
Alan Cook: Yeah.
Mr Henry: – because your auditors thought she’d had her hand in the till. Are you proud of presiding over that culture?
Alan Cook: Definitely not, no.
Mr Henry: Do you accept that the ultimate responsibility for her torment lay with you, as Managing Director of the Post Office?
Alan Cook: It did, yeah. I was the Managing Director so I was ultimately accountable. Whether I was aware is another matter and, if I wasn’t aware, I should have been aware.
Mr Henry: Right. But, as you have claimed, you maintain that you had no idea that these prosecutions were actually being instituted in your name?
Alan Cook: I’d no – well, nearly correct. What I was saying was that I had no idea that the Post – up until the Computer Weekly article, that the Post Office could initiate those without having to seek approval from any other party or body, so there was no moderating influence. That is what I was not aware of.
Mr Henry: Now, those prosecutions, the Court of Appeal Criminal Division stated, should never have been brought because they were an affront to the conscience of the court. What do you have to say for yourself about that, sir?
Alan Cook: Well, all I can do is repeat what I said at the beginning, is I just apologise unreservedly. I’m not the sort of guy that is malicious or would want to do harm to anyone but it was – and I was not aware, but it – that is not an excuse, it’s an explanation. There’s no excuse for the fact that this happened and it was on my watch. And, you know, this is what this Inquiry is about, is to establish how that could have happened and I’ve tried my honest best to portray exactly what I recall happening many, many years ago, and but it’s not acceptable. It’s not acceptable.
Mr Henry: Finally, do you have anything by way of a personal direct apology that you would like to say to Mrs Skinner?
Alan Cook: I would. I would love to talk to her afterwards but you may not want to, but I can only apologise on behalf of the whole organisation for the way that you were treated. It was disgraceful. I can only apologise personally that, whilst I had not heard of your case, I am nevertheless – I have an accountability that should have been on top of it and I wasn’t. There’s nothing more I can say. This will be with you for the rest of your life; it will be with me for the rest of my life.
Sir Wyn Williams: Thank you, Mr Henry.
I’ve just got a few questions, Mr Cook.
Alan Cook: Yes.
Questioned by Sir Wyn Williams
Sir Wyn Williams: I’d like to go back to the instruction you issued to Mr McLean to carry out an investigation.
Alan Cook: Oh, yes, yeah.
Sir Wyn Williams: I use the word “investigation” just in a neutral sense. I’d like paragraph 79 on page 27 of your witness statement to be put up on the screen, please. It’s WITN00190100. Thank you.
Now, if you’d just like to refresh your memory by just scanning that for the moment.
Alan Cook: Yes, I have. I have, thank you.
Sir Wyn Williams: That’s fine. Well, then these are my questions: you have told me that, in early May 2009, this possibility that there were a number of cases involving a challenge to Horizon came as a bit of a bolt out of the blue for you?
Alan Cook: Yeah.
Sir Wyn Williams: Yeah?
Alan Cook: Yes.
Sir Wyn Williams: And your first reaction was to instruct Mr McLean to investigate and you did so because you thought highly of him –
Alan Cook: Yes.
Sir Wyn Williams: – you say in your statement. But then, reading the rest of that paragraph, it seems to me at least, and this is what I want your help with, that this inquiry just petered out because what you say is:
“I was assured at that time that the Horizon system was functioning normally [but] I do not recall the detailed of Mr McLean’s investigation, nor have I been provided with any documents relating to the investigation by the Inquiry.”
Now, breaking that down, it may be that you’re saying that either Mr McLean or someone on his behalf said to you orally “Everything is fine” but, apart from that, there doesn’t appear to be any document or report or anything else that you have seen which actually gives us the result of Mr McLean’s investigation; is that as you understand it?
Alan Cook: I agree, sir, yes. I wouldn’t have settled for “everything’s fine” but I haven’t been able to – I haven’t been given any history or documentation that shows what he produced. I can’t remember what the response was but I wouldn’t have been able to carry on without, you know, an investigation and I think we saw, during the course of my evidence, that there was still quite a lot of activity going on some time later.
So I believe that was the moment that the organisation started examining itself but, as we’ve come to learn, there were many people that wanted to just prove that it was okay, put it that way.
Sir Wyn Williams: Yes, but my understanding is that you didn’t actually leave Post Office until early the following year?
Alan Cook: Yes, about the end of January. That’s right. Yes.
Sir Wyn Williams: So approximately seven/eight months after you had instigated an investigation by Mr McLean?
Forgive me if this sounds critical, and perhaps it is critical, but there doesn’t appear to be any urgency on your part to get an answer from him, if you allowed eight months to go by?
Alan Cook: Well, I think we’ve seen evidence of activity still going on in October/November but I just – you know, I just cannot recollect seeing a final report and I’d love to be able to say that but I’m only going to say what I completely clearly remember.
Sir Wyn Williams: Yes.
Alan Cook: I am – throughout this process, as documents have emerged, it fills in the picture for me, it helps me remember. So I remember the story, I have difficulty remembering the order and the dates. So I remember moments. The Computer Weekly article was a moment, right, that had a big impact on me, but I can’t – without evidence sort of being produced, I can’t point to what happened next, which is why I wrote the witness statement as I did, because I can’t claim something that I can’t remember.
Sir Wyn Williams: But can I take it that you have no memory of Mr McLean producing a written report before you left your position as Managing Director?
Alan Cook: I find that difficult to believe that there wasn’t one, but I can’t remember it and I haven’t seen anything.
Sir Wyn Williams: All right. Thank you very much.
Now, sorry to prolong it, but there’s one further short series of questions about the case that was referred to in the Computer Weekly article, and that’s the case of Mr Castleton. All right?
Alan Cook: Yeah.
Sir Wyn Williams: You’d said that you had no idea of Mr Castleton’s case, certainly the name Castleton, until you read that article. I just want to ask you about the process for making decisions when the Post Office was involved in quite high profile, High Court litigation, all right?
Alan Cook: Mm.
Sir Wyn Williams: Post Office instigated proceedings against Mr Castleton for approximately – the figure doesn’t matter – but approximately £25,000, said to be a shortfall as evidenced by data from Horizon. Mr Castleton defended it on the basis that there was no shortfall and this was all the fault of the computer, all right?
Alan Cook: Mm-hm.
Sir Wyn Williams: It gradually it grew from being what might be called a fairly conventional action for the recovery of a debt into a potential large-scale argument about whether or not Horizon was reliable; okay? And this was all unfolding in the first eight/nine/ten months of you being Managing Director, but none of this got to you, from what you told me?
Alan Cook: No, I mean the learnings from this are – sorry, go on.
Sir Wyn Williams: Anyway, so let me carry on. There came a point in time when the very experienced barrister who was acting for the Post Office told the experienced solicitor who’d instructed him, who in turn told the Legal Department of the Post Office, that the costs involved in this case were grossly out of proportion to what you were trying to get from Mr Castleton and they ought to think seriously about whether it was worth spending all that money, all right?
But, in the end, all that money was spent so that the total amount of the debt and the costs came to well over £300,000.
Alan Cook: Yeah.
Sir Wyn Williams: Well, what I want to ask you about is what was the process, back in 2006, for authorising the expenditure of those sums of money in the Post Office?
Alan Cook: Yeah, and that was what I was about to prematurely talk about. I mean, there’s an irony, isn’t it, that, if somebody in the organisation wanted to buy a piece of equipment, they’d probably have to get umpteen forms signed in order to be able to spend the money and yet, somehow or other, these spend decisions were being made in that prosecution, and there should have been a set of delegated authorities that said, “You’re authorised to spend up to this much money”, and because one of the issues is a case starts off – as you’ve explained, a case start off modest and becomes big, so not only should they require sign-off from an expenditure perspective, there should be a cap on how far it can go without coming back and asking for more.
Clearly, that was not in place and – and it certainly – they certainly did not come to me for approval. So we had delegated authorities in place that would allow people below me, and this would have probably lied with – Paula Vennells as the Network Director, would have been able to sign that off.
Sir Wyn Williams: Right. So what it amounts to is that there would have been a person within the Post Office organisation who would have had authority to sign off –
Alan Cook: Correct –
Sir Wyn Williams: – spending the money without taking it either to you or to the Board –
Alan Cook: Correct.
Sir Wyn Williams: – and so did you tell me that most likely person was Paula Vennells?
Alan Cook: Yes, I think so.
Sir Wyn Williams: All right. Thank you very much.
Alan Cook: Of the legal function would have thought approval from the business and the business in this case would have been the person that ran the branches.
Sir Wyn Williams: All right. Thank you.
Alan Cook: Thank you.
Sir Wyn Williams: Thank you very much, Mr Cook for providing your witness statement, and for coming to give evidence to the Inquiry this morning. I’m grateful to you.
The Witness: Thank you. Thank you, sir.
Sir Wyn Williams: So Mr Stevens, how are we proceeding next?
Mr Stevens: I think Mr Beer’s preference is to switch witnesses immediately, if we can, and make a start now.
Sir Wyn Williams: Certainly, by all means I’ll sit here quietly until you do it, if you like.
Mr Stevens: I’m sorry sir, we may need a short break. The transcriber needs a short break.
Sir Wyn Williams: Yes, sure. 12.35, ten minutes?
Mr Stevens: Yes, that’s fine. Thank you, sir.
(12.25 pm)
(A short break)
(12.35 pm)
Mr Beer: Good afternoon, sir, can you see and hear me?
Sir Wyn Williams: Yes, thank you.
Mr Beer: May I call Adam Crozier, please.
Adam Crozier
ADAM ALEXANDER CROZIER (affirmed).
Questioned by Mr Beer
Mr Beer: Good afternoon, Mr Crozier. My name is Jason Beer and I ask questions on behalf of the Inquiry. Can you tell us your full name, please?
Adam Crozier: Adam Alexander Crozier.
Mr Beer: Thank you very much for previously providing a witness statement to the Inquiry and for giving evidence today to assist us in our investigation. Can we start, please, with your witness statement. The URN is WITN04390100. You should have a hard copy in front of you. It’s 34 pages long, excluding the exhibits pages, and is dated 28 February 2024. If you turn to page 34, is that your signature?
Adam Crozier: It is, yes.
Mr Beer: Are the contents of it true to the best of your knowledge and belief?
Adam Crozier: They are indeed.
Mr Beer: Thank you. I’m not going to ask you questions about all elements of the witness statement, it stands as your evidence, and is being made available on the Inquiry’s website. Can I start with your background, please. Between February 2003 and April 2010, so for just over seven years, you were a Director and Chief Executive Officer of Royal Mail Group –
Adam Crozier: That’s correct.
Mr Beer: – and a Director of Royal Mail Holdings –
Adam Crozier: Yes.
Mr Beer: – the first being a limited company and the second a Plc?
Adam Crozier: Yes.
Mr Beer: Before joining Royal Mail, you held senior roles in Saatchi & Saatchi from 1988 to 1999; is that right?
Adam Crozier: 1995 – well, I started there in 1988, all the way through to 1999, yes.
Mr Beer: Yes, I think that’s what I said, ‘88 to ‘99 –
Adam Crozier: Sorry.
Mr Beer: – but the last four years as a Joint Chief Exec?
Adam Crozier: Correct.
Mr Beer: Then you served until 2003 – ie immediately before joining the Royal Mail Group – as the Chief Executive of the Football Association?
Adam Crozier: Correct.
Mr Beer: Can I start, please, looking at the corporate structure of Royal Mail, and I’m going to try and summarise and see whether you agree, in the interests of time, with the summary. First, there was a parent company, Royal Mail Holdings Plc?
Adam Crozier: Yes.
Mr Beer: That was wholly and directly owned by the single shareholder, the Government?
Adam Crozier: Yes.
Mr Beer: Royal Mail Holdings Plc had its own board?
Adam Crozier: Correct.
Mr Beer: It had its own Management Board?
Adam Crozier: Correct.
Mr Beer: You attended all Royal Mail Holdings Plc Board meetings and you sat on the Management Board?
Adam Crozier: That’s correct.
Mr Beer: The Chairman of Royal Mail Holdings Plc, in your tenure, was firstly Allan Leighton, between 2002 and 2008; is that right?
Adam Crozier: That’s correct.
Mr Beer: Then Donald Brydon from 2009 onwards?
Adam Crozier: Yes.
Mr Beer: Royal Mail Holdings Plc’s Board, I’m going to call that the main board, the main board had its own Audit and Risk Committee –
Adam Crozier: Yes.
Mr Beer: – upon which you sat?
Adam Crozier: Yes, attended, yes.
Mr Beer: Yes, were you a member of it or were you an attendee?
Adam Crozier: I think I was an attendee, actually.
Mr Beer: Just for those not steeped in corporate governance, the difference between being a member of a Committee and an attendee is?
Adam Crozier: I think the members were all Non-Exec Directors.
Mr Beer: Can we move on in the summary. There were a range of separate businesses within the Royal Mail and they were separated out in different ways, some of them being subsidiaries of Royal Mail, and others not; is that right?
Adam Crozier: Yes.
Mr Beer: Post Office Limited was one of those entities and that was a separate legal entity; is that right?
Adam Crozier: That’s correct.
Mr Beer: That was Post Office Limited?
Adam Crozier: Yes.
Mr Beer: Post Office Limited had its own board?
Adam Crozier: It did.
Mr Beer: It had its own Chairman?
Adam Crozier: It did.
Mr Beer: In your tenure, they were Sir Michael Hodgkinson, from whom we heard yesterday, and then from 2009, Donald Brydon?
Adam Crozier: That’s right.
Mr Beer: I think that means that Mr Brydon, from 2009, was Chairman of both Royal Mail Holdings Plc and Post Office Limited?
Adam Crozier: Yes, he was.
Mr Beer: The Post Office had its own Managing Director or CEO, the title changed?
Adam Crozier: That’s correct.
Mr Beer: In your tenure, that was David Mills, from whom we hear next week, and then, from 2006, Alan Cook from whom we have just heard?
Adam Crozier: Yes.
Mr Beer: That person, the MD or the CEO, sat on both the Royal Mail Holdings Plc and the Royal Mail Management Board?
Adam Crozier: Yes.
Mr Beer: The Post Office Limited had its own Risk and Compliance Committee?
Adam Crozier: That’s right.
Mr Beer: Now, I think, in one way or another, I’ve taken all of those points from your witness statement; you make all of those points in one way or another in your witness statement. Taking all of those points together, are you effectively saying, in your witness statement, that within Royal Mail Holdings Plc’s group of separate business units, the Post Office had a relatively high degree of autonomy from Royal Mail Group?
Adam Crozier: Yes, under its delegated powers of authority.
Mr Beer: Of the business units within the Group, did the Post Office enjoy the greatest level of autonomy?
Adam Crozier: Yes, it did. It was the only one with its own governance set-up.
Mr Beer: I missed the last word, the only one with its own governance set-up?
Adam Crozier: Set-up, yes, sorry.
Mr Beer: Why was it that it enjoyed the greatest level of autonomy from Royal Mail?
Adam Crozier: I think it was – it goes right back to when – the 2000 Act, the Postal Act, where the Government set up the company and it had two very different objectives. For Royal Mail it was to be modernised and be a commercial company in a market that was to be opened up to competition and, on the Post Office side, it was to try to become a sustainable public service, so two very different objectives, and that separate governance ran right through to them also having their own direct relationship with the shareholder and, within the Shareholder Executive, a different team within that team.
Mr Beer: Thank you. Was the result of that that you, as CEO of Royal Mail, placed very substantial reliance on the Post Office Board and the Post Office Executive Team in the running of Post Office Limited?
Adam Crozier: I did indeed, and it’s partly why both the Chairman and the CEO of the Post Office also sat on the Holdings Board, the Chairman of Royal Mail sat on the Post Office Board and the other piece of glue was the Company Secretary who sat on both. But what it did mean, through those delegated authorities, was that the Post Office largely was able to go about its business, without reference to the Royal Mail Board, other than on two really key things: one was on funding, which fundamentally impacted on the solvency of the whole group; and, secondly, on certain major, multi-year contracts where it took it beyond its delegated authority limits.
Mr Beer: I think later we’ll come on to the fact that the Fujitsu contract was one of those?
Adam Crozier: It was indeed, yes.
Mr Beer: Looking back now, do you think there should have been maybe a third added to the list of things that the Post Office ought to have come back to Royal Mail Holdings more and more frequently on, namely the conduct of investigations and criminal prosecutions?
Adam Crozier: Not at the time, no. I certainly thought that all the correct checks and balances were in place, both in terms of internal and external audit, in terms of internal and external legal advice, there was the POL Risk Committee, the POL Exec Committee and the POL Board and, through all those checks and balances, I think there was some confidence that things were working and, certainly, no one in that chain at any stage expressed any concerns about the conduct in the area you’ve just mentioned.
Mr Beer: If Royal Mail and you within Royal Mail was reliant on the Post Office to represent Post Office matters, whether in the Management Board or the main board of Royal Mail, if they did not raise or mention any issues to you of concern or which were problematic, was there any mechanism by which you and Royal Mail could find out about such issues?
Adam Crozier: Of course. Well, of course there was the structure I just mentioned of all the checks and balances, which I won’t go through again –
Mr Beer: But the checks and balances you mentioned were within the Post Office?
Adam Crozier: They were, but on top –
Mr Beer: I’m talking about the checks and balances in you learning about things that they didn’t want to tell you about?
Adam Crozier: Yeah, well, first of all, there were constant one-to-one meetings with the CEO of the Post Office.
Mr Beer: Just stopping you there, Mr Crozier, does that place a high burden on the Managing Director or CEO of Post Office Limited to be open and transparent with Royal Mail Holdings and, in particular, with you? So –
Adam Crozier: Both myself and the Board, yes, absolutely. You know, there was constant – the whole company, because of what we inherited, effectively, on the Royal Mail side, a broken company that hadn’t been invested in for a decade, hadn’t hit its quality of services, was the least modernised postal company in Europe, what that meant was, on the Royal Mail side, there was no option other than to be fundamentally transparent in the fact that most of what we inherited wasn’t working.
And that encouraged a lot of transparency and we set up a properly functioning internal audit unit, which was of course one of the ways that we could also find out what was happening elsewhere in the group, and we strengthened that. We created a whole risk agenda in the business, where we got, from the ground up, people to let everyone know what their key risks were. They looked at that risk register, that risk register was debated at the executive –
Mr Beer: Just stopping you there –
Adam Crozier: Of course.
Mr Beer: – can you recall whether the conduct of prosecutions and the possibility of bringing subpostmasters to justice, including by imprisoning them, and the issues that arise when conducting prosecutions, was on the Royal Mail Holdings risk register?
Adam Crozier: I don’t believe so and I don’t believe I recall seeing it on the Post Office register, no.
Mr Beer: Is that a failing?
Adam Crozier: With the benefit of hindsight, yes.
Mr Beer: Ie conducting an activity which is unusual for the company, would you agree?
Adam Crozier: Yes.
Mr Beer: An activity that, of itself, carries unusual risks?
Adam Crozier: Indeed.
Mr Beer: Would you agree that that unusual activity would require a different type of supervision and oversight because it brings the company into contact with the criminal justice system?
Adam Crozier: Yes, and that’s why there were lots of checks and balances around the internal and external legal advice, and it’s –
Mr Beer: Sorry, say that again? That’s why there were lots of checks and balances around the –
Adam Crozier: Internal and external legal advice.
Mr Beer: What do you mean by that?
Adam Crozier: Well, we had lots of external lawyers involved with the company. We also had prosecutions on the Royal Mail side, as I’m sure you know, and there, there were multiple interactions, much more straightforward things with police and Crown Prosecution Services.
Mr Beer: What external lawyers are you referring to that gave comfort in the prosecution of subpostmasters?
Adam Crozier: I don’t recall which ones the Post Office used at the time, I’m sorry.
Mr Beer: Did you think at the time that prosecutions of subpostmasters were conducted by external lawyers?
Adam Crozier: I believe they had a big role in that, yes.
Mr Beer: By “conducted”, do you mean the person standing up in court, ie the barrister or employed barrister or a solicitor with rights of audience, or do you mean conducted the whole thing?
Adam Crozier: I am not sure.
Mr Beer: Okay. Was there a way for people within the Post Office to report issues to you or to the Royal Mail Board if the Post Office MD or CEO was not inclined to do so?
Adam Crozier: Yes, through a function called – well, we had whistleblowing in operation and we also – which we constantly updated and tried to improve, and we also had a survey called Have Your Say, which was entirely anonymous and allowed people to effectively give us whatever feedback they thought would be helpful.
Mr Beer: Was that effectively a department or a business function, both of those things?
Adam Crozier: A team ran both of those things, yes, and two different teams, actually.
Mr Beer: How were the complaints or issues raised from that fed through to you, if at all?
Adam Crozier: The Have Your Say results, initially they were done annually, we then moved to doing them every month, a section every month and those were reviewed by the business units, by the Management Team, by the Audit Committee and, indeed, by the Board.
Mr Beer: In each of those three cases within Royal Mail, rather than Post Office doing it?
Adam Crozier: Well, I think they did their own when it was reviewed by their business units, so I’m assuming they did that with theirs. I’m not sure, I genuinely can’t recall, whether – Have Your Say for the Post Office obviously covered all the people who worked for the Post Office as personnel, and that would include people in the Crown Offices. They often talked about doing a separate one for the agents but I’m not – or the subpostmasters. I’m not sure if they ever did that or not. I genuinely can’t recall.
Mr Beer: But I’ve taken from your evidence there that that was, in each case, a Post Office-run function –
Adam Crozier: Yes, it was, yes.
Mr Beer: – and the results of it were looked at analysed by the Post Office?
Adam Crozier: Correct, and then on to the Post Office Board.
Mr Beer: I’m looking for something that jumped from the agents, as you called them, the subpostmasters, to you and your Board. Was there a facility to do that, without going through either of those mechanisms that the Post Office managed?
Adam Crozier: I don’t believe there was, no.
Mr Beer: I think it’s right that you made limit appearances at Post Office Limited Board meetings; is that right?
Adam Crozier: I think it was two, which were both in between David Mills leaving at the end of 2005, and Alan Cook arriving in March or April 2006, and partly – well, in fact, only because those two meetings were very strongly about the latest negotiations with Government around the subsidy to ensure that we were able to sign the company off as a going concern.
Mr Beer: You say in your statement – no need to turn it up, it’s paragraph 27 – that you attended those meetings because they were in relation to matters of shared interest.
Adam Crozier: Yes.
Mr Beer: So why was it that you attended two board meetings of the Post Office Board in your seven and a bit years as CEO?
Adam Crozier: For a number of different reasons. Number 1, when I arrived, the CEO of the Post Office was David Mills, who reported directly to Allan Leighton, the Chair of Royal Mail. So I was not involved in the running of the Post Office. That was a direct line relationship. And when it switched to Alan Cook, Alan had a slightly more normal dual reporting, which was obviously to the Board of the Post Office and the Chairman of the Post Office on the one hand, and then to me with regards to how Post Office interfaced with the Royal Mail Group, for instance funding or the commercial relationship between the two companies.
And I was advised by the Company Secretary that it was – that both the shareholder and the Board wanted the two things kept separate and, therefore, I shouldn’t be on that Board.
Mr Beer: We’ve spoken about the responsibility on Post Office Executive Team and its Board to refer things up to Royal Mail Management Board and the main board, were there any mechanisms for other main board members or Management Board members to, as it were, go down into the Post Office Board to take a look at what was going on?
Adam Crozier: Yes, there were. So because what we were trying to do was a very big people and cultural transformation and, certainly on the Royal Mail side, a huge technology revolution in terms of putting in sorting machines and tracking and tracing for parcels, and what have you, very unusually, we had our Group HR Director on the Board of the Royal Mail, and the Group Technology Director on the Board of the Royal Mail, and obviously those also had tentacles into the Post Office in terms of people and technology.
Equally, Allan Leighton, who was Chair of Royal Mail, was also on the Post Office Board, and the Company Secretary, Jonathan Evans, was Company Secretary on the Royal Mail Board and attended all the POL Boards as well.
Mr Beer: So were the principal links between the two through Mr Leighton and Mr Evans?
Adam Crozier: Correct.
Mr Beer: Can we look, please, at POL00362335, page 20, please. Can we rotate it, please, 90 degrees clockwise.
We can’t, I’m told.
I can’t date this because it comes within a loosely assembled pack of papers –
Adam Crozier: Right.
Mr Beer: – and it’s not dated itself. But, given it’s got the Chairman of the Plc as Allan Leighton, and David Mills as CEO of Post Office, it must be before 2006, right?
Adam Crozier: Yes.
Mr Beer: As we see at the top, the Chairman is Allan Leighton. The deputy chairman, Elmar Toime –
Adam Crozier: Yes.
Mr Beer: Off to the left, the Company Secretary of Royal Mail Holdings is Jonathan Evans.
Adam Crozier: Mm-hm.
Mr Beer: The Chief Executive of Royal Mail, you. Then a line round to company-wide functions from you?
Adam Crozier: Yes.
Mr Beer: Then two direct responsibilities, Parcelforce Worldwide and Logistics to you, yes?
Adam Crozier: Yes.
Mr Beer: Then on the right-hand side, we see – sorry, we should have worked our way across the business unit, Parcelforce, Logistics, Royal Mail Letters, GLS, Royal Mail International and then, on the right-hand side, Post Office Limited.
Adam Crozier: Yes.
Mr Beer: That has obviously David Mills as the Chief Executive at this time. It has a line into, I think, Allan Leighton, the Chairman of Royal Mail Holdings Plc; that would be correct, wouldn’t it?
Adam Crozier: That would be correct, yes.
Mr Beer: Not to the Deputy Chairman?
Adam Crozier: No.
Mr Beer: That would be correct?
Adam Crozier: Yes.
Mr Beer: Not into Jonathan Evans?
Adam Crozier: No.
Mr Beer: That’s correct as well, is it?
Adam Crozier: Also correct, yes.
Mr Beer: Then, I think, the line goes across to you; would that be correct?
Adam Crozier: In the sense that I reported in to Allan Leighton, yes.
Mr Beer: I see.
Adam Crozier: Yeah. So all three, myself, Elmar and David, all reported indirectly to Allan and Elmar, as the Executive Deputy Chairman, was in effect – I can’t think of a better phase – a first among equals so was effectively the lead executive.
Mr Beer: So this diagram represents or should be taken to represent issues arising from David Mills, the Chief Executive of the Post Office, coming through you?
Adam Crozier: No.
Mr Beer: No?
Adam Crozier: No, not at all. No. As I said, he reported directly to Allan Leighton.
Mr Beer: What does the line above the Chief Executive, Post Office Limited, David Mills, that comes up and goes across the page and comes back down to you, mean?
Adam Crozier: I think that’s just the way these things are drawn. It’s – it – very clearly, all three of us directly reported individually into Allan Leighton.
Mr Beer: So we should take this to mean that you, at this time, had no role; you’re on the opposite side of the diagram –
Adam Crozier: Correct.
Mr Beer: – and nothing in relation to the Post Office passed through you or, indeed, any other part of Royal Mail Holdings, except insofar as it went straight to the Chairman?
Adam Crozier: Correct.
Mr Beer: Thank you. That can come down.
Is that a reflection of the great autonomy that the Post Office enjoyed?
Adam Crozier: Yes.
Mr Beer: You told us a moment ago that you think you attended two meetings of the Post Office Board. When you didn’t attend, did you receive minutes of the Post Office Board?
Adam Crozier: Yes, the Royal Mail Holdings Board received minutes from each of the operating companies – were included in the board pack.
Mr Beer: You said Royal Mail Holdings received them. Did you personally receive the minutes of the Post Office Board?
Adam Crozier: Yes, as a Director of Royal Mail Holdings, yes, sorry.
Mr Beer: Did you receive the minutes of the Post Office Limited committees?
Adam Crozier: No, I don’t think we did. I think –
Mr Beer: I’m thinking in particular of the Audit and Risk Committee?
Adam Crozier: The Audit and Risk Committee, I think if there was a poor audit that went to the Royal Mail Audit Committee meeting, for further looking and work, I’m not sure if they always received the minutes of the Risk Committee, no.
Mr Beer: You personally didn’t always receive the minutes of the Post Office Limited Audit and Risk Committee?
Adam Crozier: I definitely did not, no, as far as I recall, I don’t think.
Mr Beer: So can we look at an example of the meeting of the Post Office Limited Board that you did attend?
Adam Crozier: Yes.
Mr Beer: POL00021492. We can see that it’s Post Office Limited Board Meeting, 20 April 2006.
Adam Crozier: Yes.
Mr Beer: We can see those who are members of the Committee who are present and we can see in attendance, second down, is you?
Adam Crozier: That’s correct, yes.
Mr Beer: Can we look, please, at page 4. We can see that the solvency of the Post Office was being addressed?
Adam Crozier: Yes.
Mr Beer: Does that reflect the point that you made earlier, that the very financial viability and existence of the Post Office was of a critical concern to you?
Adam Crozier: It was, and it didn’t just impact the Post Office but, obviously, because of its scale, it impacted the solvency of the Group as a whole, and the Group’s ability to sign its accounts as a going concern.
Mr Beer: Mr Corbett is recorded as outlining the company’s current financial position in further detail. It was clear that the company was insolvent and that, in the absence of support from its parent company or ultimate shareholder – that’s the Government –
Adam Crozier: Correct.
Mr Beer: – it would be unable to meet its debts as they fell due over the foreseeable future.
It was reported to the Board that the Government had agreed in principle, with the support of Royal Mail, to write a letter to the company, under which the Government acknowledged the solvency issues facing the directors of the company and directors were prepared to continue trading on a going concern basis only on the basis of the following support.
If we scroll down, we can see that it’s set out.
Adam Crozier: Yeah.
Mr Beer: So was that why you were attending this meeting –
Adam Crozier: It was, yes.
Mr Beer: – because it’s a solvency of the Post Office issue, which, in turn, affects the accounting and potential viability of Royal Mail Group?
Adam Crozier: Indeed.
Mr Beer: Can we go on, please, to page 10. If we scroll down, please, we can see there’s an Operations Report, and a document will have been produced, and then it’s summarised, the “Horizon S90 Release”. There’s a four point explanation of what the Horizon S90 release was. If you just read that to yourself. Then under (c), an issue of the network resilience was raised.
Am I right in thinking that you would have picked these things up, in a sense, by chance because you were at this meeting?
Adam Crozier: That’s correct.
Mr Beer: Save for picking things like this, which are about Horizon and network resilience, up by chance, were you entirely reliant on the information pushed up the line to you, whether from the MD or CEO of the Post Office, or from the Company Secretary?
Adam Crozier: Yes, or if anything was brought to my attention by the Group Technology Director.
Mr Beer: How would that occur?
Adam Crozier: He – the IT Director in the Post Office would have reported to the CEO of the Post Office. That was a – sorry, it’s management speak, but a hard line relationship.
Mr Beer: Yes.
Adam Crozier: But the Group Technology Director who was largely focused on driving through this automation and modernisation of Royal Mail was also there for advice and help to the Post Office Technology Team if required.
Mr Beer: So, if, as we now know there to be the case, there were, putting it neutrally, issues with the Horizon technology, would you have expected, or was the system that the POL IT structure, the Post Office IT structure, would have pushed those issues up for your attention and for the Royal Mail Group Board’s attention through the Group IT Director route?
Adam Crozier: First of all, I don’t recall the POL IT team ever doing that. That’s the first thing to say. Second of all, I would have expected them to raise it with the POL Executive Team, first of all, that was the reporting lines; they were running and controlling the Post Office and they had responsibility for Horizon. If they needed some technical expertise, yes, I would have expected them to speak to the Group Technology Director, but if there were any real issues, that was why both the CEO of Post Office and Chairman of Post Office were on the Group Board – was to enable them to have a direct line to relay any issues in Post Office to the rest of the board.
Mr Beer: In paragraph 11 of your witness statement, which is on page 4, if we can turn that up, please – paragraph 11 – you say, whilst you’ve tried to address as best you can your recollection of the corporate structure:
“… I must stress that my responses are not in any way intended to detract from the fact that it is clear to me now that this structure did not help facilitate vital information regarding Horizon and the conduct of criminal proceedings reaching me or the board of Royal Mail as it should have done.”
There is no need to turn it up but you make precisely the same point in paragraph 98.1 of your witness statement on page 33.
Before getting into the detail, can we address first what you say is clear to you now but was not clear to you presumably at the time. Firstly, what in the corporate structure prevented or did not facilitate vital information from reaching you and the Board?
Adam Crozier: I think it was – if I may expand a little, I think it was – this is a reflection, trying to help, in the sense of what could have gone wrong here. I should stress, at the time, actually it made perfect sense to me because the two companies had been set up with such a different objective, one in an entirely commercial market, one really trying to become a sustainable public service; and one that needed to modernise at enormous speed, as it opened up to competition, and the other one that absolutely had difficult issues in terms of managing the size of the network, but largely through the same business, if you like, as it had previously had, albeit with less Government revenue and more financial services revenue.
I think the issue, looking back, that I could see, that was unhelpful was actually one in the way in which it impacted on the two attitudes or cultures of the two companies, which is that, in Royal Mail, because everything, as I said earlier, was fundamentally broken, everyone on the Board was aware of that. The starting position was everything didn’t work and, therefore, there was no option but total, utter transparency because if anyone had brought a presentation saying everything is fine, they wouldn’t have been believed.
So it was all about getting everything out on the table, transparently dealing with it and trying to make progress.
I worry, with the benefit of hindsight, that, because POL didn’t have that same burning bridge, for want of a better phrase, that that same transparency didn’t allow information to flow up through that governance system on its own and that, potentially, the separation of the two aided and abetted people not getting at that information.
Mr Beer: Here, you point to the corporate structure prevented or didn’t help facilitate. What about the corporate structure, rather than the culture within each organisation? What acted as a bar in the corporate structure to the provision of information to Royal Mail?
Adam Crozier: I think just because, internally, it was very clear that people worked for the Post Office or the rest of the Group, I think it just generated that sense of two different companies, and I think the structure just, again, benefit of hindsight, I think it didn’t allow for the easy flow of information.
Mr Beer: What was the vital information about Horizon which the structure of the companies prevented you from being told about?
Adam Crozier: As far as I recall, I don’t remember anyone in the Post Office governance system, whether that’s the Board, the Risk Committee, the Exec Team, the General Counsel, the Legal Teams, most importantly the Operations and IT Teams who owned Horizon, I don’t remember any of those people flagging up any concerns in that system.
Mr Beer: What –
Adam Crozier: I don’t know whether they flagged it internally but it never reached the Holdings Board.
Mr Beer: What was the vital information about the conduct of criminal proceedings which the structure prevented you from being told about?
Adam Crozier: I think for me, I’m not a lawyer, obviously, but it’s clear to me that, central to all of this, is the issue of disclosure. I noted more recently the judgments of the Appeals Court and, clearly, there were some material deficiencies with the disclosure process. That seems very, very clear.
Mr Beer: What was it about the structure that prevented or did not help facilitate information about the conduct of criminal proceedings from reaching you? We’re going to come on to it after lunch but the proceedings were instituted, pursued and completed by a Legal Team that sat within Royal Mail Holdings, not the Post Office.
Adam Crozier: Yeah, working with the Post Office team, and I don’t recall the Company Secretary, Jonathan Evans, who had responsibility for that area, talking about that at any of the Holdings Board meetings.
Mr Beer: That’s a separate issue, Mr Crozier, whether in fact he talked about it. What was it about the structure that did not help facilitate, as you say, information about the conduct of criminal proceedings reaching the Board of Royal Mail?
Adam Crozier: I’m not sure I mentioned anything about the structures specifically with regards to that question.
Mr Beer: It’s this sentence here that’s on the screen:
“… it is clear to me now that this structure did not help … vital information regarding … the conduct of criminal proceedings reaching me …”
What about the structure prevented information about criminal proceedings reaching you or the Board.
Adam Crozier: I think I was meaning more with regards to the Horizon than the proceedings themselves.
Mr Beer: Sir, that’s an appropriate moment to break, if we may. It’s quarter past now. I wonder whether you’d mind breaking until 2.05.
Sir Wyn Williams: Yes, that’s fine.
Mr Beer: Thank you very much.
(1.16 pm)
(The Short Adjournment)
(2.05 pm)
Mr Beer: Sir, good afternoon can you see and hear us?
Sir Wyn Williams: Yes, I can. Thank you.
Mr Beer: Good afternoon, Mr Crozier. Can I pick up where I left off.
Sir Wyn Williams: Before you do, I understand that you would like me to sit until 3.45 this afternoon, which I’m prepared to do but, at about 3.00, I’d like you to check with the transcriber whether or not she needs a break or whether we can go on until 3.45 without a break.
Mr Beer: Thank you, sir. I’ll do that.
Mr Crozier before lunch, you spoke about the autonomy that the Post Office enjoyed from Royal Mail. Was it not patent or obvious from the structure of the organisation and the autonomy that the Post Office enjoyed, that there was a significant risk for issues that the Post Office did not wish to raise with Royal Mail to go unnoticed by Royal Mail?
Adam Crozier: That was the purpose of ensuring that the Chief Executive, the Chairman and the Company Secretary of Post Office were on the Royal Mail Holdings Board as I understand it. That was a decision before I arrived. Of course, we built up a strong internal audit function, which was able to go anywhere in the company, and their audit plan was checked by the Holdings Board, the Audit Committee and the Exec Team. And also there was external audit, who similarly were involved in the – right across the company and, again, had the ability to go anywhere and look at anything, and I met regularly, and privately, with internal audit and external audit, and was able to check privately whether there were any concerns that they had.
Mr Beer: In your seven years, are you aware of any external audit of the Horizon system?
Adam Crozier: External, do you mean external in terms of Ernst & Young, as in financial auditors, sorry?
Mr Beer: No, any form of out of the Horizon system?
Adam Crozier: No, I don’t think I am no.
Mr Beer: In your seven years, are you aware of any form of external audit or review of the Post Office’s prosecutorial function?
Adam Crozier: I don’t believe so, no.
Mr Beer: Are you aware of any form of internal audit of the Post Office’s prosecutorial function in your seven-year period?
Adam Crozier: I don’t recall.
Mr Beer: Can I start by looking at the responsibilities of a director of a business or of a CEO; would those duties include a director’s duty to the accuracy of accounting information and accounting records?
Adam Crozier: Yes, it would.
Mr Beer: Taking it shortly, is it right that company law requires directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the company and, indeed, of a group, if it’s within a group, and of the profit and loss of the group for that relevant period?
Adam Crozier: That’s correct, yes.
Mr Beer: Does a director have to have confidence in the figures being produced in respect of a business’s profit and loss before they can take a definitive view on the financial statements of the business?
Adam Crozier: Yes, they do.
Mr Beer: If there are any doubts about the integrity of the figures which are produced in the accounts of a business, that would be a matter of significant concern for any director of the business?
Adam Crozier: Yes, it would.
Mr Beer: Accounting integrity, or concerns over accounting integrity, would be a significant issue, would you agree, for the director, irrespective of whether the business was a unitary enterprise or franchised across ten or 1,000 outlets?
Adam Crozier: Under the combined codes, you had the same duties as a director, yes.
Mr Beer: Would you, as CEO, expect any concerns or even allegations about concerns that the accounting integrity of a business was lacking or problematic to be escalated to you and then to the main board?
Adam Crozier: Yes, either from the external auditors, the financial community, both within POL, or the group Chief Financial Officer, or the internal Audit Team. If they had any concerns, I would have expected them, if it occurred within POL, to report that to the POL Board but also to the Holdings Board and the Audit Committee, yes.
Mr Beer: Is the CEO responsible for ensuring that the board to whom they report is fully briefed on the reliability of accounting systems that are used to support the figures for the business?
Adam Crozier: Generally speaking, that would be led by the CFO but supported by the Chief Executive, yes.
Mr Beer: In the case of a group such as Royal Mail, would that include responsibility for the oversight of business units, such as the Post Office?
Adam Crozier: Under our structure, that was – as I’ve explained before, that was a separate reporting function in to the Holdings Board. Obviously, the financial numbers were collated by the Group Chief Financial Officer, yes.
Mr Beer: What were your line management responsibilities?
Adam Crozier: Generally speaking? So – well they changed over a period of time, as I think I say in my statement. I was the – initially responsible for Parcelforce and Royal Mail Logistics, which were two businesses at that time, also involved in GLS, so the parcel side, and I was responsible for trying to help modernise the Letters business. I had Marketing, Finance, and Group Technology, which, as I said before, was very focused on the huge job we had to do to modernise the Royal Mail Letters business, in terms of sorting machines, automating machines, tracking and trace capability, so that we could build a parcels business that would allow the business to compete in the future.
Mr Beer: It’s my fault for a poor question. Can we look at it the other way round: did any of your line management responsibilities include responsibility for any senior executives within the Post Office?
Adam Crozier: Between 2000 and the end of 2005, when David Mills left, no. From 2006, when Alan Cook took over from David, as I said earlier, he had dual reporting from me on group issues, with regards to things like funding and budgets and the commercial relationship between the Post Office and Royal Mail, which, of course, was huge, but also he had a direct reporting line into the Chairman of the Post Office and the Post Office Board, as you would imagine.
Mr Beer: After 2006, and other than in relation to Mr Cook, did any of the people within the Post Office Senior Executive Team report to you?
Adam Crozier: No, I don’t think so, no.
Mr Beer: Can you help us with line management responsibility for the following people: the Head of Security within the Post Office?
Adam Crozier: I believe they reported in to Jonathan Evans.
Mr Beer: Did –
Adam Crozier: The company Secretary, sorry.
Mr Beer: The Company Secretary –
Adam Crozier: Yes.
Mr Beer: – of Royal Mail Group?
Adam Crozier: And Post Office, yes.
Mr Beer: In what capacity was Jonathan Evans directly line managing that person, as the Company Secretary of Post Office or of Royal Mail Group?
Adam Crozier: I’m not sure I recall, to be honest.
Mr Beer: Who had line management responsibility for the head of Product Branch & Accounting within the Post Office?
Adam Crozier: That would have been the Post Office CFO.
Mr Beer: Any oversight of that function from within Royal Mail Group?
Adam Crozier: That would have come from the Group CFO, which was Marisa Cassoni and, in the latter years, Ian Duncan.
Mr Beer: Who had line management responsibility in respect of the Head of Legal services within Royal Mail Group?
Adam Crozier: That was Jonathan Evans, Company Secretary.
Mr Beer: Who had line management responsibility for the General Counsel within Royal Mail.
Adam Crozier: Jonathan Evans, the Company Secretary.
Mr Beer: The Head of IT in the Post Office?
Adam Crozier: Would have reported in to the Chief Executive of the Post Office.
Mr Beer: Any line, whether direct or dotted, back to Royal Mail Holdings?
Adam Crozier: Dotted for skilled advice, for want of a better phrase, to the Group Technology Director.
Mr Beer: But that’s in respect of advice?
Adam Crozier: Yes, they reported to the Chief Executive of the Post Office.
Mr Beer: So the function stayed within Post Office?
Adam Crozier: Yes.
Mr Beer: Can I look at issues in a different way, namely which parts of the business had responsibility and oversight for certain activities, conduct or functions –
Adam Crozier: Okay.
Mr Beer: – rather than looking at the people involved. Can we turn up page 14 of your witness statement, please, at paragraph 41.1. You say:
“Oversight for criminal prosecutions and civil proceedings brought by [the Post Office] would have sat with [the Post Office] Legal Team, and oversight for prosecutions brought on behalf of the rest of the Group would have sat within the Group Legal Team.”
Then you say:
“I believe that both legal teams would have been under the supervision of the Company Secretary, Jonathan Evans.”
Were you not aware that, in fact, there was no Post Office Legal team, it had no separate legal in-house function and that civil and criminal proceedings were brought by lawyers within the Royal Mail Group Legal Team.
Adam Crozier: I was not, no.
Mr Beer: So lawyers from within the Group gave advice on prosecutions, they made decisions about prosecutions and within prosecutions, and they conducted the proceedings, not any Post Office lawyers. You didn’t know that?
Adam Crozier: Was that throughout the whole period or –
Mr Beer: Yes.
Adam Crozier: And I – I’m sorry –
Mr Beer: Throughout the whole of your period.
Adam Crozier: My period?
Mr Beer: Yes.
Adam Crozier: I was not aware of that, no.
Mr Beer: Given the facts that I’ve just described, that would mean, is this right, that your Board had a responsibility for the conduct of a team of lawyers within Royal Mail Group who were acting on behalf of the Post Office, rather than the Post Office Board having such a responsibility for them, wouldn’t it?
Adam Crozier: In part yes, but also, they would be doing that at the behest of the Post Office team who owned Horizon and any issues deriving out of that.
Mr Beer: Well, they might be their clients.
Adam Crozier: Yes.
Mr Beer: Post Office Limited might be their client?
Adam Crozier: Yes, sorry, yes.
Mr Beer: I’m talking about responsibility for the conduct and work of the lawyers. That fell, if I’m right, to Royal Mail Group to manage and oversee?
Adam Crozier: My understanding at the time was that that was also under the supervision of the Company Secretary at the Post Office, in conjunction with the Royal Mail, and they used, I thought, a mix of Post Office Legal team, augmented by Royal Mail Legal Team and outside legal people, as well. That was my understanding.
Mr Beer: So be it. Can we turn up page 28 of your witness statement, please. Look to start at paragraph 83. You say:
“Generally speaking, responsibility for criminal prosecutions which [the Post Office] brought would have sat under the relevant [Post Office] Executive Team members under the oversight of [the Post Office] Executive Team as a whole, the [Post Office] Risk and Compliance Committee and [the Post Office] Board.”
Then if we go on to 84, you say:
“In response to the questions I have been asked by the Inquiry, I should add that I do not recall having involvement in or knowledge of the oversight of investigations and prosecutions brought by [the Post Office] against subpostmasters, either for theft, fraud and false accounting for alleged shortfalls in branch accounts, or for the recovery of such alleged shortfalls through the use of civil proceedings.”
Then over the page to 87:
“To the best of my knowledge, I do not recall reports of the number of prosecutions being brought by [Post Office] against subpostmasters being escalated to me, nor the fact that there were systemic issues impacting the Horizon system.”
I just want to test what you said in those three paragraphs there about your lack of knowledge about these activities of the Post Office. Can we start, please, by looking at RMG00000006. I think that should be, in my version there, upright. Thank you. If we can go back to page 1, please. Right.
Sorry, you’re going to have to tilt your head to the side. Can you see that these are minutes of an Audit and Risk Committee of the 11 November 2003.
Adam Crozier: I can, yes.
Mr Beer: Can you see that you were in attendance?
Adam Crozier: Yes, I do.
Mr Beer: I think you’re the third person down in the “In Attendance”. Then if we go, please, to page 5, please. Scroll down, please. Thank you. A security report.
Adam Crozier: Yes.
Mr Beer: The security report was received, so that’s a document that’s tabled for the meeting and, in particular, the following was noted:
“Royal Mail personnel related crime cost the business approximately £26 million per year. In 2002/03 the company had prosecuted 324 people, cautioned 108 others, recommended 47 cases to the Procurator Fiscal and taken legal action in a further 43 cases. These were noted as minimum figures, since there may also be cases where local action is taken to deal with offenders.”
This is relatively early in your tenure, is that right, you took your post in April 2003, and this is November 2003?
Adam Crozier: I think it was February 2003, I started, sorry.
Mr Beer: So eight or so months after you took up post. So, from this point onwards, you would have known that the company was prosecuting a vast number of people each year?
Adam Crozier: Yes, but it refers to Royal Mail personnel. We wouldn’t have described subpostmasters as Royal Mail personnel, so obviously I don’t recall this particular meeting, it’s a very long time ago but I think by the description here I would say that was very much focused on Royal Mail personnel, both full time and casual workers.
Mr Beer: You think this figure here does not include any prosecutions of Post Office employees –
Adam Crozier: I don’t think so I don’t think –
Mr Beer: – or subpostmasters?
Adam Crozier: I don’t believe so no.
Mr Beer: Why was that not reported to the group?
Adam Crozier: I don’t know.
Mr Beer: Can you assist?
Adam Crozier: I beg your pardon?
Mr Beer: Can you assist?
Adam Crozier: Sorry, I don’t know.
Mr Beer: Why would you have wanted to or why was it necessary to be told about the number of people that Royal Mail were prosecuting –
Adam Crozier: Oh I see, I’m so sorry.
Mr Beer: – but not of the Post Office?
Adam Crozier: Because, at this time, we were having a lot of problems in Royal Mail, both in terms of theft of things like credit cards out of the post, which was obviously severely denting confidence in the post and, indeed, of the companies that used it. There was a lot of mail – one of the reasons we were failing quality of service targets is a lot of mail wasn’t being delivered, it was either being dumped or hoarded, so a whole host of reasons in terms of why what we used to call – it was a programme run by ourselves, very much monitored by Postcomm and Postwatch called Mail Integrity, which was all about the integrity of the mail itself.
Mr Beer: In any event, through this route, you would have known about the Royal Mail’s prosecutorial activities?
Adam Crozier: Yes, indeed, yes.
Mr Beer: Would you get regular updates of the number of people prosecuted in a year, the amount of loss estimated by the criminal activities of Royal Mail Group employees or other individuals, and the amount recovered?
Adam Crozier: I’m not sure I’d use the word “regular” but there were updates in terms of prosecution – investigations and prosecution of staff that reached – obviously came to the fore around the time of the Channel 4 Dispatches programme, which was in April 2004, which was obviously a very big and not good event for the company, which highlighted, through secret camera filming, all sorts of very bad practices going on in delivery offices and mail centres.
Mr Beer: Would you agree – I think you did agree before lunch – that prosecuting before the criminal courts is an unusual activity for a company to undertake?
Adam Crozier: It is. Although I believed, and I think I’m right but, you know, I’m not a lawyer and I’m not the expert, but I think, because the ones on the Royal Mail side were – I hesitate the use the words more straightforward, in terms of theft and various other things, like hoarding or dumping, that those were very often done in conjunction with the police and other authorities. As far as –
Mr Beer: So you’re saying that these prosecutions that you’re reading about here, you understood to be independently prosecuted, rather than prosecuted by the Royal Mail?
Adam Crozier: A mix, I think.
Mr Beer: In any event, for the proportion that were prosecuted by the Royal Mail, would you agree that that activity requires a special kind of a supervision and oversight?
Adam Crozier: Yes, much more expert than I would claim to have.
Mr Beer: Would you agree that it requires particular care where the company is the alleged victim of the crime, where the company investigates, whether it’s the victim of the crime, and then decides whether to prosecute?
Adam Crozier: Yes.
Mr Beer: A phrase that’s been described in the past as judge, jury and executioner?
Adam Crozier: Right.
Mr Beer: What special supervision and oversight of such an activity would you say was required?
Adam Crozier: I would have thought the supervision of the experts, both internal and external qualified lawyers, legal advice, the General Counsel, the Company Secretary and, of course, any audit people looking at any of the issues that arose.
Mr Beer: What about things like ensuring there’s a separation of functions?
Adam Crozier: As I said, the legal process is not my area of expertise.
Mr Beer: What about things such as the independence of decision makers?
Adam Crozier: Yes, I would have thought so, yes.
Mr Beer: What about things such as intrusive supervision and regular audits and reviews of the way in which the company is conducting its prosecutorial functions?
Adam Crozier: Yes.
Mr Beer: What about special attention being paid to who you’re recruiting to investigate alleged crimes against the mail?
Adam Crozier: Yes, I would have thought so. I assumed that all of the people in the teams were proper, qualified lawyers.
Mr Beer: Is the truth of the matter that you, in your position, did not have any developed understanding of the extent to which Royal Mail prosecuted or the way in which the things that I’ve just mentioned were or were not carried into effect?
Adam Crozier: No, as I’ve said earlier, I’m not a lawyer and I’m not a – I would not claim that that is my area of expertise, no.
Mr Beer: Can we look, please, at RMG00000008, please. This is the following year. You can see that it’s 24 May 2004 and it’s a minute of the Audit and Risk Committee of Royal Mail Holdings. You are shown in attendance third down?
Adam Crozier: Yes.
Mr Beer: Can we go to page 6, please. Under the heading “Protecting Royal Mail assets”:
“[Mr] Wilson, Director of Security, attended for this item, The Committee noted that Royal Mail was inherently vulnerable as a business to attacks on its assets, whether through fraud or other events … The committee noted:
“The key activity of the business in protecting Royal Mail’s assets and pipeline, including increased focus on fraud investigations, protection of information and the level of prosecutions. Separate discussions had taken place and action plans had been developed to address the issues highlighted recently in the Dispatches programme [that you mentioned a moment ago].”
Adam Crozier: Yeah.
Mr Beer: “The company had made 299 prosecutions last year. John Neill asked if the policy on prosecutions was clear and what level of resources will be required to improve the prosecution rate. [Mr] Wilson did not feel that an increase in resource was necessary or likely to be effective … the company had identified a problem in recruiting people in cities where criminal activity was at higher levels.”
This is a discussion about protecting Royal Mail assets and prosecutions?
Adam Crozier: Yes.
Mr Beer: Again, there’s a note of the number of prosecutions made in the previous year. Again, in your view, does this relate and only relate to Royal Mail prosecutions and not include, within the figure, Post Office?
Adam Crozier: I think so, yes.
Mr Beer: Again, why were the Post Office prosecutions and the conduct of those not being sent up to the Royal Mail Board, which you’ve said already, but also to this Audit and Risk Committee?
Adam Crozier: Well, the headline says, “Protecting Royal Mail Assets”, so, not knowing what the conversation was at a previous meeting, but it could be that this is a follow-up to the Dispatches thing. One of the things we did post-Dispatches was managed to get agreement from the Government to allow us to check the criminal records of anyone that was joining Royal Mail because we had an issue with bringing people in who were there to do us harm, particularly on the casual side.
And I should stress, by the way, that makes it sound like there were lots of people at Royal Mail who were bad people. Actually, there were lots of wonderful people in that organisation and the vast, vast majority were terrific people but, clearly, we had a problem here and we had to ensure that those people who were joining the organisation were ones that we had done the proper checks on as a way of cutting down on the level of crime that was being committed on the company and, indeed, therefore the citizens of the UK.
Mr Beer: My question was: why have we seen discussion in the main board and in this committee of the numbers of prosecutions, you say, brought by Royal Mail, and about prosecutorial policy here, being referenced to the committee. But, on your account, none of this relates to the Post Office?
Adam Crozier: No.
Mr Beer: Why was that not considered by either the committee or the main board of Royal Mail?
Adam Crozier: I don’t know. Because we had gone through that very difficult and bad experience in Royal Mail, I think this was part of, I guess, what I mentioned earlier, about therefore being very transparent about the issues we were trying to deal with on the Letters side of the business, so this would have been brought forward by the Letters Team to try to create that understanding of what we were dealing with, clearly, for whatever reason, and I don’t recall why that same drive wasn’t there from the Post Office team.
Mr Beer: Can we look thirdly, we’ve – looked at the Board, we’ve looked at the Committee. Can I look at a third potential source of oversight –
Adam Crozier: Of course.
Mr Beer: – the Management Board, please? RMG00000031, please. If we just blow up the top part, thank you. This is the Royal Mail Management Board which sat, essentially, underneath the Royal Mail Holdings Plc main board as I’ve called it; is that right?
Adam Crozier: That’s correct, yes.
Mr Beer: It’s for Tuesday, 20 January 2004, the minute, and you are present, and you’re shown as a person present because you are a member of this Board?
Adam Crozier: Correct.
Mr Beer: Could we look, please, at page 5., and scroll down to “Prosecution Policy, RMM(04)94”, I think that’s the title of the paper:
“The Management Board received a paper which updated the Board on current levels of legal expenditure and seeking endorsement for a change in priorities and considered which activities might be assessed or reduced without significant risk to the business in order to facilitate further headcount reduction. The Management Board:
“Noted the balance between further headcount reductions in Legal Services and increasing external legal costs was being carefully managed;
“Endorsed the prioritisation of the resource used in criminal prosecutions by the Company. The Company’s public position of having a strict policy towards offenders would not be altered by this. [Mr] Evans would investigate the possibility of increasing Police and CPS involvement and report back to the Management Board on the outcome of these investigations …”
Then two action points are noted.
Would you say again this is about and only about Royal Mail prosecutions?
Adam Crozier: I believe so, yes, for two reasons. You will have noticed on a lot of the – well, hopefully all of the minutes that you see, we had a policy of asking the team responsible to come to a meeting to present things, and you’ll notice from the front page that you put up, there’s no one from the Post Office in that –
Mr Beer: Go back to page 1, please. If we scroll down, we’ll see the others attending, which is, I think, where they would appear if they were there?
Adam Crozier: Yes.
Mr Beer: Thank you.
Adam Crozier: Yes.
Mr Beer: You’re making the point that there’s no Post Office –
Adam Crozier: There’s no Post Office there and, if you look at David Mills’, who was the Chief Executive of Post Office’s attendance, he didn’t join until quite a bit after that topic and I don’t think there’s any way we would have taken that topic if it involved the Post Office without him there and without any representative of the Post Office there.
Mr Beer: Does that – again, that can come down, thank you –
Adam Crozier: To the best of my memory.
Mr Beer: Does that, again, reflect the fact that just like the main board, just like the Audit and Risk Committee, the Management Board did not oversee or supervise in any way the conduct of prosecutions by Post Office Limited –
Adam Crozier: No.
Mr Beer: – even though such prosecutions were being conducted by Royal Mail lawyers?
Adam Crozier: Yes, on behalf of the Post Office. And, again, I should say, that’s not my memory but, obviously, I completely take what you’re saying as read.
Mr Beer: Why was it the case that this prosecutorial activity of the Post Office was not the subject of any scrutiny in or by the three mechanisms that we’ve just looked at: Board, Risk Committee or Management Board?
Adam Crozier: I’m assuming that’s because the Post Office – if you remember I think there was a question, which is somewhere in my statement, around who set the agendas for the meetings. I think, as I mentioned earlier, at Royal Mail we were really pushing things forward and trying to improve things and deal with things very openly and transparently. If POL at that stage had been asked thorough the Chairman or the Chief Executive if they wanted any items raised at the Holdings Board then they would put those forward, obviously Mr Leighton was also on the POL Board itself and I guess that would have been because they didn’t volunteer this issue as being one that they wanted to be discussed in that forum.
At the Management Board, that was really about where the two companies came together in a sort of trading and commercial agreement, as I said earlier.
Mr Beer: Would another way of describing it be that you let them get on with it?
Adam Crozier: I wouldn’t have put it that way but I understand why you might take that reference.
Mr Beer: Do you ever remember receiving reports about the conduct of prosecutions by Royal Mail lawyers on behalf of the Post Office?
Adam Crozier: No, I don’t.
Mr Beer: Do you think, looking back with hindsight, this is an activity that ought to have been the subject of oversight and supervision by one or more of the three boards or committees that I’ve just mentioned?
Adam Crozier: With the benefit of hindsight, yes, I do.
Mr Beer: To what extent is that issue that we’ve identified the product of the structural difficulties that you identified in paragraph 11 of your witness statement?
Adam Crozier: As I said, my – again, looking back with hindsight, I think that was one of my concerns, that, in this structure, it allowed things to potentially appear in the cracks for want of a better phrase, because I can’t think of a better one right now.
Mr Beer: What information ought the Royal Mail Board, its Management Board or its Risk Committee to have received from Post Office Limited about the conduct of prosecutions?
Adam Crozier: Probably similar to what we’ve seen on Letters, which is an explanation of what was going on and to what degree.
Mr Beer: We’ve seen that, in one of the minutes, that the Board was exercising some control, was either turning the dial up or turning it down on the extent to which an active prosecution policy should be pursued. Would that be a function of Royal Mail Group Board over the Post Office that it ought to have performed?
Adam Crozier: Again, I think the level of awareness of this, because of the lack of communication from the Post Office, was probably very low.
Mr Beer: Where does the responsibility for the lack of communication from the Post Office fall?
Adam Crozier: I think you would have to say for the Post Office Chief Executive and the Chairman.
Mr Beer: That’s –
Adam Crozier: That assumes, by the way – sorry, beg your pardon –
Mr Beer: I think we’re about to say the same thing. That assumes that they knew?
Adam Crozier: Exactly that and, you know, obviously, I don’t know whether they did or not. My assumption is that they didn’t but I guess that’s one of the roles of the Inquiry, is to figure that out.
Mr Beer: As well as responsibility potentially resting with Post Office’s Chief Executive and Chairman, does responsibility not rest with Royal Mail for designing a structure in which none of its systems of oversight picked up that this prosecutorial activity was even going on, on your account?
Adam Crozier: I think it is a matter of real regret that all of those checks and balances, the governance systems in both companies, failed, as well as internal audit, external audit, all the checks and balances that were put in failed to surface this issue out of the Post Office to a wider set of people.
Mr Beer: What was the level of your contact with Royal Mail’s General Counsel?
Adam Crozier: Mostly through the Company Secretary but, from time to time, separately.
Mr Beer: Did you ever explore with the General Counsel the extent to which he or she had involvement in the prosecutorial activities of the Post Office?
Adam Crozier: I did not, no.
Mr Beer: Did you ever explore with such General Counsel how they ensured adequate resources were available to ensure effective oversight of the Post Office’s own legal and regulatory obligations?
Adam Crozier: It was quite a regular question, at most audit committees, to the various teams through Jonathan in Legal and internal Audit, you know, “Have you got enough people to do the job that you need to do?” That would be a question that would be regularly asked.
Mr Beer: What steps, if any, did the Royal Mail Board or you take to ensure that the role of General Counsel was effectively discharged, so as to ensure compliance path Post Office with its legal obligations, so far as prosecutions are concerned?
Adam Crozier: I think that – because he reported to the Company Secretary, I think his role would have been reviewed by the Company Secretary, in terms of performance.
Mr Beer: So the answer I think is, for you personally, none, but that’s because it was Mr Evans’ responsibility?
Adam Crozier: That’s correct.
Mr Beer: You tell us in your witness statement – no need to turn it up, it’s paragraph 43 – that you trusted the Managing Director/CEO of the Post Office, and the Chair, to raise any significant systemic or reputational issues relevant to the Post Office that would have had an impact on the Group, either at the Royal Mail Management Board meetings or the main board meetings; is that right?
Adam Crozier: Yes.
Mr Beer: When you say you trusted, do you mean you assumed that they would?
Adam Crozier: Not just that. I mean, obviously, I assumed there’s good people in the senior position very qualified for the roles, that they would volunteer those issues but, as you can tell in many places in my statement, I made it very clear that our style of management from the Board down was to go looking for problems. We were fixing things across the business. I clearly wish we had known about this, because I think when I look at collectively what we were tackling, I’m sure we would have done it if we were aware of it and, unfortunately, which is a huge regret, we weren’t.
Mr Beer: So you and your Board and your Management Board, you tell us actively sought out problematic areas?
Adam Crozier: Yes.
Mr Beer: Not only was this one not found, those within Post Office did not escalate it to you or your Board?
Adam Crozier: They did not.
Mr Beer: How would you define an issue that had “significant systemic or reputational issues relevant to the Post Office”, ie what was the threshold that needed to be crossed in order for an issue to be escalated to you?
Adam Crozier: I think something that would genuinely impact the performance of the company that would also have an impact on the group itself, whether that was financially or reputationally.
Mr Beer: How was that made clear or communicated to the Post Office Executive Team so that they would know – for example, the issues with which we are dealing – whether they fell on the “escalate” or “do not escalate” side of the line?
Adam Crozier: Yeah, I don’t think there would have been many Board meetings without the Chairman and the Non-Exec Directors and the Executive in the space of myself saying that we needed to try to get to the bottom of all the issues. It all started with inheriting a company in severe trouble and we asked people, at all times, to be open, transparent and for bad news to travel very fast. We went looking for that. If I take an example, which is in my statement, in the Letters business, you know, myself and the Chairman would meet with thousands of frontline delivery office managers on a regular basis.
We would get them to tell us everything that they felt was wrong with the business, issues they needed fixing. We’d go away, we’d come back the next time, we’d tell them what we’d done in terms of fixing it and we’d ask them what we needed to tackle next.
So all of those issues were just about trying to make progress in a company that was starting from a very, very terrible position.
Mr Beer: Were you relying on the judgement and discretion of the CEO and the Chair within the Post Office to raise matters which they thought ought to be before the Board?
Adam Crozier: Yes.
Mr Beer: Do you know what steps they took to motivate or encourage their staff towards openness and accountability and transparency in your period of office?
Adam Crozier: I think Sir Mike Hodgkinson, I think, set up the Risk Committee there and Chaired it himself. I think he tried to install the right attitudes. Obviously, I wasn’t in any of those meetings, I wasn’t in the POL Board meeting other than on the two occasions I think that we spoke about earlier, so I was never seeing that firsthand.
Mr Beer: You’ve mentioned that there was a fundamental difference in culture between Royal Mail and Post Office and that related, in particular, to openness; is that right?
Adam Crozier: I’m not sure if I – you might correct me and say I used the word “fundamental” but, certainly, I thought there was a real difference in –
Mr Beer: A real difference, okay.
Adam Crozier: Yes.
Mr Beer: In what did that have its origins?
Adam Crozier: I don’t – obviously, this is looking back with hindsight.
Mr Beer: Well, my next question was going to be: was it obvious at the time?
Adam Crozier: Not obvious in that sense but I think the Post Office, I think, internally within the Post Office, always thought of themselves as a different organisation, the public service, the face of Government, and felt that that was very different from the space that Royal Mail was increasingly inhabiting. So I think there was a sort of difference in outlook, there was a difference in the objective of the two companies and, as I said earlier, I think all the separation things which, in many ways, made sense, in terms of those different futures, I think also probably exacerbated some of those feelings of we’re different.
Mr Beer: We’ve heard evidence in the Inquiry from more than one person that they took decisions not to escalate concerns about Horizon or the way that cases were prosecuted because the Post Office was a highly politicised organisation, it was very hierarchical, they would have been seen, for example, as stepping out of line if they had delivered such a message, that it wouldn’t have been good for their career, and they chose unconsciously to protect themselves. Was that a culture of which you were aware, within the Post Office at the time?
Adam Crozier: I’m very sorry to hear that. I mean, I certainly encouraged the complete opposite. I wanted people to be open. We encouraged people to be open. It’s actually partly why we created Have Your Say, it’s why it was anonymous, and I regret if that was the case within Post Office but there were other ways anonymously to get information to people if people were concerned.
There was also whistleblowing too, but I think Have Your Say was another way of doing that, so there was more than one route to be able to do that.
Mr Beer: You say that you trusted Mr Cook, when he was Managing Director, to raise systemic or reputational issues that had been devolved to POL, such as concerning legal or IT functions, to you and to the main board; is that right?
Adam Crozier: I did, yes.
Mr Beer: Have you had any reaction or how do you feel about Mr Cook’s claim that, in his period of office, he did not even know that the Post Office had a prosecutorial function until 2009, ie until the Computer Weekly article, despite having been Managing Director of the Post Office since 2006 and a Non-Executive Director for years before then?
Adam Crozier: I would find that surprising.
Mr Beer: He has told the Inquiry that, although he had conversations with the Head of Security about fraud, about liaison with the police, he remained in the dark about the prosecutorial function. At the time, did he strike you as a man who was so out of touch with the business that he was running, that he wouldn’t know that one of its functions was to prosecute its own staff, resulting in many of them being sent to prison?
Adam Crozier: He certainly always gave the impression of someone who was very much in control of his brief. His particular area of expertise was in Financial Services, which was including his previous role. And, obviously, that was – given the amount of Government revenue that had been lost, both the through the loss of benefits payments and the forthcoming loss of the POL card, Financial Services was one of the few ways that the Post Office could fill that revenue gap. So he was brought in specifically with that skill. I do know that he spent – I remember him always saying how much time he spent with subpostmasters, with the NFSP, and he never gave the impression to either myself or indeed the board, in fairness, of being anything other than in control of that brief.
Mr Beer: You tell us in your witness statement that, as you have done today, that Mr Jonathan Evans, the Company Secretary, sat on both boards, the main board and Post Office Limited Board, correct?
Adam Crozier: He did, yes.
Mr Beer: Was his role, by sitting on both of those boards, expected to be one which exercised any particular function across both businesses, ie by reason of sitting on both boards?
Adam Crozier: Well, as you know, the Company Secretary has a slightly different role in the sense of not being part of a management team, if you like, effectively they report to the board and to the Chairman in a more independent way. Jonathan also had a huge history with the company, and so he played that sort of role of understanding the history, both sides of the business, and was trusted by everyone on the board, whether that was the Holdings Board or indeed the Post Office Board.
Mr Beer: My question is more was it by design, ie with a purpose, or an outcome in mind, that he sat on both boards?
Adam Crozier: I think it was to ensure there was more glue there across the two. Again, that’s something that had been decided quite a while before I arrived, but was there and in place when I arrived, and seemed to work very well.
Mr Beer: He was the line manager, essentially, of the Legal Services team within the Royal Mail Holdings?
Adam Crozier: Yes, he was.
Mr Beer: Can you say whether or not that played any part in the decision that he should be Company Secretary of both organisations and should sit on both boards?
Adam Crozier: I genuinely don’t know, partly because the decision had been made quite some time before I arrived, I’m sorry.
Mr Beer: Can we turn, please, to your knowledge of Horizon. You tell us in your witness statement that you recall that the system was first piloted in 1995, and rolled out in 2000 with further development thereafter and was, therefore, relatively established when you arrived in 2003?
Adam Crozier: When I say I recall, I now recall because I’ve read all this stuff. When I arrived, it was just the system that the Post Office used.
Mr Beer: Were you, therefore, not aware of the history of the procurement for the contracting about and development of, Horizon when you arrived?
Adam Crozier: Not in the slightest, no. It would be quite unusual for someone to arrive and people to take them back eight years, five years, whatever. So no, not –
Mr Beer: I want to ask you about the extent to which any of that back history was revealed to you. Were you aware of the collapse of the wider contract between the Post Office, Fujitsu – then called ICL – and the Benefits Agency?
Adam Crozier: No.
Mr Beer: That was a matter of quite some controversy in the late ’90s, before you joined Royal Mail. That was something of which you were unaware?
Adam Crozier: No.
Mr Beer: Were you aware of or told about on arrival the issue of the withdrawal of the Benefits Payment Card, and therefore the Benefits Agency, from a joint programme with the Post Office, which was seen as an existential crisis for the Post Office?
Adam Crozier: No. You don’t mean that when they decided to no longer pay benefits –
Mr Beer: Yes.
Adam Crozier: – through the Post Office, do you?
Mr Beer: Yes.
Adam Crozier: I was aware of that because, obviously, that was a dramatic loss of revenue for the Post Office, which actually caused a lot of the initial subsidies to be required from the Government.
Mr Beer: Was that linked in your briefings or your readings in, in any way, with originally the Benefits Agency being part of a joint programme –
Adam Crozier: No, that was.
Mr Beer: – to procure the system?
Adam Crozier: That was entirely linked to the fact that this was coming from the DWP, Department for Work and Pensions, which was – their role, not surprisingly, was to get value for money in terms of the public purse, and, effectively, the cost, as it was described to me, the cost of providing a benefits payment to a particular individual through the Post Office, I don’t remember the exact figures, but roughly speaking might be £1 and, if it was done directly into the bank account, it might be a matter of 5p or 6p.
So, from a spending taxpayers money wisely point of view, that was a change that they felt they had to make. So, in that sense, the Government was both causing the – inadvertently causing the difficulty of taking a lot of money away from the Post Office, and the subpostmasters, but then was also trying to solve the problem in another part of the field by providing a subsidiary to help allow the company to continue to trade.
Mr Beer: You weren’t told or didn’t read about, on joining the company, that part of the equation for the DWP opting for direct payments was that they had lost trust in Fujitsu, ICL Pathway, and the quality and reliability of the computer system that they were selling?
Adam Crozier: As it was told to me, it was all about the costs benefit analysis for them and the use of public money.
Mr Beer: Were you told about a political decision having been made, that the Post Office had to take the Horizon system from Fujitsu, against many of its employees wishes –
Adam Crozier: No.
Mr Beer: – because they too thought that it lacked, and its supplier lacked, credibility and reliability?
Adam Crozier: No, I – when was that? Was that –
Mr Beer: That carried on for many, many years.
Adam Crozier: Okay, well, I’m not aware, no.
Mr Beer: Okay.
Adam Crozier: Long before my time, I assume.
Mr Beer: When the system was being developed, tested and then rolled out, there were a series of so-called Acceptance Incidents – ie problems or issues with the system or with processes – that contractual provisions regulated as to whether they needed to be solved before a national rollout. Were you briefed about that process: the Acceptance Incidents issue?
Adam Crozier: No.
Mr Beer: Were you aware of the autumn 2000 National Audit Office report, which criticised Post Office Management and indeed the Government in the management of the arrangements in the contractual history for the procurement of Horizon?
Adam Crozier: No.
Mr Beer: When you took up your role in 2003, did you have any appreciation at all, or were you briefed about, any issues with the contracting for, development of and rolling out of horizon?
Adam Crozier: No, as I arrived, the system had effectively been rolled out and people were, as far as I was aware, just dealing with that as the system the company had used. And organisations in my experience do have a habit of, once they’re up and running with something, there’s a tendency just to get on with things, and not look back.
Mr Beer: So Horizon was relatively well established by 2003 –
Adam Crozier: Yes.
Mr Beer: – and was working?
Adam Crozier: As far as I was aware, yes.
Mr Beer: Did nobody brief you about the rather problematic birth that it had had?
Adam Crozier: No.
Mr Beer: At any of the future meetings that you attended, did any of those who had been in post at the time of the rather difficult development of Horizon – for example David Miller or Jonathan Evans – ever tell you about those issues?
Adam Crozier: Jonathan did not and part of my briefing when I arrived at the company was meeting Dave Miller, and I do not believe he mentioned it at all.
Mr Beer: Would you agree that the Horizon system was one on which the effective and efficient running of the business was greatly dependent?
Adam Crozier: Yes, I would.
Mr Beer: It was a business critical system?
Adam Crozier: Yes.
Mr Beer: But what steps did the main board take in your seven-year period to ensure that it was running reliably and with integrity?
Adam Crozier: I don’t recall exactly but I would have – I would naturally assume that it will have been part of the internal audit plan.
Mr Beer: Can you recall whether any such steps were taken by the Management Board or the Risk Committee?
Adam Crozier: Well, the – the internal audit plan would all be approved and come to the Management Board and the Audit Committee and the Board for debate.
Mr Beer: Are you aware of an internal audit conducting any review, or investigation in your seven years, of the reliability and accuracy of the data that Horizon produced?
Adam Crozier: I genuinely can’t remember, sorry.
Mr Beer: Would Internal Audit, if they did conduct such an investigation or a review, be the appropriate people to do so?
Adam Crozier: Yes.
Mr Beer: What skills did Internal Audit, so far as the operation of a computer system, have?
Adam Crozier: Well, it’s a financial accounting system, they have those skills and abilities. That’s what good Audit Teams do. They know how to get under the skin of projects like that and to understand how the mechanics of the system worked, if they were concerned about anything like that, they would have the ability to call in further expertise in any particular area and then to bring forward a report.
And, as I said earlier, we encouraged – you will have noticed on some of the papers, certainly, I know the ones that were sent to me, that our internal audit reports were pretty brutal, and we asked them to be that way because we wanted to understand, you know, the worst of what we were dealing with.
As to when and if they did one on Horizon, as I said earlier, I genuinely can’t remember. I would have thought so, on the grounds of over those years, and an important issue, but I don’t remember the individual report, I’m very sorry.
Mr Beer: Sir, I’ve sailed past 3.00.
Sir Wyn Williams: How is the transcriber faring?
Mr Beer: I think she said she wanted a 10-minute break.
Sir Wyn Williams: Yeah, okay. So we’ll begin again at 3.15 – yes, 3.15.
Mr Beer: Thank you, sir.
(3.06 pm)
(A short break)
(3.15 pm)
Mr Beer: Good afternoon, sir. Can you see and hear us?
Sir Wyn Williams: Yes, thank you.
Mr Beer: Thank you.
Mr Crozier, you address in your witness statement, no need to turn it up, paragraph 63 to 65, issues of knowledge of bugs, errors and defects in Horizon. Is the short summary this: that at no time did anyone within the Post Office Executive Team, or its Board, draw your attention or, so far as you’re aware, your board’s attention, to any bugs, errors or defects in Horizon.
Adam Crozier: As far as I recall, they did not. Could I just mention one more point? If I may.
Mr Beer: Yes, of course.
Adam Crozier: Just, in case I misunderstood an earlier question, you asked me about external audit of the Horizon system, obviously the external auditors were constantly testing, when they were reviewing the accounts and the numbers at the half year and the full year, that the system was working as it should work.
Mr Beer: Just stopping you there, if I may, without wishing to probe on a clarification point raised, you said obviously the external auditors were examining the operation of Horizon. Why was that obvious to you?
Adam Crozier: Oh, sorry. Just a word, sorry. No particular meaning. I just meant, in the sense of, obviously, they would be checking the quality of earnings, the quality of the numbers, in the work that they were doing for half year and full year audits. Just in case I misunderstood you in thinking that was an outside specific look at Horizon. That is all. If it’s a needless clarification, I’m sorry.
Mr Beer: It’s certainly not needless at all because we have seen the audits and the extent to which they do undertake that function, and that’s a very open question.
Adam Crozier: Okay.
Mr Beer: Why did you believe that external auditors, as part of their external accounting audit function, would assess the reliability of the Horizon system?
Adam Crozier: Well, they would be looking at the numbers and the quality of the numbers and the consistency of the numbers that they were looking at, so I assume they would be cross-checking all of that all of the time.
Mr Beer: So does it amount to this: you would expect that, if they are to sign off the accounts, in circumstances where the data within them is produced by a computer system, that they would make some enquiries and conduct some investigation on an annual basis into the reliability of the data itself?
Adam Crozier: I would have thought so. Again, I’m a layman on this, but I would have thought so.
Mr Beer: Was anything ever said or shown to you, so far as you can now recall, that suggested that that is what they, in fact, did?
Adam Crozier: Nothing that was shown to me suggests that they had a concern about the quality of the numbers.
Mr Beer: Was anything shown to you to suggest, so far as you can now recall, that their audit, in fact, involved any examination of the integrity of the Horizon system?
Adam Crozier: I don’t recall, sorry.
Mr Beer: Can we turn back then to the bugs, errors and defects issue?
Adam Crozier: Yes.
Mr Beer: I think it remains the case that you say that, in your seven-year tenure, at no time did the Post Office draw your attention to any bugs, errors and defects in the Horizon system?
Adam Crozier: No, and the Operations Team, whether that was David Miller, Ric Francis or Paula Vennells, they attended lots of different meetings. I do not recall them doing that, no.
Mr Beer: You, I think, probably know now, in general terms, that, as a result of the findings of a series of court cases, it has been established that, within the period 2000 to 2010 – so including your period of office from 2003 to 2010 – there were a series of bugs, errors and defects in the Horizon system, of which the Post Office knew and which either caused or were capable of causing financial irregularities and balancing problems?
Adam Crozier: I am now aware of that, yes.
Mr Beer: Would you expect the people within the Post Office who you have just listed, if they had been aware of them, to draw them to you and your Board’s attention?
Adam Crozier: I would have expected them in the first instance to draw them to the attention of the Post Office Exec Team and Board and absolutely, yes, to, if they were serious and systematic, to the Management Team and the Holdings Board, yes.
Mr Beer: So you would have expected it not to have been a direct communication to you but to have gone through the Post Office Board route; is that right?
Adam Crozier: Well, to simplify it, I would have expected them to tell the Post Office Chief Executive, and I would have expected the Post Office Chief Executive to tell the Board and myself very quickly and simultaneously.
Mr Beer: Did you know about a Post Office stock line on Horizon, namely one in which it was said that the “system is robust”?
Adam Crozier: Only from what the Inquiry has sent me in terms of some of the responses sent by Alan Cook to various parties.
Mr Beer: I think you’re referring to some internal Post Office emails, which refer to what I’ve just said as being our stock line?
Adam Crozier: Yeah, okay.
Mr Beer: Firstly –
Adam Crozier: I was not aware of that, no, sorry.
Mr Beer: Okay. Were you aware of, had you heard the phrase when you were in office, that the Post Office believes that its system is “robust and has integrity”?
Adam Crozier: I certainly never heard – I didn’t hear that statement but I never heard anyone say that it wasn’t.
Mr Beer: So you hadn’t, as you recall, heard the stock line nor did you know it was called a stock line?
Adam Crozier: No, sorry.
Mr Beer: Is that because, from your perspective, the integrity or lack of it in Horizon wasn’t in issue?
Adam Crozier: It wasn’t an issue that was being flagged up by anyone in that sort of chain of checks and balances that I outlined earlier, no.
Mr Beer: If Horizon’s integrity was in question, but a stock line was being used in which it was said that it was robust, that would be a serious matter for not only the Post Office but for Royal Mail Group, wouldn’t it?
Adam Crozier: It would indeed, and it would also be entirely wrong.
Mr Beer: I’m sorry?
Adam Crozier: It would indeed.
Mr Beer: In late 2009 and early 2010, I think the business had any just secured state subsidy to bring it barely into profitability; is that right?
Adam Crozier: I think it finally came through after I left, some time later in 2010, I believe.
Mr Beer: Had the securing of that state subsidy been a major issue for most of your period of time in office?
Adam Crozier: I think there were three occasions, I think, when that became an enormous debate. Probably one of the biggest was around 2006 because, at that point, they’d announced that the Post Office Card Account was also going, so there was – in terms of looking forward and going concern basis, there was yet more revenue going to be disappearing from the Post Office and that required – I think, part of the agreement then was a particular subsidy, I can’t remember the exact number, but it also meant a reduction in the number of post offices by around 2,500, I think.
So, from a Post Office point of view, you know, for almost every subpostmaster, an issue was the declining income and the closures of the Post Office, and I think for MPs, for Select Committees, for Government, that almost took over the whole agenda for the Post Office, and at roughly the same time there was a thing called the Hooper review, which was an independent Government review, which they adopted, which came up with four things: (1) that the Royal Mail should be allowed private capital; (2) that the Post Office should stay in public ownership; (3) there should be a change in regulator; and (4), Government should look to try and take care of the Post Office pension.
The code for outside capital was actually that was a request from the shareholder to try to look to see if Royal Mail could be sold, in part or in whole, to another European player or private equity.
Mr Beer: Would you agree that the significance of the dire financial situation of the business, the Post Office business, would have been apparent to everyone in the Post Office Executive Teams throughout your time in post?
Adam Crozier: Most certainly.
Mr Beer: Would you agree that, if any, question marks over the integrity of Horizon and the data it produced would be a very significant matter not only for the Post Office but also for the shareholder?
Adam Crozier: It would.
Mr Beer: In part, because that shareholder was also responsible for the investment by way of the subsidy?
Adam Crozier: Indeed.
Mr Beer: You say that Royal Mail met with the shareholder – the Shareholder Executive, ShEx – on a roughly quarterly basis?
Adam Crozier: Yes.
Mr Beer: When you were providing feedback and updates to the Government through the Shareholder Executive, were you entirely reliant, if the matter concerned the Post Office, on the information that the Post Office Board and Chief Executive relayed to you?
Adam Crozier: The conversations that we had with the Shareholder Executive, as the Royal Mail Management Team, were mostly around, I think – if I can find the right space in my statement – were around the financial performance of the company, how far we were getting with our modernisation programme, relationships with the unions, and of course questions of ownership. I’ve mentioned one around the potential sale of or in part of Royal Mail, there was another large debate where myself and Allan Leighton and the Board, we wanted to try to turn Royal Mail into, in shorthand, a John Lewis partnership. We wanted 20 per cent of the company to be owned by our people, and I include in that subpostmasters.
We valued the subpostmasters, Allan, as an ex-retailer, understood the importance of frontline managers, and we want to the subpostmasters, actually, to have an ownership of the Post Office. So we discussed things like that but, obviously, we discussed funding.
At the same time, the Post Office had very regular meetings with Shareholder Executive but a separate team within that, and that was the constant day-to-day on Post Office business, closure programmes, revenue, all of those things, so there was sort of parallel, if you like, conversations going on.
Mr Beer: Was anyone from Royal Mail Group present at any of those meetings or communications between the Shareholder Executive and the Post Office?
Adam Crozier: No doubt some, but probably not all, and some would have been Jonathan Evans, I think.
Mr Beer: So there were, as you’ve described it, essentially two parallel routes back to Government?
Adam Crozier: Correct, yes.
Mr Beer: You tell us in your statement that the Shareholder Executive rarely attended Royal Mail Board Holdings; is that right?
Adam Crozier: That’s right, yes.
Mr Beer: Why was that?
Adam Crozier: Well, the times I can remember them attending were, to be honest, the things I’ve mentioned, which were around potential ownership changes, were around the solvency debate and the subsidies. That always had to be – I mean, another degree of separation was that had to be very carefully done from a Royal Mail point of view, those had to be commercial loans at competitive rates, and –
Mr Beer: Cutting thorough it, Mr Crozier, were they entitled to attend?
Adam Crozier: They were absolutely entitled to attend.
Mr Beer: Every meeting?
Adam Crozier: Yes, sorry, but rarely did, save for those really big topics, of funding, solvency and ownership.
Mr Beer: That was their choice; is that right?
Adam Crozier: That was their choice, yes.
Mr Beer: What about attendance by the Shareholder Executive at Post Office Board meetings?
Adam Crozier: During my time, they did not do that nor did they have a representative on the board during my time, no.
Mr Beer: What was the reason for that?
Adam Crozier: I don’t know. You’d have to ask them.
Mr Beer: Finally then, please, you tell us in your witness statement that your objective in your period of office was to deliver a better group for all stakeholders, and would you agree that, so far as this Inquiry is concerned, that objective would include treating subpostmasters as trusted trading partners –
Adam Crozier: I would indeed.
Mr Beer: – not assuming that they were on the take or some of them were on the take?
Adam Crozier: No, I think some of the language I’ve heard over the last few weeks is deplorable.
Mr Beer: Were you aware of the removal of the facility for subpostmasters to query losses that were attributable to them by the computer system?
Adam Crozier: No, I have wracked my brain on that and I genuinely don’t remember that coming to the Board, no.
Mr Beer: Would you agree that the removal of that function was inconsistent with treating them as trusted trading partners?
Adam Crozier: I don’t know the detail of it. From the sounds of it, I would have agreed with you.
Mr Beer: It was a form of requiring them to pay for all losses attributed to their branch by a computer without the facility for them to query or even to investigate how that loss had occurred.
You, I suspect, have read some of the judgments of the courts of the past few years –
Adam Crozier: Yes, I have.
Mr Beer: – concerning the Horizon system?
Adam Crozier: They’ve made it very clear in terms of the failures, in terms of disclosure.
Mr Beer: In particular, the Horizon Issues judgment of 2019 sets out a series – and it’s into double figures – of defects in Horizon, which were prevalent and were known about by the Post Office during your seven-year tenure.
Looking back, who is responsible for the fact that none of that, on your account, was escalated to you or your Board?
Adam Crozier: I’m not sure it’s fair or right for me to speculate on something as important as this. All I can say, from what I remember at the time, was that it did not get up to the areas that I’ve mentioned earlier. Looking back with hindsight now, clearly, at a certain level of – in the Post Office, it went no further.
Mr Beer: This happened, in a sense, on your watch?
Adam Crozier: Yes, it did.
Mr Beer: You must have had a period of self-reflection and thought: what went wrong? What conclusions, if any, did you arrive at?
Adam Crozier: I mentioned in my statement, you know, I can genuinely say it’s one of the toughest jobs I’ve ever done, from a terrible starting point and the degree of difficulty in making change in the Royal Mail.
I do look back and wonder, as we talked about extensively earlier, whether the structure exacerbated the problems, for want of a better word. I can see that there was a lack of transparency now in the Post Office. I had assumed they were making the same strides that we were in the rest of the company and, you know, at the time, what I don’t understand now is why people – it seems like a perfectly normal thing for me to do is, if you were worried about the performance or if you thought there were issues, why you wouldn’t get someone from the outside in to look at that and give you a genuine, open, independent view of what the problem was.
And I can see that those were mistakes and whilst I used to like to look back on my time as it being very hard but we made a lot of progress, clearly, it’s impossible to do that now without feeling that it’s in large part tainted by this, for obvious reasons.
Mr Beer: Thank you, Mr Crozier. Those are the questions I ask.
Sir, there are two lots of Core Participant questions of no more than five minutes each.
I think we’ll start with Mr Moloney if that’s possible.
Questioned by Mr Moloney
Mr Moloney: Thank you, sir. Mr Crozier, just two matters, please.
Early in the questioning of you by Mr Beer this afternoon, you were taken to Audit Risk and Compliance Committee minutes, do you remember?
Adam Crozier: Yes.
Mr Moloney: Prosecutions were referred to in those minutes, numbers of prosecutions, cost to the business, and so on. Your view was that the discussions to which those entries referred must have related solely to Royal Mail prosecutions.
Adam Crozier: I think so, yes.
Mr Moloney: One of the reasons for that was that nobody from Post Office was present at the meeting when they were discussed?
Adam Crozier: It was also because they were referred to as Royal Mail personnel, if I remember, and that’s not how subpostmasters would be referred to in the Royal Mail.
Mr Moloney: I see. At the time of the meeting about which those minutes were prepared, was it Post Office Legal Department that conducted Post Office prosecutions or Royal Mail?
Adam Crozier: I thought it was Post Office.
Mr Moloney: If I suggested to you that Post Office only took over prosecutions after separation of Royal Mail Holdings and Post Office Limited in 2012, would you be able to disagree?
Adam Crozier: I don’t recall. I’m not sure I’d be able to disagree, no.
Mr Moloney: Right. So you don’t know who was responsible, you’re not sure who was responsible for Post Office prosecutions at the time at which those minutes were prepared?
Adam Crozier: Well, I assume the client would have been – well, those minutes, I think, referred to Royal Mail. So just to make sure I understand the question, if you’re asking me who was responsible for the Post Office, obviously the Post Office was the client.
Mr Moloney: Right.
Adam Crozier: Where they were sourcing that legal help from, I had always assumed it was partly internal, partly through a bit of Royal Mail resource and, obviously, external resource too, as far as I can recall.
Mr Moloney: Thank you.
You’ve just agreed with Mr Beer that Post Office was facing real financial difficulty on your watch.
Adam Crozier: Yes.
Mr Moloney: Yes. Insolvency was in issue?
Adam Crozier: From before I joined and during the time I was there, yes.
Mr Moloney: You agreed that those were factors that everyone in the business would have been well aware of?
Adam Crozier: Yes, I believe so, yes.
Mr Moloney: Anyone who read the annual reports or the press, indeed?
Adam Crozier: Yes.
Mr Moloney: You agreed that Horizon was a business critical system?
Adam Crozier: Yes.
Mr Moloney: If Horizon were to fail because it lacked integrity and you had to start from scratch, it would have heightened, even more so, the commercial survival of the Post Office at that time, wouldn’t it?
Adam Crozier: Yes, it would but that would have had to be faced into, if there was a problem there because, you know, frankly the issues we were facing on Royal Mail were, in terms of cost and investment, far greater than that would have been, so it would have had to have been faced into, and the Post Office, as actually in fairness the Government showed, was not something that the Government was ever preparing to allow to truly fail. It was more a question of what was appropriate in terms of the revenue that was genuinely there versus the desire to obviously allow the Post Office to continue its really valued role as part of the social fabric of the UK, particularly for certain segments of the population.
Mr Moloney: In hindsight though, do you think that, essentially, the existential problems that would have arisen around the failure of Horizon would have been a disincentive to those who’d been present at the difficult birth of Horizon to, as it were, escalate that up, in terms of telling you what went wrong in the early days and what problems there’d been with Horizon in its development and rollout before you arrived?
Adam Crozier: I’m not sure I do agree with that, if I’m being honest. You know, I wasn’t aware that Horizon had had this very difficult birth, for want of a better phrase, but all IT systems constantly need improving and fixing, and the company in full mode was trying to fix everything. And I do like to think – I know this is incredibly easy to say now, I hasten to add – that if we had been aware that there was a real issue that needed fixing I think collectively people would have figured out a way to tackle that and I think that case would have had to have been made by the Government because, in the end, it would have been more important to get it right.
So I still believe, whatever the difficulties, if people genuinely felt there were problems, they should have said something.
Mr Moloney: If people knew of the problems before you arrived –
Adam Crozier: Yeah.
Mr Moloney: – should they have said something about that to you?
Adam Crozier: I certainly wish they had.
Mr Moloney: Thank you, Mr Crozier.
Questioned by Mr Stein
Mr Stein: Mr Crozier, I represent a large number of subpostmasters and mistresses.
Towards the end of the evidence and the answers you were giving to Mr Beer you said this, you said that, if you were worried about the performance, if you thought there were issues, why wouldn’t you get someone from outside in to look at that and give you a genuine independent view of what the problem was? Mr Beer was asking you questions about difficulties add failures in the Horizon system.
Mr Crozier, there were people who were raising queries about the performance of Horizon. They were subpostmasters/mistresses, they were trying to do that in the time that you were in charge by phoning the helpline and saying, “We’ve got a problem, this thing’s got a shortfall. It’s not my fault. There’s something wrong with the machine”.
Do you know what they were told, Mr Crozier, during your period? They were told to pay up, pay up for that supposed shortfall. So people did raise problems with Horizon system, they were the subpostmasters that were under your care; what do you think about that?
Adam Crozier: I think that’s obviously entirely wrong. I would have expected – I thought and would have expected that when people raised issues, these would be openly and fairly looked at. I know, from the evidence I’ve been sent, that people sent letters which the Post Office team replied to. I always assume, because I do it myself – I wouldn’t send or sign a letter that I didn’t believe in, so I assumed that people will check those things out properly, and I assumed that they would handle those professionally and openly and ensure that any issues that were raised were investigated properly.
Mr Stein: You probably heard, Mr Crozier, that what happened was that, because subpostmasters and mistresses were being told to pay up – it’s your contractual duty, they were told, to pay up – and many of them did, paying out for shortfalls that were certainly not their fault. They got that money from their own pockets, they got that money sometimes from borrowing from friends, some, you may recall, got that money from their kids’ piggy banks, others got money from loan sharks at extortionate interest rates, tipping them into financial chaos and bankruptcy.
Now, help us please understand what happened to that money when it was paid in? Was it properly accounted for, this money paid into balance supposed shortfalls?
Adam Crozier: I assume it was, through the financial team.
Mr Stein: Was it accounted for as profit?
Adam Crozier: I don’t know.
Mr Stein: Well, the very early part of the questions being asked by Mr Beer, he asked you a number of questions about the corporate directorial responsibility and part of the director’s responsibility is a responsibility over the accounts of a business; is that agreed?
Adam Crozier: Yes, it is.
Mr Stein: It is. It would be wholly wrong, would you agree, to account for a payment for a shortfall as profit; do you agree with that?
Adam Crozier: I’m not an accounting expert, so no, I don’t – I wouldn’t know exactly how you would account for different payments in different –
Mr Stein: Your background is you have a business qualification, I believe –
Adam Crozier: I do, I do.
Mr Stein: – and you’ve obviously worked at senior levels –
Adam Crozier: I have but –
Mr Stein: – and you have an understanding of accounts, don’t you, and you have a responsibility to read those accounts, don’t you?
Adam Crozier: I do.
Mr Stein: Yes, one of the accounts kept by a business is the profit and loss account; do you agree?
Adam Crozier: It is.
Mr Stein: Right, so money being paid in by a subpostmaster on being told “You need to pay up, for a supposed shortfall”, is that a profit, Mr Crozier?
Machine is saying “There’s something wrong here, there’s £100,000 wrong”. That subpostmaster, using my example, is then paying that large sum of money in. Is that actually meant to be recorded as a profit, Mr Crozier?
Adam Crozier: I suppose it depends what it’s replacing. I don’t know.
Mr Stein: Shouldn’t it be on the balance sheet? Because, in theory, it’s creating the opposite side to the loss?
Adam Crozier: I assume so, yes.
Mr Stein: Yes. That’s where it should be. Now, the Directors of Post Office Limited should have had their eye on these accounts, shouldn’t they?
Adam Crozier: Yes.
Mr Stein: The second reason for them to have eye on the accounts is on the costs of the legal actions being taken against subpostmasters, do you agree?
Adam Crozier: I would agree, yes.
Mr Stein: Because that’s a way of looking at and tracking the money that was being paid for the expensive costs of taking people to court, or the cleaners.
Now, those directors, including yourself, from the RMG Board level, did you pay attention to the costs, the legal costs being spent on those people being prosecuted, the legal costs of those people being taken to the civil courts?
Adam Crozier: They would have been taken in the round, I suspect, both at Post Office and the Royal Mail –
Mr Stein: Forgive me for interrupting you.
Adam Crozier: It’s okay.
Mr Stein: Because this period of time we’re talking about, which Mr Beer has emphasised, was a period of time for the Post Office and RMG where the business was financially in trouble?
Adam Crozier: Indeed.
Mr Stein: It was a period of time whereby Post Office branches and numbers of them were being cut, yes?
Adam Crozier: Yes.
Mr Stein: So the question of these costs, costs being put in these accounts, would have been under some scrutiny, wouldn’t they?
Adam Crozier: Yes, they would. There was reference to some of them in the papers that have been sent through, yes.
Mr Stein: So one of the ways to get information about what is happening within the business will have been through the scrutiny of accounts; do you agree?
Adam Crozier: Yes.
Mr Stein: If money has been taken from subpostmasters for errors made by the Horizon system and been put into the profit accounts of Post Office, that would be wrong and dishonest, wouldn’t it, Mr Crozier?
Adam Crozier: Well, I don’t know if it was, so it’s difficult for me to comment.
Mr Stein: If it was, Mr Crozier it would be wrong and dishonest, wouldn’t it?
Adam Crozier: On the face of it, yes, but, again, I don’t know how that was treated.
Mr Stein: Lastly, you heard the evidence of Lord Justice Hooper, who gave evidence earlier this week, he said that, on a number of occasions when he was trying to investigate such matters, he asked for the accounts, tried to find out where the money went and he never got a satisfactory answer. He never saw those accounts. Do you know why?
Adam Crozier: When was this, sorry?
Mr Stein: This was later on after your time?
Adam Crozier: Okay.
Mr Stein: He was after the very sorts of accounts that I’ve been describing.
Adam Crozier: Right.
Mr Stein: Do you know why he wasn’t given those accounts?
Sir Wyn Williams: I don’t see how Mr Crozier can possibly answer that, since he had gone four years previously.
Mr Stein: I understand, sir, you’re right.
Where were those accounts kept, Mr Crozier? The accounts that relate to profit and loss and balance sheets? Where were they kept; were they kept at Chesterfield?
Adam Crozier: Well, obviously all the information was also held at the Head Office.
Mr Stein: Now, so far, we’ve heard from a number of people in relation to POL and RMG and it appears that nobody took responsibility for the prosecution of subpostmasters, nobody took oversight of it, nobody at all. Are you proud of that?
Adam Crozier: No.
Mr Stein: How much were you paid during your period of time as chair of RMG?
Adam Crozier: I’d need to look back. I don’t know; I’m sure it’s absolutely available in all the annual reports.
Mr Stein: It’s in millions, isn’t it, Mr Crozier?
Adam Crozier: Yes, it probably, is, yes.
Mr Stein: Thank you.
Sir Wyn Williams: Thank you, Mr Crozier.
That brings to an end today’s session. We will resume again –
Oh, sorry, I should formally thank you for your witness statement and thank you for answering so many questions during the course of today.
So we’ll resume, again, at 10.00 on Tuesday, I think, with Mr Miller, is it, Mr Beer?
Mr Beer: That’s right, we’ve got David Miller first and then David Mills second.
Sir Wyn Williams: How squeezed are we for time? We have two witnesses and it’s becoming clear to me that two witnesses is a stretch, on occasions, in one day.
Mr Beer: Yes, we’ll review that, sir, in the light of experience.
Sir Wyn Williams: Thank you. See you all on Tuesday.
Mr Beer: Thank you very much, sir.
(3.48 pm)
(The hearing adjourned until 10.00 am on Tuesday, 16 April 2024)