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In Strictest Confidence
Brief to BIS for Edward Davey’s prospective meeting with ‘Justice for
SubPostmasters Alliance’
The following confidential brief is to assist BIS in preparation for the forthcoming
meeting between Edward Davey MP and the ‘Justice for SubPostmasters Alliance’
(jfsa). Further information can be provided if needed. It should be noted that the jfsa
website makes the point that it has access to ‘a criminal law firm and a major
national firm of solicitors’ — therefore any statements or comments made at the
meeting may be subsequently quoted in legal processes.
The following note looks at;
- An overview of jfsa
- Integrity of the Horizon System
- Comments of the action with subpostmasters for accounting irregularities
- Comments in respect of jfsa’s stated aims
- Background on cited cases
Overview
The Justice for SubPostmasters Alliance has been set up ‘to represent the victims of
the Post Office and their Horizon system, as nobody else will’. The organisation’s
stated aims (from its website) are;
- there needs to be a fundamental change in the way suboffices are ‘managed’
by the Post Office and this can only be brought about at government level.
* There has to be an independent investigation into the introduction, operation,
reliability and accuracy of Horizon.
= A complete change in the way subpostoffices are managed by the Post Office.
Together with a new and fairer contract for subpostmasters that removes the
pin-head dancing around a subpostmaster being an agent or an employee. A
new contract that actually covers the use of IT in subpostoffices.
= An ombudsman or an independent third party has to be introduced between
the Post Office and the subpostmaster who would hear appeals in issues of
disagreement, as currently the Post Office act as judge, jury and executioner.
= Finally, the removal of the cosy relationship between the Post Office and the
Federation has to happen (described by many as when the Post Office says
jump, the Federations only answer is, how high). This could easily be
achieved by establishing an extra and alternative representative
subpostmaster body.
The jfsa website quotes 8 cases — spanning several years and all to do with accounting
irregularities — which it seeks to cite as indications of a lack of robustness with the
Horizon system.
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Integrity of the Horizon system
- The Horizon system has been in place for over 10 years. In a typical month the
system conducts around 80 million customer sessions with 230 million
transactions across the system. This is delivered through around 35,000
counter positions in around 12,000 Post Offices which perform weekly and
monthly accounting balances. Around £175m per day is settled to over 700
client companies who use Post Office Ltd — a substantial flow of data to and
from organisations with regularly audited accounts. Over its extensive period
of operation the system has proved robust. The cases identified by jfsa where
there is some kind of allegation in respect of the system are a miniscule
proportion of the many millions of accounting events that subpostmasters have
done within the system. Furthermore around 15% of POL’s transactions have
been conducted over Crown Office terminals which run exactly the same
system yet no issues have been identified. If there were any systematic
integrity issues within the system they would have been evident over the past
10 years. NFSP and CWU have expressed confidence in the system.
- The system is currently being updated to ‘Horizon Online’. This is being done
to achieve benefits in running costs and change management. It is not being
done because there are any doubts about the robustness of the original Horizon
system.
- The integrity of both Horizon and Horizon online is built on tamper proof
logs, real time back ups, and absence of ‘backdoors’ so that all data entry or
acceptance is at branch level and is tagged against the log-on ID of the user.
This means that ownership of the accounting is at branch level and it is
impossible to make changes to branch accounts remotely.
- Critically, Horizon creates a separate audit file of every transaction done with
every record written to the log having a unique incrementing sequence
number. This is retained remotely for seven years and cannot be altered in any
way. Therefore, in any legal case relating to the system or allegations that
data was missing, this audit log can be produced to identify exactly what was
recorded onto the system in the branch concerned at the time concerned.
- Subpostmasters are trained on the system, there is material to support in
branch and helplines are available. If an error occurs through a user mistake —
there is a full system in place for investigation and error resolution. If there is
a local disconnection of the system at a branch for any reason, IT controls
detect the outages and raise recover alerts to the branch to check and update
the accounts.
- As with any large organisation, Post Office Ltd has and continues to
implement a range of mechanisms whereby accounting processes and outputs
are regularly reviewed to ensure ongoing accuracy.
In Strictest Confidence
Action taken with subpostmasters for accounting irregularities
Post Office Ltd has a regular system of auditing subpostmasters’ accounts. If
irregularities are discovered, then a formal and thorough investigation is triggered
and, if necessary, action can be taken in accordance with the subpostmaster’s contract.
Subpostmasters have the right of representation throughout internal disciplinary
procedures ~ and if the case leads to summary termination of contract, there is the
right of appeal to an appeals manager who considers the case. Again there is a right
to representation through this process — this role is often undertaken by the NFSP.
In certain cases, following consultation with legal advisors, a decision may be made
by POL to pursue a criminal case. Since 2005 there have been 230 criminal cases that
have proceeded to Court. Of these 169 have been found guilty and 18 defendants
cautioned. Of the remaining 43, 1 was found not guilty but this was nothing to do
with any Horizon challenge. 42 cases were not carried forward for a variety of
reasons (but there is no suggestion that any of these reasons were related to concerns
about Horizon).
Similarly, as there is a legal contract between the subpostmaster and Post Office Ltd,
if a subpostmaster believes that his/her contract has been terminated inappropriately;
he/she can also refer the process into the legal system.
Comments in respect of jfsa’s stated aims
- Independent investigation into Horizon
The Horizon and Horizon online systems have been fully tested and meet all the
requirements of Post Office’s Clients. They produce full audit logs to enable the
analysis of every transaction. There is no evidence of systematic error issues and
individual cases of concern can be thoroughly forensically analysed via the audit logs.
In this environment an independent investigation would be very costly and
unwarranted. The Courts and the legal system provide the mechanisms to investigate
individual cases should that be necessary — and that is the proportionate response to
the very small number of specific cases where issues about Horizon have been
alleged.
- A different Subpostmasters Contract
The current subpostmasters contract is a commercial contract with the Post Office Ltd
that is freely entered into by the subpostmaster. It has existed, in a variety of forms,
for decades with amendments to it being discussed and agreed with the NFSP (as the
recognised representative body for subpostmasters). The current contract is the 1994
issue as amended by certain contractual variations since that point. As a commercial
contract, it is fully compliant with, and falls under, the jurisdiction of UK laws.
- An ombudsman or third party to handle disputes between POL and
subpostmaster
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The Subpostmasters Contract has Section 18 which explicitly covers appeal processes
which include rights to be accompanied by an NFSP representative or a friend.
Appeals are heard by a senior Post Office Manager who has not been involved in the
case. As with any commercial contract, there are legal avenues available under UK
Law which can be followed to resolve disputes.
- Establishing a representative body other that the NFSP.
The NFSP is a recognised trade union (subject to all relevant trade union legislation)
and an independent membership body that is widely recognised as representing the
interests of sub-postmasters. It has over 7,500 members and a democratic structure
through its membership to determine policy formulation. By contrast jfsa is a self
appointed group that claims numbers ‘close to 100’ with no other supporting
information available. Clearly any subpostmasters are free to form any association
they wish, just as subpostmasters can seek to influence NFSP policy through its
democratic structures. However, there is no clear evidence of any need for Post Office
Ltd’s to change its relationship approach with the NFSP as a body that can provide a
fair and effective representation of subpostmasters views.
Background on cited cases
MP cases raised by BIS
The following information is feedback to be used to respond to BIS in relation to
recent requests for information. No formal responses have been provided.
George Osbourne MP (letter to Ed Davey 26 July 2010)
This case relates to Mr Walters the former subpostmaster at Hockley Post Office in
Poynton, Cheshire who was suspended following an audit at his branch in November
2007. At Audit the shortage was £14,146.37. We terminated Mr Walter’s contract for
services in February 2008 for falsifying accounts and failing to make good losses. At
the time Mr Walters was given the opportunity to appeal the decision but chose not to
do so.
The security team confirm that Mr Walters was interviewed in accordance with the
Police and Criminal Evidence Act (PACE); he declined legal representation and had a
NFSP representative with him. At the time of the interview Mr Walters did not
express any concerns about the way it was conducted.
Some examples of the causes discovered at interview are; claiming for rejected
postage labels that have no value, a mis-keyed transaction by Mr Walters, preparation
of remittance pouches with incorrect values, and/or failure to enter them on the
system.
The conclusion of the interview was that the loss was caused by Mr Walter’s inability
to follow the processes and procedures required of a subpostmaster.
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Alun Michael MP (letter to Ed Davey 20 July 2010) & Jenny Randerson AM
(letter to Ed Davey 12 July 2010)
Alun Michael and Jenny Randerson are both showing interest in the same case. This is
Mrs Somaskandaraja the former subpostmaster at Splott Road Post Office. Mrs
Somaskandaraja was investigated for pension and allowance fraud, she was suspended
in October 2004 and her contract was subsequently terminated. This case has been
subject to comprehensive legal correspondence over many years and Mrs
Somaskandaraja has raised a variety of issues unrelated to the Horizon challenge. The
branch was closed under the Network Change Programme and Alun Michael
expressed his concerns about the closure at the time but did not mention Mrs
Somaskandaraja.
Keith Simpson MP (letter to Ed Davey 7 June 2010)
The letter to Mr Simpson is from Mrs Callow who is the mother of Mrs Sayer. Mrs
Sayer is the former subpostmaster at Erpingham Post Office and she was suspended in
January 2008 following a cash verification visit where a loss of £18997.60 was
identified. Her contract for services was subsequently terminated. During her
interviews regarding the case she changed her story several times and this was one of
the reasons taken to pursue the legal case. She was ultimately prosecuted for
falsifying accounts. She was sentenced on 15" February 2010 in Norwich Crown
Court to 40 weeks in prison suspended for 2 years, with 200 hours of unpaid work to
be performed. Horizon was not mentioned in any interviews or discussions with Post
Office. The first time the issue was raised was in Norwich Crown Court by the
defence barrister who referred to an article on a blog.
Valerie Vaz MP (Walsall South ) on behalf of her constituent Mrs Jasvinder
Kaur
Mrs Jasvinder Kaur Uppal is the former subpostmistress at Lazy Hill Post Office. She
was suspended in July 2009 and her contract was subsequently terminated. The
investigation at her branch commenced when it was discovered by a customer that
electronic bank withdrawals from their accounts were being duplicated. After an
interview with our investigations team Mrs Kaur Uppal admitted that she had been
pretending to have a problem with the computer and making the customers repeat the
transaction. This case went to court and initially Mrs Kaur Uppal pleaded guilty.
Subsequently she decided to change her plea and we are waiting for a new court date
to be appointed. As this information is now subject to official court proceedings it is
sub judice and on this basis should not be discussed publicly.
Justice for Subpostmasters Alliance (JFSA) website cases
The JFSA website outlines 8 cases. We have tried to establish the details from the
website; however in some cases the information is quite vague.
Case 1
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We think that this case is Mr Julian Wilson the former subpostmaster from Astwood
Bank Post Office. Mr Wilson was arrested, interviewed and suspended. He resigned
following his suspension. He admitted to inflating cash over a 5 year period to cover
losses and made a full admission to false accounting. The case went to Crown Court
where Mr Wilson entered a guilty plea of false accounting, was sentenced to 200
hours of unpaid work, and ordered to repay monies due and pay £3.5K towards legal
costs. The repayment of the loss is still outstanding and is being pursued legally.
NB. We have correspondence with ex MP Jacqui Smith via BIS/DBERR Jan 2009
where we confirm that there has been no evidence of Horizon integrity issues.
Case 2
This appears to relate to Shirley Rayner former subpostmaster at Glentham Post
Office. The loss was a combination of stock and cash, our records show a total of
£2220.62. Ms Rayner resigned almost immediately to avoid termination. She refused
to allow the premises to be used by a temporary subpostmaster and as a consequence
the branch closed.
NB We have correspondence with Edward Leigh MP (December 2009) where we
confirm that there has been no evidence of Horizon integrity issues.
Case 3
This case looks similar to the facts of Mr Rajinder Bilkhu who is currently the
subpostmaster at Bowburn Post Office. We have had ongoing correspondence with
Mr Bilkhu who remains as the subpostmaster at this branch. We provided support,
additional training and made suggestions about how he could improve operations at
his branch. There were ongoing problems with the way that he accounted for lottery
scratch cards. He continued to blame the Horizon system for his errors and at one
point started legal action against Post Office. He withdrew his action and as a result
had to pay our costs of approximately £5k. The computer base unit at his branch was
replaced in 2008 and there are no further issues with the branch that we are aware of.
However, there is no evidence that the base unit was in any way a factor.
NB We have correspondence with Roberta Blackman Woods MP via BIS (December
2009) where we confirm that there has been no evidence of Horizon integrity issues.
Case 4
This is Alun Bates the former subpostmaster at Craig y don. He set up the post office
victims website and is the chair of the justice for subpostmasters organisation. Mr
Bates refused to accept responsibility for the poor management of his office and also
admitted to rolling over losses and gains. We provided training and support which
included writing off some of the losses. Eventually in 2003 we terminated his
contract with three months notice due to the total break down in the relationship.
NB This case was featured on the BBC Wales programme. External Relations have
also met with and corresponded with David Jones MP. He wrote to Edward Davey in
his capacity as Chairman of the JFSA on 8 July 2010.
Case 5
This is Mr Ward the former subpostmaster at Rivenhall. Mr Ward was suspended in
2005 and reinstated with conditions, follow up training and support. In September
2008 a shortage of £10952.12 was discovered at audit. He was subsequently
interviewed about the loss and his contract was terminated. He appealed against this
In Strictest Confidence
decision and a review was conducted. The decision to terminate was upheld. The MP
for this branch is Priti Patel we recently met with Ms Patel and we have discussed this
case. Mr Ward appears to have links with the Computer Weekly publication where
there have been several articles relating to Horizon integrity.
Case 6
We are confident that this case relates to Josephine Hamilton former subpostmaster at
South Warnborough Post Office. The loss was £36,644.89 discovered on audit and
the case was sent for trial at Winchester Crown Court. Mrs Hamilton agreed a deal to
repay the money in exchange for us to withdraw the charge of theft. She was found
guilty of 14 counts of false accounting in February 2008. She was sentenced to 12
months community service and received a supervision order. The money was repaid,
we understand that the local villagers clubbed together to clear the loss.
NB This case was featured on the BBC Wales programme.
Case 7
This looks similar to the facts of Mr Ward, former subpostmaster at Priory Road Post
Office. There was a loss of £12030.70 which includes £11k of personal cheques. Mr
Ward was found guilty at Bristol Crown Court and sentenced to a Community Order
with a requirement of 150 hours unpaid work.
Case 8
This case relates to Mrs Junor at Upper Largo Post Office branch. Accounting errors
came to light in July 2007. Local support was provided to help Mrs Junor resolve the
problems and the net loss is being repaid via her remuneration. Interestingly we have
no calls logged from Mrs Junor regarding problems with the Horizon system over the
period checked January 2009 to April 2010. The first time that Horizon integrity was
mentioned was via a letter to the Prime Minister which was managed through BIS.
NB Mrs Junor sent a letter to the Prime Minister in April 2010.
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