FUJ00152602 - Civil Case Study of Lee Castleton: Extract from Lee Castleton’s Part 18 Reply setting out allegations against Horizon
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(c) that the Marine Drive branch never ran out of cash (i.c. it always had
sufficient cash to service its transactions).
Ld The problems that the Defendant encountered with the Horizon system and the
occasions on which he encountered them were as follows:
i) Not communicating properly. The Horizon system, as installed at the
Marine Drive branch, included 2 computer terminals with touch screens
and keyboards, together with bespoke software developed and
maintained on behalf of the Claimant by Horizon Systems. One of the
terminals was known as the base unit, which the Defendant believes had
a smal] amount of internal memory, and had an ISDN, (subsequently
broadband), connection off-site to a central monitoring and/or data
storage and/or controlling station, which was maintained on behalf of the
Claimant by Fujitsu Services. The other terminal was known as node
unit, which the Defendant believes had no separate internal memory, was
connected to the base unit and communicated to it such data as might be
input to it. The Defendant believes that periodically, several times
throughout a day’s trading, the base unit would then transmit data input
both to it and through the node unit, onwards to the central station. On
occasions too numerous to recall during the period in question, the
Defendant told the Claimant that he considered that the 2 units were not
communicating with each other properly.
ii) Screen freezing. The display of one or other or both of the terminals
would ‘freeze’, ic. lock up and fail to respond, either to commands
attempted to be entered through the terminal’s keyboard or commands
attempted to be entered by hand through the touch screen function of the
terminal’s display, requiring the system to be rc-booted. This problem
was a regular occurrence and happened approximately weekly during the
i period in question.
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iii)
iv)
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vi)
Blank screen. The display of one or other or both of the terminals would
suddenly go blank before returning to the sales screen. This problem
occurred approximately monthly during the period in question.
Card swipe not reading. The electronic card swipe of one or other or
both of the terminals, used to read a customer’s payment card, would fail
to read the card properly. This problem was a very regular occurrence
and happened approximately daily during the period in question.
Rolling over cash figures. The Defendant believes that the Horizon
system ‘rolled over’ cash figures in the weekly cashflow figure (a report
that can be produced, also known by the Claimant as On Hand Cash
Handling, or ONCH) giving a figure that was 4-5 times as big as the
actual cash declaration for that day. The Defendant first became aware
that this information was available to be printed out during cash week 48,
the week ending 25 February 2004, when it was printed out by one of the
Claimant’s business support workers (although he subsequently became
aware that his assistant, Christine Train, had been aware of it since in or
around week 43, and had periodically run off cashflow reports). The
Defendant looked at this figure several times each week from that time
onwards until his suspension by the Claimant on 23 March 2004. On
average, the figure given by the system was incorrect on at least one
occasion each week (although previously, prior to the Defendant being
aware of the facility to print the figures, Ms Train had noted that the
figure was incorrect more frequently, often several times each week).
Lost transactions. The Horizon system would ‘lose’, i.e. fail to record,
transactions which the Defendant knew he had entered onto the system.
By way of example only, a cheque which the Defendant knew he had
entered into the system as being a cheque, would not appear identified as
a cheque. This problem would occur at least weekly during the period in
question, sometimes as frequently as twice a day but then not for about 4
days.
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How and why each of the problems experienced by the Defendant with the
Horizon system means that the alleged losses in question were theoretical rather
than real, is an issue that will require disclosure from the Claimant for the period
in question, in particular as to the correct operation of the Horizon Systems’
software, (including any modifications or upgrades), and the correct operation of
the hardware maintained by Fujitsu Services, (including any replacement
equipment), together with expert evidence, both in the field of Information
‘Technology and Accountancy. Without prejudice thereto the Defendant replies as
follows:
‘i) If the Horizon system missed a transactional piece of information it
would alter the balance recorded on it. If it failed to record a payment
out, there would be less actual cash at the branch than the amount of cash
recorded on the system. As more cash tends to go out from a Sub Post
: Office than comes in, such a discrepancy would tend to operate so that
the balance showing in the system was greater than the actual balance
held at the branch.
ii) By way of example only, if a cheque paid in is input to the Horizon
system and the system sends that data off-site but the system loses that
information locally, when it is time to ‘cut off’, i.e. print a cheque report
to send with a bundle of cheques to be sent away, the report will not
correspond to the number of cheques present and it is necessary to re~
input, manually, the additional cheque, so the report matches. However,
t a further amount may have been added to the balance recorded centrally
by the amount of the lost cheque, although possibly as cash. Thus the
Sub Post Office appears to have more money than it does.
‘The Defendant reserves the right toamend this reply following disclosure and
expert evidence.
Between cash weeks 42 and 49, the Defendant:
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(a) denies ordering approximately £305,000 cash from the Clanmant. The
Defendant ordered approximately £288,850. The relevant figures are
shown in ‘Table 6 Remittances from ADC’ line 14 in the documents
headed ‘Cash Account (Final)’ for this period.
(b) denies returning approximately £20,000 to the Claimant. The Defendant
retuned approximately £34,891.28 to the Claimant. The relevant figures
are shown in Table 9 Remittances to ADC’ line 1 in the documents
referred to in the unswer to (a) above.
(c) admits that the Marine Drive branch did not run out of cash.
Request
25 In paragraph 6 of the words “upon disclosure by the Claimant of the daily balance
snapshot documents” please state:
28 What the Defendant believes is the purpose and functionality of a balance
snapshot and the basis of his belief.
2.2. Whether the Defendant admits that a balance snapshot is a running total printout
showing a balance of what cash a branch should have, not necessarily what cash
‘it actually does have. If the Defendant does not admit this, please state why not.
23 "Whether the Defendant maintains that a balance snapshot is able to (and should)
show the actual transfer of cash from a Cash Account into a suspense account.
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2.4 ‘How and why the Defendant believes that a balance snapshot is capable (i.e. has
ithe functionality) of conclusively demonstrating that the shortfalls were only
accounting errors rather than genuine shortfalls.
i 25 Whether the Defendant relies upon any other receipts apart from balance
i snapshots to be able to demonstrate that the shortfalls are nothing more than
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alleged accounting errors and if so, specify which documents and categories of
‘documents are those upon which the Defendant seeks to rely.
‘The Defendant believes that the purpose and functionality of a balance snapshot
is to give a picture of what the Horizon system believes to be the level of cash
and stock held and receipts and payments made at a given point during the
current balance period but it is not a real time picture. (cf the Claimant’s Horizon
System User Guide Navigation Booklet - Ref: HSUG 14/1 — at page 17 line 8) It
is not possible to be sure when it is printed that everything is up to date. The data
that comprises a balance snapshot is held off site. A request for a balance
snapshot may not include the last ‘packet’ of data yet to go from the base unit in
the Sub Post Office and it is not possible to check whether it has gone or not, so
the balance snapshot may not be fully up to date. It will also be subject to any
errors that have occurred in the operation of the system (as to which see the
Defendant’s answer to request 2.2 below). The Defendant’s belief is based on
speaking to Post Office staff such as Ms Oglesby, engineers, Horizon Systems
helpdesk staff, Network Business Support Centre staff and the Horizon system
manual.
(‘The Defendant admits that a balance snapshot is a running total printout which
May show the balance of what cash a branch may have but equally it may not for
a number of reasons:
i) all data ‘packets’ may not have been sent from the base unit;
i i) some data may have been lost or additional data input;
iii) wrong amounts may have been input;
jiv) an amount may have failed to be input.
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'If all of these aspects have been performed correctly, a balance snapshot should
show a balance of what cash a branch should have but often it does not. A
‘balance snapshot will also show individual transactions successfully entered onto
and recorded in the Horizon system.
The Defendant maintains that a balance snapshot is able to and should show the
actual transfer of cash from the cash account into the suspense account to the
extent that it will show the transactional aspect of that transfer and how it affects
the rest of the balancing procedure. It is a notional transfer and it is recorded on @
‘balance snapshot as a payment. However, it is necessary to be able to interpret
the information recorded on a balance snapshot to understand that it is a transfer
to the suspense account as it will tend to be described, (below a heading
“OTHER PAYMENTS”), as “Loss a 2a in”.
How and why a balance snapshot is capable of demonstrating that the alleged
‘shortfalls were only accounting errors rather than genuine shortfalls will be a
‘matter for expert evidence in the field of Accountancy. Without prejudice
thereto, the Defendant believes that by comparing the actual balance snapshots
‘which he took daily after the close of each day’s trading over the period in
question, with the final balance produced by the Horizon system at the end of
each week's trading, the daily cash declarations, and final weekly cash
decleration, (both compiled manually), it should be possible to demonstrate that
‘the alleged shortfalls were only accounting errors rather than genuine shortfalls.
\The daily balance snapshots should (but may not, for the reasons set out in reply
2.2 above) equal the daily cash declared. The daily balance snapshots should (but
may not, for the reasons set out in reply 2.2 above) produce the final weekly
balance (transactionally). The daily cash declarations should produce the final
.weekly cash declaration. A comparison between all 4 sources of data should be
able to show where error has arisen.
The Defendant does not rely upon any other receipts apart from balance
‘snapshots but considers that it will be necessary to reconstruct all transactions
carried out at the Marine Drive branch for the period in question. In order to do
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‘so, the documents or categories of document upon which the Defendant will seek
‘to rely will include the following reports as may be necessary:
Daily Reports
4) Balance Snapshots;
sii) Daily Cash Declaration;
iii) Cheque Listing Report;
iv) National Savings and Investments Bank deposits and withdrawals;
vy) Personal Banking;
vi) Alliance & Leicester deposits and withdrawals;
wii) APS Transaction Report;
mil) TV Licensing Report,
Weekly Reports
iD Green Giro Report;
ii) P+A Report;
‘itt) PO Paid Report (P490);
iy) Redeemed Stamps Summary;
v) Miscellaneous Transactions:
vi) P+A Report (P2311MA, P+A P2311MA(6)),
vi) Milk Token Summary (P3890);
viii) PO Paid Report (P492MA/P2037MA),;
‘ix) Suspense Account Report,
Ro) Cash Account;
xi) Final Balance.
‘In addition there were weekly cash/stock ordering e-mails received and faxes
sent. Further, the Defendant believes that an audit trail or transactional log of
‘transactions carried out at the Marine Drive branch was kept by the Claimant.
‘The Defendant will seek to rely on these documents following disclosure. The
Ipurpose of so doing is in order to be able to cross-reference as many different
isources of data as are necessary in order to identify where the discrepancies have
‘arisen.
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