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Post Office Mediation Scheme
Second Sight - Case Review Report
Case Reference: M120
Applicant: Pauline THOMSON
Advisor: Graham Cade (Howe & Co)
31 December 2014
This report and accompanying documents are confidential and are not to be disclosed to
any person other than a person involved in the processing of the Applicant’s claims through
the Scheme
1. Introduction
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1.1. This report has been prepared by Second Sight, which is the trading name of Second Sight
Support Services Limited, the company appointed to conduct an independent investigation
of a number of matters raised by Subpostmasters, or former Subpostmasters.
1.2. This report should be read in conjunction with the following:
a)
b)
¢)
d)
e)
the documents submitted by the Applicant and her Professional Advisor;
Post Office's Investigation Report (‘POIR’) including attachments;
comments by Post Office on the previously issued draft of this report:
Second Sight's Briefing Report - Part One; and
Second Sight's Briefing Report - Part Two.
The Applicant has not provided any comments on the previously issued draft of this report.
1.3. The Terms of Reference for Second Sight as set by the Mediation Working Group for this work
are as follows:
a)
To investigate the specific complaints raised by each Subpostmaster who has been
accepted into the Scheme with the aim of providing:
vi.
an assessment of points of common ground between Post Office and that
Subpostmaster;
an assessment of points of disagreement between Post Office and that
Subpostmaster;
where there is disagreement, a logical and fully evidenced opinion on the merits of
that Subpostmaster's complaint where it is possible to do so;
a summary of any points on which it is not possible to offer a fully evidenced
opinion due to a lack of evidence/information;
a view on whether a case is suitable for mediation; and
assisting with any reasonable requests made by the Working Group and/or Post
Office.
1.4. Second Sight has been provided with the following documents:
a)
the Initial Application to the mediation scheme submitted by the Applicant;
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b) the Case Questionnaire Response ('CQR') submitted by the Applicant's Professional
Advisor; and
c) Post Office's Investigation Report (’POIR’), prepared in response to the above
mentioned documents.
1.5. The following are the issues raised by the Applicant:
a) responsibility for direct losses that total £34,330.41;
b) transaction anomalies associated with Cheque Remittances ('Rems');
c) mis-advice by Post Office's Helpline;
d) adequacy of training and support, including Helpline and Audit;
e) process issues at the end of each Trading Period;
f) Post Office's Investigations and Prosecutions processes; and
g) other consequential losses, not dealt with in this report, but which may be raised if the
case progresses to mediation.
1.6. This report focuses on the net loss of £34,330.41, an amount that remains unrecovered from
the Applicant. Other issues, not all of which are dealt with in detail in this report because we
could not find a causative link to the financial loss, may however be relevant to the mediation
process.
1.7. The Applicant states that she did not know how the losses had arisen but alleges that the main
drivers were, indirectly, inadequate training, mis-advice by Post Office's Helpline and
inadequate investigative support.
1.8. The Applicant was in post as Subpostmistress of the Matfield branch between 4 September
2004 and her suspension on 12 September 2008 following an Audit that identified a discrepancy
of £34,330.41. She had previously worked in various Post Office branches, mainly on a part-
time basis, saying that she had become comfortable with using the simpler, paper-based,
system that preceded the implementation of Horizon. She had received Horizon training when
at the Spenser Wood branch and although she worked alone in the Matfield branch with no
assistants it appears that she operated Horizon without significant difficulty in the period up to
2007.
1.9. The Applicant reports that she was arrested on the day of the Audit and taken into custody.
She also says that a search was conducted of her house but that no evidence of theft was
discovered. She did, however, later admit that she had been falsely inflating the branch's cash
on hand figures by an amount exceeding £40,000, for a period of four to five months prior to
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the Audit. As a result of the Applicant's false accounting, it would have been impossible for
Post Office and very difficult for the Applicant to have identified the amount of any shortfall and
the days on which it occurred. As a result potentially remediable errors became actual losses.
1.10. The Applicant was charged with both theft and false accounting but the theft charge was
2.
2.1.
3.1,
3.2.
later dropped when she pleaded guilty to three counts of false accounting. She was convicted
on the false accounting charges and sentenced to 120 hours of community service but no order
in relation to compensation or costs was granted to Post Office.
Points of common ground between the Applicant and Post Office
It is common ground that the shortfall disclosed by the 12 September 2008 Audit was
£40,783.50. That amount was then reduced to £34,330.41 after deducting a credit balance of
£6,453.09 that had been held at Post Office's Finance Service Centre (FSC) representing the net
amount remaining of discrepancies that the Applicant had previously settled centrally.
Points of disagreement between Post Office and the Subpostmaster
The Applicant says that, when she took over the running of the Matfield branch she received no
training and did not even know the name of anyone she could contact for help and advice and
that, up until the date of the Audit, she did not have a single visit from any Post Office manager.
Records however indicate that during her tenure the Applicant made 128 calls to the NBSC
Helpline and 22 calls to Fujitsu's Horizon Helpline and made calls seeking to contact her Retail
Line Manager. She says that her problems started about a year or eighteen months before she
was suspended when losses started to arise that she did not understand. Post Office refers to a
statement made by the Applicant, while she was being interviewed under caution at Tonbridge
Police Station on 12 September 2008, that she "had received adequate training" and considers
this to be persuasive evidence that the Applicant had indeed received adequate training. As
this was just one statement, without reference to which aspects of training were being referred
to, or over what period, we do not give as much weight to this statement as does Post Office.
We also consider it to be plausible that, no matter how well trained or experienced the
Applicant may have been, serious mistakes could still have been made, for example when trying
to correct previously-made errors, if the branch staff had no prior experience of how to do
those things correctly. We return to this aspect of training and support in paragraphs 5.1 and
5.2 below.
The Applicant says that she had a particular problem when a holiday relief worker (who
happened to be the previous Subpostmistress) failed to properly Rem out cheques totalling
£6,319.22 that she had received from customers, though she had correctly sent them off to the
appropriate Post Office Cheque Handling Centre. The Applicant says that, when she returned
from holiday, the £6,319.22-worth of cheques was still showing up as stock in the branch. The
Applicant says that, despite her following advice given by the Helpline, "the loss doubled up"
and that it (we take it that she means "the /oss") remained on the branch's books until it
became subsumed in an apparent £40,783.50 shortfall discovered by the auditors. In its
comments on the previously issued draft of this report Post Office states that "The NBSC call
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logs do not contain any record of a call correlating with the advice given by the helpline referred
to by the Applicant in this paragraph. There is therefore no record of the advice she refers to
ever having been given".
3.3. The Applicant says that "no attempt whatsoever was made to investigate the cause of the
actual loss, the interview just proceeded on the assumption that I was guilty of theft".
3.4. Referring to the prosecution, the Applicant asserts that “at no stage during the proceedings
against me did the Post Office produce any disclosure, there was no accounting evidence
produced by them to show where and how I had stolen the money that they said I had".
3.5. The Applicant has also produced (included as an Exhibit to her CQR) a forensic accountant's
report that was adduced in defence against the theft charge. The accountant at several points
in his report refers to the difficulties that he faced as a result of trying to review documents that
were illegible "due to the poor printing quality". Post Office's view on this matter is that "the
Applicant was fully responsible for her branch, including maintaining adequate records". The
report includes the following remarks:
“the prosecution have provided no accounting evidence" and...
“without sight of the daily cash declarations, I cannot be certain that:
a) The Horizon system was not working correctly and the discrepancy could be as a
consequent of faults within the system
b) Due to human error on one or more occasions, a figure has been wrongly entered
into the system by Mrs Thomson, which has led to the discrepancy, which has later
been compounded by the defendant declaring the amount held on the system to be
correct".
4. Where there is disagreement, a logical and fully evidenced opinion on the merits of that
Subpostmaster's complaint where it is possible to do so
4.1. Post Office has investigated the matter of the £6,319.22 in cheques that were sent to the
Cheque Processing Centre but not remmed out of Horizon and has established that a
Transaction Correction (TC) Credit was - correctly - issued, on 3 October 2007, to the branch.
The Applicant should, on receiving that TC Credit, have accepted it and at the same time
reduced the cheques figure on Horizon by that £6,319.22 (i.e. the TC Credit would have then
cancelled out the impact of reducing the cheques on hand figure to zero). The Applicant did not
do that, however, instead settling the TC centrally and failed to reduce the cheques figure to
zero. This had the effect of generating, in the branch's books, a surplus of £6,319.22 because
those cheques were still being shown, just like the branch's stock of stamps and cash, as an
asset held in the branch. There being no cheques there, the stock of cheques was overstated,
thereby maintaining an apparent, but not real, surplus.
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4.2.
4.3.
4.4.
5.
5.1,
5.2.
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By settling that TC Credit centrally (normally TC Invoices, rather than Credits, are settled
centrally so that they can be paid off in instalments by deductions from salary) the Applicant
had created, in effect, a centrally-held debt due to her instead of reducing the cheques-held
figure to zero. That debt due to her comprised the greater part of the figure of £6,453.09 that
served to reduce the apparent Audit-date shortfall of £40,783.50 to £34,330.41, as mentioned
in paragraphs 1.6, 2.1 and 3.2 above.
The first cheque-related error was compounded nine months later, in July 2008, when the
Applicant incorrectly overstated the branch's outgoing cheque remittances by £6,177.18,
thereby generating a negative figure on the cheques line in Horizon (though this ought not to
be possible). The Applicant manually adjusted that figure back to zero on that same day. When
the Cheque Processing Centre found the shortfall in remitted cheques, Post Office generated
another TC (a TC Invoice this time) to correct that error. The Applicant again settled this
centrally.
Having reviewed these errors and related TCs, we have concluded that Post Office was not at
fault in any of its actions. The Applicant, on the other hand, made mistakes and then
compounded them with further mistakes, which had the effect of masking the branch's true
shortfall that was, by that time, very substantial.
Asummary of any points on which it is not possible to offer a fully evidenced opinion due toa
lack of evidence/information
It has proved impossible to determine whether the Applicant's criticisms of her training are
justified because Post Office no longer holds the records that we would need to evaluate the
training that she received. Post Office states that "There is no evidence of the Applicant
requesting additional training in her calls to the NBSC". As in other cases that we have reviewed
and where this comment has been made we do not agree that this necessarily means that she
had been properly trained and supported. We note, however, the Applicant's remarks,
referenced in paragraph 3.1 above and despite the statement made by the Applicant when
being interviewed under caution, our view is that she was inadequately trained and supported
in regard to the correction of errors.
We are sympathetic to the substantially different and greater responsibilities that a
Subpostmistress, working alone and using the Horizon system, bears than does any counter
assistant operating in a paper-based environment and not having to balance the books and
investigate and correct discrepancies. We do not share Post Office's apparently-held view that,
by reason of her prior counter experience, only minimal training was necessary when she was
elevated to the post of Subpostmistress. Although, as referred to in section 1.7 above, it is
difficult to make a direct connection between inadequate training and specific shortfalls we do
think that it is reasonable to conclude that, as a result of what might have been insufficient
training, she will very likely have made or compounded mistakes that could have generated
substantial losses in the branch. We have concluded, therefore, that Post Office bears some
responsibility for those losses.
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5.3.
5.4.
5.5.
6.
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We do recognise that, whenever figures are falsified to conceal losses, Post Office is prevented
from seeing, and therefore also prevented from reacting to, those losses. It follows that,
although false accounting cannot ever be the initial cause of a loss, it can exacerbate that initial
loss by preventing its detection and mitigation and it can also prevent the correction of the
practices and procedures that generated the loss in the first place. In that context, the
Applicant must also bear some of the responsibility for those losses.
In regard to the Applicant's reference to a loss "doubling up" Post Office has found no evidence
to help us establish what really happened and we have concluded, in the absence of further
evidence, that the comments made in paragraph 4.1 above deal with this. We consider it likely
that the compounding of errors that we have referred to in this report could have created a
situation where other errors remained undetected and uncorrected, thereby giving rise to
further shortages. To the extent that operational errors were to blame for the branch's
shortages, it is likely that customers benefitted from them.
Post Office says that the forensic accountant's inability to determine the actual figures entered
by the Applicant into the Horizon system was because the Applicant had "failed to print legible
records of transactions and retain them in branch as she was required to do". \n this instance,
Post Office seems to be attributing the failure of the theft charge to the Applicant, rather than
to any systemic weakness in Horizon's audit trail. We ourselves, having experienced similar
difficulties in examining branch records, in particular the impact of dealing with sometimes
barely legibly printed narrow rolls of paper, can understand the negative impact that such
illegibility has on the ability of branch staff to follow the transactional audit trail when
investigating discrepancies.
Is this case suitable for mediation?
6.1. In our opinion this case is suitable for mediation, not least because it will offer both parties
the opportunity to reach closure in understanding the impact that training inadequacies,
and the Applicant's falsification of the accounts, had in increasing the impact of errors
made by the Applicant and also increasing the magnitude of the losses that ensued from
those errors. The following issue should also be considered:
a) whether Post Office or the Applicant is responsible in part or in whole for the loss of
£34,330.41 that remains unrecovered by Post Office.
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