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DRAFT — IN CONFIDENCE
BRIEFING FOR CHIEF EXECUTIVE
Issue
1. Your forthcoming telephone conversation with James Arbuthnot MP (JA) to discuss his
concerns about the Scheme.
Recommendation
2. That you reassert Post Office’s (PO) support for the original aims of the Scheme and:
Give JA an opportunity to explain the nature of his concerns which he has indicated will
likely call into question PO’s good faith towards the Scheme;
e Calmly but robustly rebut the charge, underlining the unusual lengths to which PO has gone
to respond to the concerns of Justice for Subpostmasters Alliance (JFSA), MPs and Applicants
to the Scheme;
* Place on record PO’s own concerns over the effect that JFSA’s refusal to participate fully in
the business of the Working Group, evident breaches of confidentiality in relation to its
workings, and the inadequacy of Second Sight’s case reviews is having on the credibility of
the Scheme and the confidence placed in it by PO [and Sir Anthony Hooper];
@ Make clear that, while PO remains committed to a thorough investigation of the concerns
raised by Applicants in each and every case, it cannot be expected to accept responsibility
for matters in circumstances where there is no evidence that it is at fault; and
Indicate that, should those in whose interests the Scheme was principally established (JFSA
and its members) no longer feel it is capable of meetings their needs, this is something upon
which PO will need to reflect very carefully.
3. While the conversation also represents an opportunity to appeal to JA to bring pressure to
bear on JFSA to engage with the Scheme constructively, it is not clear that doing so would have the
desired effect or that, even if it did, that would necessarily be in PO’s best long term interests.
Background/Argument
Case Profile and Cost
4. PO has been investigating Applicants’ cases afresh for some 2 years. In the cases
investigated to date, the accumulated evidence broadly points to 3 scenarios — cases in which losses
have occurred through accounting and other errors by staff in the relevant branch, those in which
errors have been exacerbated by false accounting, and those involving theft.
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5. A total of 82 investigations have been completed. A fresh investigation in all 54 remaining
cases has begun and this process will be completed on or by 22 December 2014.
6. The cost to PO of this process to date is £3.4 million. A further £4 million is currently forecast
to be spent, producing a total of £7.4 million. As an absolute average, this means that each of the
136 cases in the Scheme will cost PO just shy of £55,000. These figures do not include any payments
PO may make to Applicants in the Scheme.
The integrity of Horizon
7. In not one of the cases re-investigated so far has a fault with the Horizon system been
established. That said, we are being extremely careful to avoid any sense of complacency and we
will apply the same rigour in investigating the remaining cases as we have to date.
8. However, PO is entitled to take the view that in the absence of evidence to the contrary, the
presumption must be that the system is working as it ought to. To start from a contrary position,
whereby PO must prove the system’s reliability, goes against both common sense and established
practice. Bluntly, it is not PO’s job to prove that Horizon did not cause the losses incurred by
Applicants to the Scheme, but for Applicants to provide evidence that it did.
Current Challenges
9. Beyond the very significant resource impact that providing all Secretariat functions to the
Scheme adds to what is already a major undertaking, PO faces a number of additional challenges:
e Breaches of confidentiality/media: PO has, at all times, been keen to ensure that the
business of the independent Working Group should be confidential, not least given the
sensitivity of much of the relevant material. That is in line with its terms of reference, agreed
to by all parties, and highlighted as the only legally binding obligation on participants to its
work. It has unfortunately become clear that that confidentiality has been breached. One
example is the recent article in Private Eye which contained details of the Working Group’s
decision making process which it would be impossible for that publication to have guessed
at correctly. Moreover, suggestions have been made, including by JA, that should PO not
take a particular course of action, the media might be called upon presumably in an attempt
to place it under some form of pressure. In the context of a Scheme which depends critically
on the confidence participants (including PO) have in it, both of these developments are
deeply damaging. PO maintains that, should any participant in the Working Group have an
issue or concern they wish to raise, the proper forum for doing so must initially at least be
the Working Group itself. That has not happened in this case which, quite apart from
legitimate concerns over confidentiality, marks a lack of professional courtesy.
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JESA’s non-participation: JFSA have recently adopted a policy position not to comment on,
discuss or otherwise participate in the examination of cases by the Working Group where
Second Sight has deemed these suitable for mediation. They now leave meetings of the
Working Group before these cases are discussed, depriving Sir Anthony Hooper and PO of
the benefit of their input. Were this policy position confined to a limited number of cases,
‘one might perhaps be able to contain its effects. However, since Second Sight have deemed
well in excess of 95% of the cases they have reviewed as being suitable for mediation (as to
which see below), JFSA’s stance plainly undermines the role of the Working Group and the
successful operation of the Scheme.
Second Sight’s reports: these reports are based on an independent review of all the material
available to PO as a result both of its initial, and now fresh, investigation of each case.
Second Sight almost invariably conclude that the question of responsibility for the losses in
branch (i.e. whether the Applicant or the PO is responsible) is suitable for mediation. As
noted above, none of the cases re-investigated to date have produced evidence of a fault
with Horizon, or that PO was otherwise directly responsible for those losses. Legitimate
questions over the adequacy of training provided by PO may arise in a tiny minority of cases
and PO has already embarked on a review of its practice in this regard. In contrast, and in
most cases, Second Sight appear simply to ignore the weight of evidence (or the totality of
evidence) which points to a clear finding that the Applicant was responsible for the losses,
preferring instead to leave the question open and recommend mediation. This is at its most
egregious where Second Sight refuse to acknowledge the responsibility of Applicants even in
cases where the Applicant has admitted to, and/or been convicted of, theft. In recent
discussions with the Working Group Secretariat, Second Sight have indicated that they have
been working on the basis that all cases would proceed (‘be nodded through’) to mediation
by virtue of having been accepted into the Scheme and that this was all parties’
understanding of the process (presumably including PO). Leaving aside the obvious question
as to what Second Sight actually consider their role to be if a decision to mediate all cases
had already been taken prior to the conclusion of their case reviews, this mistaken belief
may be responsible for their near default finding of suitability for mediation. Needless to
say, this represents a serious problem for PO.
Expectations gap: the Scheme, originally designed to resolve concerns around the reliability
and performance of Horizon, is in practice more often than not being used by Applicants as a
vehicle for making very substantial claims against PO for losses it is alleged to have caused.
While the case in which the Applicant is seeking £13 million may represent the extreme end
of the spectrum, claims in excess of £1 million are common. In addition, and despite
strenuous efforts to head the problem off, a number of Applicants with criminal convictions
appear to consider the Scheme as being capable of providing them with an alternative
platform from which to appeal those convictions. These wholly disproportionate claims (on
any reading) and inappropriate/unrealistic expectations of the Scheme will only fuel the
already pronounced sense of dissatisfaction, no matter how misdirected, felt by Applicants
towards PO.
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e The appropriateness of mediation: Second Sight’s near default recommendation to mediate,
even where there is no evidence to question the original finding that Applicants were
responsible or liable for the losses in individual branches, inevitably places PO in a highly
invidious position. Partly given their number, it is all too easy to characterise PO’s view that
these cases are not suitable for mediation as being self-serving and high-handed. However,
in the absence of any evidence that it caused losses (in contrast to often substantial and/or
conclusive evidence pointing to responsibility resting with the Applicant), it is manifestly
right and reasonable for PO to adopt this view and act accordingly. To ignore the evidence
in these cases would, in effect, be tantamount to asking PO to accept responsibility for
events which simply did not take place. That perverse outcome would also have a hugely
detrimental and significant downstream effect on the integrity of the PO Network as a whole
in effectively sending a message that it pays, quite literally, to make wholly unsubstantiated
or opportunistic claims that PO is responsible for losses suffered in branches up and down
the country. In the vast majority of cases, PO would be quite happy to sit down and speak
with Applicants to give them a further opportunity to speak to the PO directly and to
explain, where it is possible to do so (false accounting by its nature frustrates this process),
how losses occurred. A conversation of this nature would be considerably more
appropriate than mediation, not least since each mediation costs PO in the region of
£34,000.
10. While not all of these issues need necessarily be raised in your conversation with JA, it is
important to recognise that they are far from superficial or capable of a quick fix.
Asilver lining ?
11. With that in mind, you may wish to consider whether, in the light of the concerns being
expressed on all sides, this is the appropriate juncture for PO to look again privately at alternative
ways to address, fairly and thoroughly, the concerns of Applicants to the Scheme. This would,
naturally, be done on a contingency basis, with proposals being brought to the Board only if and
when a reasonable judgment is made that the Scheme in its current form will not meet its original
purpose or will only do so at disproportionate cost. While this thinking is not directly relevant to
your conversation with JA, this advice would have been incomplete without recognising a
development of this sort representing a credible future change of direction for PO.
Immediate needs
12. Returning to the here and now of your conversation with JA, it is plainly difficult to know
exactly what may transpire. The suggestion would be to keep the conversation out of the detail and
seek to refocus his mind on the big picture facts of the situation:
e There is a strong sense that the starting point for people involved in this process is that PO
and the Horizon system are or somehow simply must be at fault
That does not do them any credit — fair-minded people keep an open mind and do not rush
to judgment
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* Post Office has gone to extraordinary lengths to address the concerns of Applicants, the JFSA
and MPs, and has devoted considerable resources in doing so in the face of significant
business challenges and competing priorities
e Ithas, at all times, acted fairly, responsibly and maintained the confidentiality of the process
to maximise the chances of the Scheme’s success
e = Itis far from clear what those who are now critical of PO’s handling of this issue would have
us do
13. You may consider that, given the obvious sensitivity of the discussion as well as the
possibility of JA seeking to explore the detail of certain cases and our response to them, it would be
helpful for Chris Aujard to be on hand at the relevant time.
Patrick Bourke
26/10/14