POL00040313
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COMMERCIALLY SENSITIVE AND PREPARED IN CONNECTION WITH MEDIATION
Initial Complaint Review and Mediation Scheme
Post Office Investigation Report
Branch Name: Walton on Branch Code: 090023 Case Number: ™Mo71
Thames
Applicant Name: Mr David Status of Case: I Mediation Date of 13 Sept 1993
Yates Application Appointment: I to 7 March
2003
Executive summary
Background
The Applicant was the subpostmaster at the Walton on Thames branch from September 1993 to 7 March
2003. He started working for Post Office in 1979 and had worked as a counter clerk, Crown branch manager
and finally a subpostmaster at Walton on Thames. He viewed himself as experienced in the business of and
workings of a Post Office.
On 7 March 2003 an audit took place which revealed a cash shortage of £366,788.67. The Applicant initially
claimed that the shortage was caused by a large outward cash remittance he sent the previous day not having
been booked into Horizon, When asked for paperwork by the auditor to evidence the cash remittance, the
Applicant admitted that the branch was in fact short in the region of £350,000 in cash.
An interview under caution took place at which the Applicant admitted to taking funds belonging to Post Office
and claimed to have used the money for personal and business debts, but was unable to quantify the amount
used for those purposes. He acknowledged that it was wrong and said that he had acted alone. He claimed
that the shortage had ‘mushroomed’ over a five year period. He admitted that he concealed the loss and had
also lied to auditors at previous audits to evade detection. The Applicant was prosecuted. He pleaded guilty to
one count of theft and was sentenced to 3 years in prison, of which 13 months were served with 13 weeks on
Home Detention Curfew. No significant shortfalls have been encountered at the Walton on Thames branch
since the Applicant’s contract was terminated,
Conclusion
Although there is a very limited amount of documentary evidence available, as the relevant events took place
between 11 and 16 years ago, Post Office concludes that the £359,325.71 loss sustained at the branch was
attributable to theft by the Applicant, as admitted by him during the audit on 7 March 2003, the interview
under caution the same day and his subsequent guilty plea. A guilty plea entails an acknowledgement to the
court that the defendant committed the offence (i.e. that he acted dishonestly). It is likely that, prior to
entering his plea, the Applicant would have been advised of this central principle by his own lawyers.
There is no evidence of either the Applicant or his staff complaining of irregularities with Horizon at any stage
during his tenure and so his complaints of a lack of competent and adequate support and inability to ‘park’ and
investigate differences do not stand up. The Applicant admitted to losses being incurred prior to the
introduction of Horizon, which is contrary to his claim in the CQR that the losses only started when Horizon
was introduced.
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The Applicant's Issues
1. The Applicant claims that the cumulative shortfall of £359,325.71 identified at audit on 7 March
2003 was caused by failings in Horizon rather than theft /fraud or user error;
2. The Applicant claims that he had no choice but to accept a guilty plea when criminally prosecuted;
3. The Applicant claims that a lack of competent and adequate support via the Post Office helpdesk or
by any other means contributed to the cumulative shortfall. In particular the Applicant cites the
inability to park and investigate differences, and the fact that any shortfalls had to be made good
without being fully investigated as significant factors in the losses sustained.
The Applicant claims £1,287,384.08 by way of compensation for his contract for services being
terminated and subsequent criminal prosecution. He claims to have lost his good reputation, which in
his opinion he cannot be fully compensated for.
Case Review Actions
Summary of the information collated by Post Office
Information available from Post Office records:
Information area
Information provided with
this response
Information not available
Electronic Filing Cabinet
Horizon Service Desk
Transaction Corrections
Financial Dispute Resolution
System Connectivity
Branch Training Records
Contractual Files/records
Branch Audit Reports
><] ><] ><) ><] ><] ><] ><] x
NBSC Call logs
X (part records)
Response to issues raised by Applicant
The Applicant claims that the cumulative shortfall of £359,325.71 identified at audit on 7 March 2003 was
caused by failings in Horizon rather than theft /fraud or user error
Due to the age of this case (1998 to 2003) Horizon data is not available and it is not possible to attempt to
show exactly how the cumulative shortfall built up by reference to accounting information. However, that sort
of analysis would have been almost impossible even if accounting information had been available because the
Applicant admitted at interview to inflating the amount of cash on hand at the branch and completing false
cash remittances, meaning that the data inputted by the Applicant could not be relied upon.
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The only relevant documentary evidence available is: i) a transcript of the Applicant’s interview under caution
on 7 March 2003 regarding the criminal allegations against him; ii) the NBSC call log for July 2000 to March
2003; iii) the audit report (Doc 004) and iv) the Performance Improvement Advisor (PIA) call log extract for the
same period.
What is apparent from the documentary evidence available is that the Applicant did not cite Horizon as the
cause of the very large cash shortage identified on 7 March 2003 at any time during the audit, the
investigation or the prosecution process. Nor is there any evidence of the Applicant ever making a claim during
his tenure that soon after Horizon had been installed (11 July 2000), he found unexplained losses occurring.
Further, no significant shortfalls have been encountered at the branch since the Applicant’s contract was
terminated.
On commencement of the audit on 7 March 2003, the auditor asked the Applicant for a balance snapshot. A
balance snapshot is a method of extracting data from Horizon to reveal the level of cash and stock on hand at
the branch. The snapshot revealed that cash in the sum of £410,345.67 should have been on hand at the
branch. The auditor then asked the Applicant to provide the branch’s cash declaration for the previous day,
Thursday 6 March 2003. A physical check of cash on hand should be completed on a daily basis and declared
on Horizon so as to identify any variance between the amount of cash that should be held in branch according
to the branch’s accounts on Horizon and the amount of cash that is in fact physically present in the branch.
The previous day’s cash declaration indicated that £43,566.00 was physically present in the branch, revealing
that cash totalling £366,779.67 was missing from the branch.
When asked for an explanation for the significant variance, the Applicant initially claimed to have despatched a
cash remittance out the previous day, but claimed not to have entered it yet onto Horizon.
By way of explanation, a remittance can be either classed as inward or outward depending on whether
cash/stock is being received by the branch from Post Office or vice versa. An outward remittance in this case
relates to the branch returning cash to the local Cash Centre. The outward remittance is logged into Horizon
by the subpostmaster sending it before being delivered to the Cash Centre. The Applicant claimed that the
cash was in-transit when the auditor was present (in other words it had physically left the branch) but he had
not yet booked it on to Horizon.
The auditor then asked to see the Applicant’s ‘cash in transit’ collection receipt, which indicated that the last
collection was a day earlier than claimed on 5 March 2003. The auditor requested further information from
the Applicant in order to check the amount of cash remitted on that day. The Applicant claimed that he could
not find the paperwork to confirm this. At this stage, the Applicant informed the auditor that no remittance
had been despatched the previous day and that the audit would probably result in a shortage of approximately
£350,000.00. The total loss revealed at audit was £359,325.71.
It should be noted that the explanations given by the Applicant both at the audit and during the security
investigation that led to his prosecution were inconsistent and changed over time. For example, as referred to
below the Applicant at one stage admitted to inflating cash figures for 6 months, but at other stages admits to
having done so for more than 5 years.
Prior to the audit on 7 March 2003, the branch had been audited on two previous occasions (23 May 2002 and
15 November 2002). At these audits, the cash remittances out logged at the branch do not appear to have
been verified by the auditors and so no irregularities were identified. However, following the audit on 15
November 2002, a detailed review of the Applicant’s cash remittances took place. It appears that
discrepancies were identified at this stage, either because no record of particular remittances were found at
the Cash Centres or the information did not correlate.
At that time, branches submitted a paper based balance ledger (known as Cash Account) to Finance Service
Centre (FSC) which detailed all receipts in and payments out in addition to cash and stock declared on hand.
Associated documents would also be submitted to FSC along with the Cash Account.
Cash Centre information would also feed into FSC in order to settle with clients, monitor cash holdings and
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detect risk. Due to the age of the case it is not possible to say with any certainty what exactly transpired in
respect of the 2002 audits and why the large shortfall was not identified at an earlier stage, but it appears (at
least in respect of the November 2002 audit) to be because no cross check had taken place to verify whether
the cash remittances out that the Applicant had logged at the branch had actually been delivered to the Cash
Centre. This would have allowed the Applicant to remove cash from the branch without detection.
Acriminal investigation was instigated immediately upon discovery of the large loss at the 7 March 2003 audit
and the Applicant was interviewed the same day. A copy of the transcript of the Applicant’s interview is
available (Doc 001).
The Applicant was interviewed under caution by a Post Office investigator under the Police and Criminal
Evidence Act (PACE). The Applicant had the right to legal representation and a ‘friend’ (i.e. National
Federation of Subpostmasters’ (NFSP) representative). However, he chose not to have anyone else present
with him at interview.
During the interview, the Applicant admitted the following:
* Acash shortage at the branch had been building up over a 5 year period, which started with error
notices, but ‘slowly mushroomed’.
The Applicant inflated the cash on hand figure at the end of each accounting week to cover up the
loss in the branch accounts so that a balance would be achieved without any shortage being revealed.
© The Applicant had ‘taken to pay staff or ... you know the business wasn’t doing as well as it should be’.
The Applicant had also taken money for his own expenses. He claimed to have acted alone and that
no one else knew. The Applicant’s assistant was later interviewed and ruled out as a suspect.
The Applicant stated that the loss had grown gradually but a total loss approaching £350,000 had
been concealed for the last 6 to 7 months (which is inconsistent with his admission that the shortage
had been building up over a 5 year period). The Applicant stated that there had not been ‘any big
jumps’ but that the ‘amount kept building up’. Given this statement and the large size of the loss, it
seems more likely that the shortfall had been accruing over a 5 year period and indeed as noted
below the Applicant was charged with theft over a period of 5 years.
The Applicant had falsified accounts by transacting false outward remittances to conceal losses, which
went undetected for the reasons detailed above.
© The Applicant made little attempt to pay the money back.
The Applicant confirmed that he understood the accounting process for dealing with shortages and
error notices (now known as Transaction Corrections). By way of explanation, error notices are an
accounting adjustment issued by FSC which are designed to correct accounting errors made in branch
that have been reported to Post Office or that Post Office has become aware of. They impact on the
branch balance by causing a discrepancy for the value issued which is intended to offset the amount
of the error.
* The Applicant stated that he’d been working for Post Office since 1979, and regarded himself as
experienced and conversant with all areas of a Post Office.
It appears that efforts were made to recoup the loss via the civil recovery route but due to the age of the case
no records exist as to the amount recovered, if any. The Applicant claims that he repaid Post Office
approximately £41,000 using sums borrowed from a friend. This cannot be verified due to lack of Post Office
information available.
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Conclusi
Post Office’s findings are that the Applicant stole sums totalling £359,325.71 from Post Office and concealed
this theft for at least six months and possibly as long as five years. Although audits took place in May and
November 2002, the Applicant’s wrongdoing was not detected. It is not possible to say exactly why this was
the case due to the age of the case and inconsistencies in the Applicant's version of events, but it appears to
have been because no cross check had taken place to verify whether the cash remittances logged by the
Applicant were delivered to the Cash Centre. At no time during the 7 March 2003 audit, the interview with Mr
Posnett or the ensuing prosecution process did the Applicant claim that the losses were caused by Horizon
errors. Further, the Applicant admitted that the shortfall had been building up since 1998 (which is well before
Horizon was introduced on 11 July 2000) so his claim that the differences started to occur a few weeks after
Horizon was introduced does not stand up to scrutiny.
The Applicant claims that he had no choice but to accept a guilty plea
The Applicant admitted to theft and false accounting during the cautionary interview. Although he initially
told the auditor what amount would be missing and after initially trying to explain it by claiming that the
discrepancy related to an unprocessed cash remittance out, he later admitted to the auditor that he had been
submitting fake cash remittances in order to falsify the accounts. There is no evidence to indicate that the
Applicant blamed Horizon at any point during the 7 March 2003 audit at which his criminal behaviour was first
discovered, or during the cautionary interview, or at any time throughout the post-interview investigation and
prosecution process.
During the cautionary interview the Applicant was made aware of his right to remain silent, his right to seek
advice from a solicitor and his right to have a friend present at the interview, but he nevertheless chose to
respond to questions and declined to have a solicitor or friend present.
The Applicant admitted to the theft and false accounting over a period of five years at interview and pleaded
guilty to one count of theft in the Crown Court. He was sentenced and received a three year custodial
sentence. At the court hearing the Applicant was represented by his own barrister and solicitors. Prior to.
entering his guilty plea it is likely that he would have been advised that, in pleading guilty, he necessarily
admits to having dishonestly taken POL money without permission or authority and unlawfully applying that
money to his own use, all with the intention of not repaying that money.
Conclusion
There is no evidence to suggest that the Applicant had no choice but to accept a guilty plea. The Applicant had
legal representation at the time he entered his guilty plea and the circumstances surrounding the plea are a
matter between the Applicant and his legal advisors.
The Applicant claims there was a lack of competent and adequate support via the Post Office helpdesk or by
any other means thereby leaving the differences unresolved. The Applicant claims there was an inability to
park and investigate differences, and that he had to make good the differences without these being fully
investigated
Due to age of this case there is no information available relating to the Applicant's error notices from 1998 to
2003, correspondence relating to error notices or other information that would enable any discrepancies at
the branch to be more forensically investigated.
Post Office NBSC call log for the period 13 July 2000 to 31 March 2003 has been obtained Doc 002 refers and
reveals that 125 calls were made to NBSC. 79 ‘H’ calls were received and 46 ‘Q’ calls were made.
Doc 002 shows two types of calls; ‘H’ and ‘Q’ call in column B of the Excel spread sheet. ‘H’ calls refer to the
branch calling NBSC for assistance. The call log reveals that the Applicant called on three occasions in October
and November 2000. These calls relate to: i) a balancing issue on Horizon; ii) a remittance out barcode that
would not scan properly; and iii) advice on the Horizon upgrade implementation. No further calls were made
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regarding the new Horizon system, errors or losses emanating from Horizon. The remaining calls relate to
ordinary product, ordering or process advice.
“Q” calls refer to calls made by Post Office-employed specialist performance improvement advisors (PIA), who
contacted branches to ensure that transactional documents and processes were properly completed and
adhered to.
The “Q’” calls log at Doc 002 shows that almost all of the 46 calls made to the Applicant related to error notice
irregularities or non-submission of accounting information such as Cash Accounts. Doc 003 is an addendum
dealing with the various PIA enquiries. It is important to note that the Applicant had ample opportunity to
bring any irregular losses or anomalies to the attention of the PIA at the time. The log reveals that he never
took this opportunity.
A call made to the Applicant on 1 May 2002 relates to ‘5 to 11 errors in period 12’. The following annotation
was completed by the PIA, ‘errors spoke to SPMR, (sub postmaster) who said he apologises for any
inconvenience caused by these errors and said greater care will be taken in the future. He appreciated our
intervention as it helps him to understand his mistakes’.
Another PIA annotation, dated 18 December 2002, relating to week 23/02 transactional information reveals:
the Applicant ‘always says he can’t find them or never received them’. ‘Escalated to Elaine Wright’. It appears
that Elaine Wright was tasked to visit the Applicant in order to determine the reason for the non-conformance
and / or obtain the missing accounts / documents. Elaine Wright was a retail line manager at the time and had
at the time been in that post for 5 years. Her role involved the supervision of a number of Post Offices within a
defined geographical area; ensuring that business objectives are met in the area of sales, accuracy, mystery
shopper, etc. Due to the age of this case, there is no record to confirm whether or not Elaine Wright visited
the branch or what the outcome of that visit was.
During the Applicant’s tenure, Post Office operated a system of paper based error notices which was reviewed
and reconciled by FSC, who would deal directly with subpostmasters. For instance, if a subpostmaster had
made a mistake regarding a giro deposit, (i.e. had entered an incorrect value or had not submitted the
transactional documents), the relevant department would issue a paper based error notice. Supporting
evidence would be provided with the error notice to help the branch understand the error made in branch. If
the branch had any queries in relation to this, they could contact FSC to gain further clarity. Discrepancies
relating to the error could be held in the branch suspense account where it could be held until enquiries into
the discrepancy were concluded. It could then be removed by processing an error notice by or making the
discrepancy good.
The ‘settled centrally’ function was only introduced in 2005, and relates to a Horizon system function which
allows subpostmasters to ‘park’ losses or gains rather than making them good straightaway at the end of a
trading period, if for example they do not agree with the discrepancies, are awaiting an error notice or wish to
make a shortfall good via deductions out of their monthly remuneration. During the Applicant’s tenure, this
process would have been paper based and in all likelihood, an FSC administrator would have corresponded
with the Applicant.
During this period, despite the numerous calls in to NBSC and the PIA calls to the Applicant, he never
complained about error notices and ‘parking’ and investigating shortfalls.
It is important to note that the Applicant was a competent subpostmaster with many years’ experience as a
Post Office counter clerk, Crown Office manager and finally a subpostmaster. The Applicant would have been
fully conversant with Post Office processes. The operating procedures at Crown branches are largely the same
as those at agency branches.
Counter Operations Manuals were provided to every branch within Post Office network. A weekly newsletter
known as the ‘Counter News’ was also available at the time and sent to every branch in the network. This
detailed any operational updates and guidance.
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Due to the age of this case, there is no information available regarding the extent of the Applicant’s training.
As such, it is not possible to confirm whether the Applicant received the standard subpostmaster training at
the time. It is possible that he did not receive bespoke subpostmaster training given his experience and as he
used to work at the branch while it was still a Crown Office, and so he would have been well versed in counter
clerk and its back office accounting duties.
Conclusion
There is no evidence to suggest that the Applicant did not have competent and adequate support from Post
Office or that any perceived inability on his part to investigate discrepancies contributed in any way to the
shortages incurred. The Applicant was very experienced and well versed in the support processes provided by
Post Office, and would have received the same support as other branches. It is evident that the Applicant did
use NBSC regularly and support was provided from his line manager. However, there is no evidence of him
using Post Office support functions to report any issues with Horizon.
Reference Description
Number
001 MO071_POL_001_Taped Transcript_AD
002 MO071_POL_002_NBSC call log July 2000 to March 2003_AD
003 MO071_POL_003_PIA call log extract_AD
004 MO71_POL_004_Audit Report_AD