Initial Complaint Review and Mediation Scheme
Post Office Preliminary Investigation Report
Branch Name: I Rugeley Branch 2642425 Case M118
Code: Number:
Applicant Carl Page Status of Mediation Date of 01 April
Name: Case: Application I Appointment: I 1997
Executive summary
The Applicant was appointed as Subpostmaster of Rugeley Post Office on 1 April 1997 (Doc
003). Following an audit on 14 January 2003 which revealed a shortage of £645,345.18, the
Applicant was precautionary suspended which led to his contract being terminated with an
effective date of 14 January 2003.
The Applicant's claim focuses on lack of training and adequate support, defects in Horizon,
problems with bureau transactions and accounting procedures and issues relating to
criminal proceedings taken against him. The Applicant makes no specific financial claims in
his application but does refer to the loss of his investment which was over £100,000.00.
Findings
The main focus of the Applicant's complaint relates to the use of the Forde Money Changer
which was used alongside but independent of Horizon. It was used to convert sterling into
currencies bought and sold over the Post Office Counter. Post Office can confirm that the
process at the time was that the Applicant or a staff member would be required to manually
input the daily rates for all currencies bought or sold by Post Office, into the Forde Money
Changer from a fax delivered daily to the branch. Further, special (better) rates were
authorised if, for example, the branch was situated near a bureau competitor. From the
evidence available, the significant loss revealed by the audit related primarily to the
Applicant selling foreign currency at rates below the daily approved rates supplied by Post
Office.
As part of this review, Appendix D of tab 4 of the Applicant’s Case Questionnaire Response
(CQR), described as a "spreadsheet of Euro transactions", was requested from Second Sight
who have been unable to provide the document, having explained it had not been supplied
by the Applicant. Without this document, and given the very limited data available to Post
Office on this case, Post Office is unable to comment fully on the bureau transactions (which
were manually inputted into Horizon).
There are no records to substantiate the Applicant’s claim that he did not receive sufficient
training to undertake his role. The Applicant’s reliance on his first wife to operate the branch
was not a matter for Post Office to query following her departure, as the Applicant himself
had been appointed as Subpostmaster. Further, after she left there are no records of any
requests for additional support or training logged with Network Business Support Centre
(NBSC}.
Although records of calls made to the Horizon service desk (who deal with technical faults.
with Horizon) are not available, the NBSC logs have been sourced dating back to April 2000.
There are several calls logged relating to the use of Horizon and there is one referring to a
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possible system fault but these do not correlate with the discrepancies reported.
It is Post Office’s view that the subsequent security investigation and criminal proceedings
were conducted fairly and in accordance with the strict rules and procedures in place. There
is no indication that the Applicant was treated unfairly.
Other issues raised are responded to in the body of this report.
Conclusion
Due to the Applicant's tenure coming to an end more than 10 years ago, there are very
limited records pertaining to the case available to Post Office. Post Office has established
what is most likely to have occurred through discussions with Post Office employees who
were involved with this branch at that time and are still within the business.
Based on the records that are available (including conversations with Post Office employees
dealing with the case at the time and by referencing NBSC call logs) it is clear that Horizon is
not at fault for the losses suffered at the branch. This is further supported by the Applicant’s
admission of theft.
The Applicant has stated that he willingly entered preferential rates into the Forde Money
Changer to allow a frequent purchaser of large sums of foreign currency;;
obtain currency at a rate below those approved by Post Office. Post Office understands from
these conversations that a third party raised an issue with the Police as they were concerned
at the volume of currency being exchanged by) This suggests that the
currency was not being used abroad as one would normally expect foreign currency
purchased would be. The Applicant states his volume of sales were due to the preferential
rates that were available at the branch to I j
It therefore appears that the incorrect selling of foreign currency was the cause of losses at
the branch. Regardless of whether the Applicant acted fraudulently or innocently, the
Applicant is liable for the loss caused by selling foreign currency at rates below those
prescribed by Post Office as this amounts to a failure to follow Post Office's procedures.
The Applicant states that he was given authority to provide preferential rates by his Retail
Line Manager, Mr Geraty. Mr Geraty is no longer in the business and so Post Office has been
unable to obtain his comments and therefore Post Office are unable to substantiate these
claims. Mr Geraty had over 25 years’ experience in Post Office and many years’ experience
of supporting the post office network. There is no evidence other than the Applicant’s claim
that Mr Geraty would have advised the Applicant of the correct Post Office procedure in
relation to preferential bureau rates for bulk purchases of currency.
Asa result of the above issues and Post Office's investigation at the time, the Applicant was
prosecuted. The Applicant pleaded guilty at Stafford Crown Court to a single indictment of:
‘The Defendant stole £94,000.00 from the post office having begun to do so on return from
holiday in August 2002. A guilty plea entails a complete admission of the facts alleged in the
count on the indictment pleaded guilty to unless qualified by a written basis of plea. The
remaining deficit of £188,000.00 may have been the result of incompetent accounting or
possibly theft by other person(s)’. The Applicant was sentenced to a custodial sentence of
two years for this offence and served nine months in prison, three months on a tag, and was
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on licence until September 2009. Post Office maintains that this conviction was correct and
that the Applicant stole at least the £94,000 that he pleaded guilty to.
“The Applicant's complaint
The Applicant’s initial complaint was received via Second Sight on 15 November 2013. A
SLO1 was sent on 26 November 2013 and a CQR was accepted by Post Office on 10 April
2014.
The issues raised by the Applicant are as follows:
Failure to provide adequate training and support
*The Applicant states that he and his wife took over the branch in February 1997 as a
business partnership, with the Applicant assuming the role of Subpostmaster. The
Applicant says that he and his wife were given two weeks’ ‘on the job training’ at
Wolverhampton Post Office and were expected thereafter to manage ‘what was in
effect a combination of a small bank, government office and shop in strict accordance
with the Post Office’s internal rules and regulations’.
A Bureau de Change (Forde Money Changer) was installed in 1998. The Applicant
cites that he, his wife and one member of staff received approximately three hours of
onsite training from a member of Post Office staff, and they were given an
Operations Manual.
*The Applicant and his wife separated in 2000 and divorced in 2001. The Applicant
states that ‘The Post Office raised no concerns or issues with the new state of affairs
nor did they enquire if the Applicant was coping with the business working alone’.
The Applicant says that after his wife left, he relied on his staff, and at this point the
Applicant received correspondence from the Post Office regarding inconsistencies
found at audit, the level of errors, failure to cross sell and failure to despatch excess
cash. Despite this the Applicant received no further training.
Defects in Horizon
* The Applicant states that Horizon is defective in that it relies wholly on manually
input figures and that there were numerous performance issues for which Post
Office failed to provide any remedies.
Bureau Transactions
The Applicant questions the sum of £282,000.00 shortage in the AM stock unit.
# The Applicant claims he was misled by Post Office in regard to the restrictions which
applied to the exchange rate that could be levied on bulk foreign exchange
transactions. In particular, the Applicant states that the Retail Line Manager (RNM),
Mr Geraty, ‘suggested that Mr Page could sell currency at a level provided that
everybody gained’. He states that Mr Geraty also told the Applicant ‘that he could
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provide favourable exchange rates for someone buying in bulk as long as they were
less than the buyback rate’, (NB the exchange rates would need to be more than
the buyback rate to favour the purchaser)
© Post Office did not question the acceptance of cheques for these transactions.
Issues related to criminal prosecution
* The Applicant states that Post Office had insufficient evidence to indicate that he
was guilty of theft and hence these allegations should not have been made.
e@ The Applicant raises the issue of the amount claimed by Post Office changing from
an initial £645,000.00 to £282,000.00 and then a final sum of £94,000.00.
© The Applicant states that Post Office froze his assets and “ successfully undermined
his efforts to sell the branch". The Applicant took on a loan to ‘purchase’ the Post
Office initially.
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Case Review Actions
Summary of the information collated by Post Office
Information available from Post Office records:
The case review undertaken covers the period 12 April 2000-to the date of this report.
Due to the timescale of the case many records are unavailable however the following documents
have been reviewed. Post Office contacted those employees still in post who may have had
involvement with this case to ask for their assistance Where their recollections have been used
these have been noted as such within this report. Employees’ recollections are however limited due
to the passage of time.
case
Information area Information provided I Information obtained Information not
with this response from CQR available due to
dated nature of
Transaction x
Corrections
Network Business % (12/04/2000-
Support Centre 16/01/2003)
(INBSC) logs
Record of audit x
Security reports x
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Training/Intervention x
Records
NBSC CALL LOGS BETWEEN 12 April 2000-16 January 2003 (Doc 002 Refers)
Records indicate that:
231 calls were recorded between 12 April 2000 — 16 January 2003 broken down as follows:
2000 — 64 calls
30 calls refer to transactional knowledge for customer service, 15 were requests for telephone
numbers or addresses, 6 refer to remittances or stores and stock ordering, 6 refer to balancing and
error notices, 1 was a request for Retail Line Management contact, 1 refers to branch closure, 1is a
call from Post Office regarding performance issues, 1 is a complaint from the Applicant regarding
the time he has waited for a NBSC response.
3 refer to Horizon
e 14 April 2000 Jane reports she cannot log out
e 18 April 2000 Applicant reports a screen freeze
e 17 June 2000 Margaret reports ‘system busy’ for 20 minutes
2001 — 80 calls
46 calls refer to transactional knowledge for customer service, 16 calls from Post Office regarding
performance issues, 8 were requests for telephone numbers or addresses, 5 refer to remittances or
stores and stock ordering, 4 refer to branch closure, 1 refers to identification verification of visitors.
2002 — 79 calls
24 calls refer to transactional knowledge for customer service, 24 calls from Post Office regarding
performance issues, 17 were requests for telephone numbers or addresses, 5 refer to remittances
or stores and stock ordering, 4 were requests for Retail Line Management contact, 2 refer to
balancing and error notices, 2 refer to identification verification of visitors, 1 refers to branch
closure.
2003 — 8 calls
3 calls refer to transactional knowledge for customer service, 2 refer to branch closure, 1 was a
request for telephone numbers or addresses, 1 refers to identification verification of visitors, 1 was
a request for Retail Line Management contact.
Record of Audits
26 January 2001: the only record is a call logged with NBSC by staff to verify identity of auditor at
branch.
9 November 2001: Audit of branch revealed a shortage of £811.44
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27 June 2002: Audit of branch revealed a shortage of £8,335.63. Whilst there is no exact
breakdown of the shortage revealed, records show that the majority of the loss £8,016.15 was
found in stock unit AM.
There is also a print out of the suspense account produced at 17:21:46 included within the CQR (the
suspense account is a holding account with Horizon). There are two entries recorded: a cash
shortage of £145,873.74 lodged from the AM stock unit on 27 June 2002 and a cash surplus lodged
by BU stock unit on 27 June 2002 of £191,192.95.
The shortfall is therefore likely to be calculated as:-
BU stock unit surplus £191,192.95
AM stock unit shortage £145,873.74
Other shortages £53,654.84
Audit Result £8,335.63
This was raised by the Applicant at the meeting held between him and his RLM and Contract
Advisor on 3 July 2002, where it was Post Office’s view that the discrepancy was possibly in stock
unit 03 (although no further details are given) whilst the Applicant believed it related to transfers
between stock units.
The following procedural weaknesses in the branch were also reported:-
1. Officer In Charge (OIC) used the Applicant’s log-in to access Horizon
2. OIC only had clerk level access therefore was unable to produce Cash Account (C/A)
3. No provision made for staff to produce C/A in Subpostmaster’s absence
4. Three stocks not rolled over on Wednesday, one of which would have been used on Thursday
which would have been week 14. (Stock units not rolled on or prior to Wednesday 26 June 2002.)
5. Postage credit given to customers
6. Bureau transactions not entered daily
7. Lottery transactions not entered daily.
These were discussed with the Applicant at the meeting on 3 July 2002, the details of which are
included within the body of this report.
The CQR (Tab 4 page 20) makes reference to an audit on 31 July 2002 but there are no records to
support that an audit of the branch took place on that day. Post Office assumes this to be a
typographical error for 3 July 2002.
14 January 2003: Audit of branch revealed a shortage of £645,345.18. Paperwork supplied by the
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Applicant as part of his submission shows the final account discrepancy as £645,345.18.
It is not recorded why the amount changed when the case went to court or why, if as the Applicant
claims, it reduced to £94,000.00. However the Applicant's CQR submission contains the following
breakdown of the shortfall.
5 Cheques seized by Police on 13 January 2003 (the evening prior to the Audit) £638,675.65
Differences in the currency and sterling on hand £3.583.14 (-)
AM stock unit shortage £3086.39 (-)
£645,345.18 (-)
The CQR submitted states that on the evening of 13 January 2003 (the night prior to the audit) Post
Office security investigators and Police Officers attended the premises of Rugeley Post Office and
conducted a search of the branch including the foreign currency till.
The 5 Cheques (referred to above) were seized, as part of the search of the foreign currency till.
They were all drawn from account 71392875, RPX Recycled Plastics Ltd, summarised as follows:-
Cheque Number Cheque Date Amount (£)
100148 2 January 2003 278,181.82
100159* 13 January 2003 100,000.00
100160* 13 January 2003 100,000.00
100161* 13 January 2003 100,000.00
100162* 13 January 2003 60,493.83
The four cheques annotated * above total £360,493.83 which equalled the value of foreign
currency receipts found ort ‘a regular customer of large foreign exchange
transactions at the branch) at the time of his arrest.
One possible explanation is that the bulk of the shortage related to cheques held at the branch
which were disallowed for the purposes of the audit. These cheques would have been sent for
processing and if they cleared would reduce the amount due to Post Office by the Applicant. It is
highly likely that some of the cheques did ‘clear’ whilst others were returned ‘refer to drawer.’
iilst no records exist in relation to this, this had happened on previous occasions with RO!
GRO i The amount is likely to have decreased as a consequence of part recovery of the sum
The CQR further states that during the audit on 14 January 2003 a balance snapshot (a Horizon
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report which shows the amount of cash, currency and stock held within an individual stock unit)
was produced for the ‘AM’ stock unit which stated that a sterling equivalent of £282,000.00 of
foreign currency was held within that unit. There was no foreign currency physically found in the
stock unit by the auditors on the day of the audit. It was initially presumed therefore that cheque
number 100148 for £278,181.82 was payment for this ‘missing’ foreign currency. This was later
disregarded as it was revealed that cheque numb actually presented to the branch to
cover three previous cheque payments made bt In December 2003 which may
have been returned ‘refer to drawer" due to insufficient funds in the bank account. (Whilst
December 2003 is referred to in the Applicant’s complaint Tab 4 point 6.13 it is assumed this should
be December 2002.) .
It should be noted that the cheque number 100148 was dated 2 January 2003. This suggests it had
been held in the branch for 12 days. At that time Subpostmasters were required to despatch
cheques every day of the week except Friday and Sunday. This enabled cheques to be cleared
promptly and earn maximum interest for Post Office.
When the Applicant was asked for an explanation of cheque number 100148 he confirmed that it
was presented bi 'to cover the three cheques that had “potentially bounced” but
the Applicant states he was given this cheque at the start of January 2004. (Whilst January 2004 is
referred to in the Applicant's complaint Tab 4 point 6.15 it is considered this should be January
2003 as by January 2004 the Applicant had not worked in the branch for twelve months and the
cheque presented would have been six months out of date).
Thus the conclusion was drawn that the £282,000.00 was an unidentified loss in the ‘AM ‘stock unit
and formed the basis for the theft charge made against the Applicant.
Post Office is unable to determine the exact circumstances of these events given the limited
records available but the following facts can be stated with certainty:
a) Cheques were acceptable as a method of payment for foreign currency transactions at Post
Office branches during the indictable period (1 March 2002 to 14 January 2003) but should only be
accepted when accompanied by a valid cheque guarantee card and the cheque amount should not
exceed the value of the cheque guarantee card. Clearly the Applicant exceeded this on multiple
occasions by a wide margin.
b) A special rate for foreign currency transactions over £5,000.00 could be obtained by contacting
First Rate Travel Services by telephone at the time of the transaction.
c) Other special rates (offers) were detailed on the fax sent every morning (except weekends) to the
branch; these rates were manually input to the Forde Money Changer.
The Forde Money Changer which the CQR states was installed in the branch in 1998 was a
standalone terminal not linked in any way to Horizon. It performed various functions and produced
daily and weekly reports to enable the Operator to buy and sell foreign currency to customers, to
record sales of foreign currency and to provide print outs so that sales and holdings could be
verified and transferred to Horizon.
Daily on request the Forde Money Changer would produce a Command 3 printout. This report
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contained the transaction summaries for the day and closing balance for each currency held in the
branch.
Weekly on request the Forde Money Changer would produce a Command 10 printout. This report
would detail the amount of each currency held and details of any revaluation and commission
totals for the week.
The CQR states that when the Forde Money Changer was installed “it involved having to set aside a
separate room which was used solely for Bureau de Change”. Discussion in connection with this
report with the RLM who still works with POL (albeit in a different role), confirms that the Applicant
did build a separate room within the Post Office designated area. This room was used to conduct
: foreign currency transactions which were consistently completed before the
branch opened daily in the privacy of this room away from the other members of staff. Post Office
assumes that all foreign currency transactions were conducted from this separate room due to the
Forde Money Changer being located there. The Forde Money changer terminal was approximately
18 inches by 12 inches and about 6 inches high; there was no requirement by Post Office to build a
new room as the Applicant claims.
The CQR lists a number of weeks when the amount of foreign currency declared on Horizon was
different to that reported as on hand on the Forde Money Changer. The discrepancy between
these figures increased over several weeks prior to the audit of 14 January 2003.
The variances are detailed below:-
Week Ending Foreign Currency Forde Money Changer I Difference (£)
Declared (£) (£)
04 September 2002 196,292.24 7,292.24 189,000.00
19 September 2002 299,754.23 102,754.23 197,000.00
25 September2002 297,790.91 100,790.91 197,000.00
16 October 2002 319,841.32 104,841.32 215,000.00
06 November 2002 373,929.97 148,929.97 225,000.00
18 December 2002 370,591.17 100,591.17 270,000.00
As stated above there is no direct link between Horizon and the Forde Money Changer and it is
possible to make inputting errors but the level of these errors is so significant (in terms of
frequency) that it is unlikely that human error could account for them all. It is stated in the CQR
that it was common practice that sales of foreign currency td were processed via
the Forde Money Changer but not collected or presumably paid for until several days later
(although the CQR fails to record this latter point). This was contrary to Post Office procedures as
all transactions have to be settled at the time of the transaction with an acceptable method of
payment for foreign currency purchases. At that time this would have been either cash, cheque
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supported with a valid guarantee card up to maximum limit of the card, bankers draft, building
society cheque or debit/credit card or a combination of these.
One possible cause of these differences is that foreign currency holdings were being inflated to
conceal the sums being taken by the Applicant. It is noted that the CQR states that the difference
had risen to £282,000.00 by 8 January 2003 which is just days before the audit on 14 January 2003.
It reported a snap shot figure of sterling equivalent of foreign currency in the ‘AM’ stock unit of
£282,000.00 which was not present. This also being the sum forming the basis for the theft charge
to which the Applicant pleaded guilty. (Doc 001 refers)
At the audit of 14 January 2003 a cheque was on hand that had been held in the branch for 12 days
(see below). One of the most probable explanations also suspected by the officers dealing with the
case was that the practice of processing a transaction without taking payment or taking payment
but not despatching the cheque received for processing at the clearing house was being adopted.
The second option would have allowed: 0 exchange the currency purchased for
cash at another bureau outlet and either pay the money into his bank which allowed the cheque(s)
to clear or he simply returned to the branch and refunded the cheque(s) with cash.
Further there was little point in processing the transaction prior to!
branch as these transactions did not take long. The only timely element would be counting out the
physical cash to the customer given the large sums involved, which would have had to be
completed whenever! GRO
It was also suspected by the officers dealing with the case at the time that
currency back to the branch for the Applicant to resell. When the matter went to court the
Applicant's defence team raised the issue of the volume of currency sold tol
suggested this exceeded the total amount of currency supplied to the branch during the Applicant's
GRO ihad sold currency back to the branch, then this is one possible
explanation to account for the difference.
In the report produced by Mr Liddell on page 4, it is stated that the Applicant had sold 242,000
Euros more than could be accounted for taking the opening balance remittances (currency
delivered to branch) in and sales of foreign currency into account. This is consistent with the
scenario whereby currency was sold back to the branch by
Response to issues raised by Applicant
Failure to provide adequate training and support
Issue 1 Post Office failed to train the Applicant adequately or at all in relation to Horizon and
foreign currency transactions
The earliest records that Post Office holds in relation to training packages for new entrants is that
available to new Subpostmasters appointed in 2001. At that time the package consisted of two
days pre transfer training, 10 days on site training and support when the Subpostmaster
completed the next balance. It is likely that a very similar package would have been made
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available to the Applicant on appointment in 1997.
The training package in place in 1997 would have been in Post Office’s view adequate for the role
as Subpostmaster.
Although there are no records to support this specific installation, when the Forde Money
Changer was installed in 1998 training would have been delivered on the use of the machine and
foreign currency transactions. Training material would have been supplied to the Applicant as
this is standard procedure when a new transaction is introduced. The standard training package
considered necessary would have been delivered and if at any time the Applicant felt that
additional training was required this could have been requested via his Retail Network Manager.
The branch as a former Crown (directly managed by Post Office) would have used the ECCO
system which was a partly computerised system and was the forerunner of the Horizon system in
use today. It is therefore Post Office’s view that the grounding provided by ECCO would have
greatly assisted the transition to Horizon on its introduction.
In 1995 Post Office commissioned the Horizon system from the company known as Fujitsu
Services Limited, after the initial pilot there was a rolling programme to install Horizon at all Post
Office branches.
On 15 December 1999 the Network Business Support Centre (NBSC) was established to help and
support Subpostmasters and their staff with customer transactions and navigation of Horizon.
NBSC records indicate that a Horizon Field Support Officer (HFSO) was at the branch on 12 April
2000 which would suggest that this is the date that the branch migrated to Horizon. A balancing
book was requested for this branch by the HFSO on this date. The standard training for Horizon
was, prior to go-live, an evening event to provide Subpostmasters and staff with an overview of
the system. Each member of Post Office staff was also given one day’s classroom training on
Horizon plus an extra half day for supervisory staff who were involved with the office balance.
A Horizon Field Support Officer (HFSO) was allocated to be on-site for the first two days of go-live
to assist Subpostmasters and staff with navigating the screens when serving customers and to
support Subpostmasters in branch with transactional and accounting procedures.
The HFSO was also due to attend on the day of the first balance following the go-live date.
Training Manuals and workbooks were supplied to each branch.
Due to the time elapsed there are no records available to confirm completion of this training at
this‘or any other branch at that time.
The Applicant states that he and Mrs Page separated in 2000 and divorced in 2001. The Applicant
states in his application that his wife tended to deal with the accounting side of the business as
she was much more adept at this than he was. As the Applicant was appointed three years prior
to these events and had received initial training this would not be of concern to Post Office and it
would be for the Applicant to raise if he required more training as a result of the loss of his wife's
assistance in the branch.
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The Applicant's reliance on his former wife was not raised at the meeting held on 3 July 2002
attended by the Applicant, the Retail Line Manager and the Contract Advisor to discuss
performance and a number of written warning letters sent to the Applicant.
The Applicant cites that Post Office recommended additional training to include the opportunity
to shadow another Subpostmaster but failed to make good this offer.
Due to the time elapsed there are no records of additional training delivered to the Applicant. It
is accepted that the case questionnaire response (CQR) contains notes of an interview held on 3
July 2002 and there is reference to the Applicant shadowing a “good branch Manager”: there are
no records to indicate if this activity ever took place. There are no records of any calls made by
the Applicant to NBSC to follow this matter up. As the meeting was held six months prior to the
audit of 14 January 2003 which led ultimately to the termination of the Applicant's contract for
services it is Post Office’s view that had the Applicant been so minded he could have taken it
upon himself to arrange a visit to another branch or contacted NBSC to request one. The fact
that the Applicant states that this did not happen would indicate that he was not so minded.
Defects in Horizon
Issue 2 There are defects in Horizon in that it relies wholly on manually input figures.
Post Office has extensive controls spanning systems, processes, training and support. Horizon,
like many systems, depends on the quality of entries by the Users.
Horizon relies on all Users being required to log on with a User ID and password, leaver/joiner
controls for allowing and removing access and the person in charge of the branch setting the
appropriate level of access for different users.
The integrity of Horizon is founded on tamper proof logs and all data entries are tagged against
the log on ID of the user. There are systems and support in place for branches to maintain
comprehensive, accurate and timely accounts and transactions can only arise in Horizon from
actions of the Subpostmaster or their staff. Horizon operates on a double entry” accounting
basis and maintains a balanced trading position.
The Subpostmaster is responsible for ensuring that he and his staff record transactions and
methods of payment promptly and accurately. They have the tools and they are encouraged to
do physical checks. Mistakes do occur (intentionally or unintentionally) and this is when
supervisory checks are important in the branch and where detection processes from central
teams would come into play E.g. cheques remitted to processing centre are verified on receipt
and any errors reported back to the branch by the issuing of a transaction correction from the
Financial Service Centre (FSC).
Once errors are established the NBSC would have provided support on how to address and deal
with mistakes and any issues arising out of the balancing procedure. Prior to the introduction of
the NBSC the Retail Network Manager would have provided similar support.
It is refuted by Post Office that manual inputting of figures was a defect in the system as most
commercial organisations, supermarkets etc. relied on manual inputting prior to the introduction
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of electronic point of sale (EPOS). As with all human interaction mistakes can happen but
processes and procedures were in place at that time to assist the Applicant with rectifying them.
The Applicant asserts that there were numerous letters sent by Post Office relating to
performance, but that they failed to provide remedies.
NBSC call logs indicate that the Applicant received the following number of calls from the NBSC
regarding performance issues: 1 in 2000, 16 in 2001, and 24 in 2002.
Post Office does not hold any records of the actual issues raised with the Applicant due to the
time elapsed. It is noted that there are numerous performance related letters included with the
Applicant's Case Questionnaire Response (CQR) and these are not disputed. It is the
responsibility of the Subpostmaster to question any notification of errors sent to him that he
does not understand. The aim of these notices was to highlight errors made at the branch as
these could cause discrepancies to the branch and/or inconvenience to Post Office clients (e.g.
National Savings and Investments or DVLA) and customers. Once highlighted the expectation
was that this would prevent future errors of this type. Errors made have the potential to damage
the Post Office’s reputation with our clients and customers. There is also the cost involved of
resolving the error made.
A meeting was held which the Applicant attended along with his Retail Line Manager and the
Contract Advisor on 3 July 2002 to discuss the Applicant's poor performance and the written
warning letters sent to the Applicant requiring immediate improvement. The Applicant
accepted that he had failed in his responsibility to ensure that the branch was operating
properly, he proposed to appoint an Office Manager and have more staff on duty at the end of
the day to ensure that daily work was properly summarised and checked. The Applicant also
states that a staff member will be given the responsibility for bureau which he would then check.
The Applicant “accepted that there had been inadequate checking procedures in place up to
now” (referring to the “Rugeley MSPO — notes of interview held 3 July 2002” enclosed at Tab 1
of the CQR).
The Retail Line Manager at the same meeting stated that his main focus was sales growth via
customer service, and therefore transaction accuracy was not his main forte. He suggested that
the Applicant prepare a list of what he needed and then go to a branch office on a staggered
basis to obtain his requirements. There are no records to indicate if the Applicant did this.
There was other support available to the Applicant at the time through three main channels:
1) Operational Instruction Manuals (paper based copies held in branch and updated monthly,
Operational Focus weekly updates and guidance on transactions and services and Memoview-
messages direct from the Horizon terminal once installed)
2) the Network Business Support Centre (NBSC ) after 15 December 1999 (a telephone helpline)
and
3) Network line management. The Applicant refers to a Mr Geraty, who was the Applicant’s
Retail Line Manager. Mr Geraty left the business in 2011 having completed over 39 years’ service
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and was very experienced in his role.
Records of NBSC logs have been examined for the period 12 April 2000-16 January 2003. Whilst
the records are not exhaustive due to the time elapsed they do cover the indictment period of 1
March 2002 to 14 January 2003. During this period there were no calls logged requesting
additional training by the Applicant or his staff. Records show that during the period examined
there were six requests logged with the NBSC for the RNM to contact the Applicant. Records do
not indicate the reason for these requests.
As it was the responsibility of the Applicant to access the support available to him Post Office
reasonably expected the Applicant to do this.
Bureau Transactions
Issue 3 The Applicant questions how the alleged shortfall in the AM stock unit built up over a
period of time and questions the basis on which Post Office alleged that the shortfall was
“hidden” in the foreign exchange stock unit on Horizon
As part of this review Second Sight were requested to provide Appendix D of tab 4 of the
Applicant’s CQR (described as a “spreadsheet of Euro transactions"). Post Office understands
that this has not been provided by the Applicant to Second Sight and Post Office no longer holds
any audit or investigation records for this case. Post Office is therefore unable to comment on
this particular issue. It should however be noted that the Applicant pleaded guilty to a single
charge of ‘between 1 March 2002 and 14 July 2003 stole £282,000.00 in money belonging to Post
Office Ltd (Contrary to Section 1 of the Theft Act 1968)’ on the basis of a plea agreed as follows
that ‘The Defendant stole £94,000 from the post office having begun to do so on return from
holiday in August 2002. The remaining deficit of £188,000 may have been the result of
incompentent accounting or possibly theft by other person(s)’ (Doc 001 refers).
Post Office purchased currency from First Rate Currency Services (FRCS). For every £100.00 of
currency purchased Post Office would pay £101.00 to FRCS. On purchase Post Office would
apply a retail buy rate to the currency which would devalue the currency by approximately 6% of
the purchase price. The currency would be held at the retail buy rate until it was sold to the
customer.
On receipt of foreign currency from Post Office in branch the Applicant or his staff would enter
the amount received into the Forde Money Changer. The Forde Money Changer would hold the
currency at the retail buy rate until it was sold to the customer at which point it would convert it
to the sell rate as notified by the daily fax referred to above. This would create a profit on the
transaction.
As part of this review, the Product Proposition Manager, who was involved with the Applicant's
initial trial, was able to confirm that the Applicant used the Forde Money Changer to enter rates
below the retail buy rate when he was selling currency tol,
calculation below.)
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The Applicant states he was misled by Post Office with regard to the restrictions on foreign
exchange transactions and in particular the exchange rate which could be levied on bulk
transactions.
It is accepted by Post Office that preferential rates for larger foreign exchange transactions were
utilised at this time and to the current day. The level of the preferential rates and how the rate
was determined are the critical factors here. As part of this review training officers who had
experience of the Forde Money Changer were contacted. The procedure was that a fax was
received each morning in branch on a fax machine supplied by Post Office for this purpose. If
there was a special rate it was annotated on the fax. The rates including any special rates were
input to the Forde Money Changer manually. The faxes were required to be retained in branch
for two years.
A procedural audit of the branch's travel services-bureau de change was conducted on 9
November 2001 i.e. outside the indicted period. Twelve faxes were examined and no procedural
weaknesses were recorded. Control objective 7 SP of the compliance audit relates to special
commission transactions and records that special transactions procedures including rates are
discussed with branch personnel (this would typically be the Subpostmaster or the Officer in
Charge.) It is recorded that there were no actual transactions to verify so compliance would
have been judged on the responses obtained during questioning. It was confirmed that all SP
rate transactions were authorised by the outlet Manager (i.e. the Applicant or the staff member
acting as Officer in Charge on any particular day).
There are inconsistences in the CQR submitted by the Applicant as on page 4 it refers to Mr
Geraty having advised the Applicant “that the selling rate should always be higher than the
buyback rate so that POL would still make a profit”. Mr Geraty is no longer in the business and so
Post Office has been unable to obtain his comments and therefore Post Office are unable to
substantiate these claims.
In fact the buyback rate must be higher than the selling rate as the example below highlights:-
£1,000.00 of Euros are purchased by a customer at a selling rate of 1.22. This would mean the
customer would receive 1220 Euros.
1220 Euros are bought back from a customer at the buyback rate of 1.35 which would mean the
customer would receive £903.70.
Therefore the selling rate of 1.22 (used in this example) is and must be lower than the buyback
rate of 1.35 applied.
The Applicant states that Post Office should not have accepted cheques for the bureau
transactions performed in the branch and Post Office profited from the transactions undertaken.
Cheque payments for bureau de change transactions were acceptable during the period of the
Applicant's tenure. Cheques should only be accepted for bureau de change transactions if
supported by a valid cheque guarantee card. As it would appear that the amounts involved were
far larger than any cheque guarantee card limit these cheques were accepted by the Applicant
incorrectly. It would appear if the timescales quoted by the Applicant are correct that this
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irregular cheque acceptance practice adopted was conducted over a considerable period of time.
Cheque acceptance procedures would have been part of the initial training package delivered.
Thus Post Office was deprived of potential profit for some of these transactions. This was
because on these occasions currency was sold for less than Post Office was either buying it for or
at the same rate. Also there would have been a loss of interest on cheques held back by the
Applicant.
Cheques should have been despatched from the branch every weekday except Friday (as there
were no staff working at the processing centre to accept the despatch on Saturday). Cheques
accepted on Friday and Saturday were all despatched together on Saturday. The practice
adopted by the Applicant of holding cheques for reconciliation purposes (as claimed by the
Applicant) was both incorrect and unnecessary as Horizon recorded every cheque entered and a
report was required to be produced and retained of cheques despatched.
The cheques would then have been processed via a clearing house and as such Post Office would
only be notified if the cheques were returned “refer to drawer”. Due to time elapsed the only
records available of “refer to drawer” cheques being returned to the branch are within the CQR
evidence supplied by the Applicant. It shows three unpaid cheques that records indicate were to
be discussed with the Applicant during the audit undertaken on 9 November 2001. The record is
further annotated ‘called away to a robbery not completed’ which would indicate that the
discussion did not take place. There is no evidence that the unpaid cheques referred to relate to
GRO I transactions, however they were for large amounts of £11,141.11, £8,985.18
and £520.00 which indicates that they may have been. To be returned unpaid there would have
been an error made on the acceptance which prevented the money being recovered directly
from the customer. The error could be no or insufficient transaction details recorded on the
reverse of the cheque or the cheque had been made out incorrectly. The reason for returning
the cheques to the branch is not recorded.
On 11 October 2001 and 19 November 2001 the NBSC call log indicates that the following
instruction was given to the Applicant after a cheque for £30.00 was returned unpaid:-
“Ensure all cheque acceptance procedures for the product are followed correctly, E.G. FULL
transaction details recorded cheque guarantee card number recorded if required”( Doc 2).
Although it is stated in his CQR at point 11.5 that the Applicant believed that accepting cheque
payments fro: as at no risk, the cheques returned to him and the instructions
issued by NBSC should have alerted the Applicant to the risk that accepting large unsupported
cheques posed.
The instructions issued by NBSC indicate that the Applicant was aware of correct cheque
acceptance procedures. These procedures were not exercised when cheques were accepted
_ifor bureau transactions.
Horizon would not prevent the Applicant from completing these irregular transactions.
The Applicant states that the audit conducted at the branch on 14 January 2003 was not verified
against source documents or critically examined.
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Due to the time elapsed since the audit at the branch on 14 January 2003 there are no records of
the audit except the reference in the Applicant's CQR.
The purpose of audits conducted was and is to provide assurance of financial assets due to Post
Office and confirm compliance with a range of business processes, procedures and regulatory
requirements. The audit is conducted to reflect the current trading position of a branch at the
moment the audit is undertaken. This is completed by comparing the cash and stock physically
on hand to that stated as on hand by Horizon. Thus the trading position of the branch is
established. If a discrepancy is revealed Auditors have a defined escalation route. Finance
Service Centre (Post Office accounting centre ) has the role of managing and assuring client,
branch and bank balances.
The Applicant states that Post Office failed to take due notice when transaction corrections were
issued.
Due to the time elapsed there are no records available of transaction corrections issued to the
branch. Horizon depends on the quality and accuracy of data entry by Users. Post Office had
enabled controls at the branch level for the prevention and detection of errors. If the branch
fails to identify the error made prior to the documentation being despatched from the branch to
the client the Finance Service Centre (Post Office accounting centre) issues a transaction
correction to correct the error made.
The Applicant states that Post Office changed the amount he was charged with taking from an
initial £645,000.00 to £282,000.00 to a final £94,000.00. (Also referred to as £96,000.00 in the
Applicant's initial application to the scheme).
The Applicant pleaded guilty to the charge of theft put on 15 November 2006. A basis of plea
was agreed as “The Defendant stole £94,000.00 from the Post Office having begun to do so on
return from holiday in August 2002. The remaining deficit of £188,000.00 may have been the
result of incompetent accounting or possible theft by other person(s).” Therefore, the loss figure
did not change from £282,000.00 to £94,000.00 but Post Office was willing to accept that a
smaller amount of the loss had been caused by theft (Doc 001).
The Applicant also cites in his CQR point 32 “it was known that if the alleged amount was less
than £100,000.00 the likely custodial sentence would be 2 years or under”. Point 33 states “he
was further advised that he would be a candidate for open prison and would serve about half a
year living at home ona tag”.
There are no records to indicate why the amount was reduced from £645,000.00 as reported at
the audit on 14 January 2003 to £282,000.00 as stated by the Applicant. The reduction to
£94,000.00 the Applicant states was made due to an advance made by the Prosecution to the
Applicant's defence team at the beginning of the second court case which he says was due to the
flaws in the prosecution’s case. Post Office’s view is that such offers more frequently emanate
from the defence rather than the prosecution: “What if I pleaded to £xxx instead of £xxxxx?” in
this case £94,000.00 rather than £282,000.00. For the defence, such advances are often an
attractive (and only) way of compromising an otherwise evidentially strong case in a way which
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reduces both sentence and confiscation/compensation.
Sentencing is always a matter between the court and defence; the prosecution has no role in
sentencing.
Similarly, as neither the prosecution nor the court have any say in where a convicted defendant
spends his prison time, this being entirely a matter for the Home Office/HM Prison Service, it is
not considered that there was a suggestion made by Post Office that he was a candidate for
Open Prison.
For these reasons, the Applicant would not have been advised by Post Office or any
lawyer/prosecutor acting for Post Office as to his likely prison status, prison-type, release date or
release status (e.g. Tag). It is possible however that the defence lawyer made these suggestions
to the Applicant. That of course would be an issue between him and his lawyer and could not
form the basis of any legitimate complaint against Post Office under the Mediation Scheme.
Issues related to criminal prosecution
The Applicant claims that Post Office had insufficient evidence to indicate that he was guilty of
theft.
If the Post Office could not prove their case or had behaved improperly the trial process was the
proper arena to deal with these complaints. If there was insufficient evidence then the defence
could have made a submission of no case to answer. If there was improper behaviour by the the
Prosecution in the conduct of the case then the defence could make an abuse of process
argument. Should these not find favour with the Judge then the applicant should have lodged
grounds of appeal with the Court of Appeal.
In the event the Applicant pleaded guilty to theft with the benefit of legal advice and was
sentenced accordingly. A guilty plea , as stated above, entails a complete admission of the facts
alleged in the count on the indictment pleaded guilty to unless qualified by a written basis of
plea. Post Office’s view is that had a trial been required then the case would have been found in
the prosecution's favour.
Whilst Post Office is unable to determine with certainty having reviewed the limited data
available, it has taken the view that the most likely cause of the discrepancy reported at the audit
on 14 January 2003 is as follows.
The initial charge of theft of £282,000.00 related to the audit of 14 January 2003 when the
foreign currency reported as on hand on Horizon of £282,000.00 in stock unit ‘AM’ was not
presented to the auditors. The Applicant accepts that no such amount of foreign currency was
found at that time in Rugeley Post Office as stated in the CQR. (Tab 5 Page 12)
The reason for the reduction by £188,000.00 to £94,000 was following an approach by the
Applicant’s defence team to Post Office lawyers. They took the view that as the amount of
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foreign currency inflations between the period of 4 September 2002 to 18 December 2002
totalled £94,000.00, and prior to this time the Applicant had been on holiday, this was a
reasonable figure to accept for the basis of the plea.
The £94,000.00 was theft by the Applicant as his guilty plea at court demonstrates.
Other issues
During his period of suspension the Applicant failed to fulfil his obligation to pay rent to Post Office
as landlord of the premises that the Post Office was sited in. The property was never owned by the
Applicant and so when he ceased to pay rent, Post Office took control of the premises and leased it
toanew party. The exact nature of the payment made to Post Office by the new party when the
premises transferred cannot be determined due to there being no records available from which to
verify this, but it is very likely to be a lead in payment to cover training etc.
List documents {if any)
1. M118 _POL_001_Court Sentencing Sentencing Details 19 January 2007
Details_CB
2. Mi18_POL_002_NBSC Call Logs CB NBSC call logs 12 April 2000-16 January 2003
3. M118_POL_003_Period of TenureCB Table of Postmasters at Rugeley