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POST OFFICE RESPONSE TO CRR ON M029
Second Sight
By email only
05 September 2014
Ref: M029
Dear Sirs
Post Office's Response to Second Sight’s Case Review Report on case M029
This letter sets out Post Office’s response to Second Sight's draft Case Review Report dated 27
August 2014 for application M029 (the CRR).
Post Office agrees with the overall content of the CRR. However, there are a number of points that we
would ask Second Sight to consider when drafting the final report which are set out below and in the
attached appendix.
The Applicant's Criminal Conviction
The Applicant has been convicted of false accounting and is therefore responsible for the losses in
his branch as explained below.
The Applicant has previously pleaded guilty to a charge of false accounting. A plea of guilty to a
charge entails a complete admission to the offence.
The plea was voluntarily entered after the Applicant had the opportunity to take legal advice. Post
Office is not responsible for any advice that the Applicant may or may not have received. If the
Applicant considers that they were wrongly advised, then that is a matter between them and their
lawyer.
Post Office does not consider that there are any new circumstances in this case that would justify a
change of plea and therefore maintains that the Applicant's guilty plea is good evidence that he
submitted false accounts.
As stated in the original Scheme Documentation, Post Office has no power to overturn a conviction.
The proper forum for this is an appeal through the Courts. Neither the draft CRR nor the Post Office
investigation identifies any information or evidence which Post Office considers would make the
applicant’s conviction unsafe. However, it remains open to the applicant to appeal their conviction
through the Courts.
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False accounting
Due to the false accounting, any small operational losses were not shown in the branch's accounts.
As daily cash declarations were made falsely (by declaring that there was more cash in the branch
than there actually was) then it was impossible for Post Office, and will have been very difficult if not
impossible for the Applicant, to have:
. Known if cash was missing;
. Identified the days on which cash went missing;
. Identified which member of staff may have been the source of errors; or
. Located the erroneous transactions that were the cause of the loss.
Daily accurate cash declarations are the most critical aspect of branch accounting, without which
losses of cash go unchecked.
The false accounting in this case means that it was not possible at the time of these events, and it
remains impossible now, to precisely identify all the errors in branch which have caused a shortfall.
Post Office primarily relies on reviewing the branch accounts to help subpostmasters identify errors
but because the accounts in this case have been falsified, it is not possible to distinguish between
genuine errors and intentionally false entries.
Notwithstanding that this is a criminal offence, operationally Post Office insists on daily accurate
cash declarations. The Applicant's negligence is why he is liable (under the terms of his Contract) for
any losses hidden or caused by his inaccurate record keeping. It is also an established principle of
the Law of Agency, that agents like Subpostmasters are liable pay to Post Office (as principal) any
cash sum declared in their accounts even if that declaration is false.
Post Office therefore considers that the Applicant is liable for the losses in the branch due to his
false accounting
Consequential Losses
Paragraph 1.5(g) of the CRR notes that the Applicant has raised consequential losses "which may be
raised if the case progresses to mediation". As stated in the CRR, it is outside the scope of the
Scheme and Second Sight's role for it to assess or comment on any consequential losses claimed by
an Applicant.
However, in the interests of transparency, Post Office notes that it does not consider the losses
claimed by the Applicant to be recoverable. The relationship between Subpostmasters and Post
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Office is governed by a contract which makes it clear that the relationship between parties is one of
agent and principal, permitting Post Office to recover branch losses from the Subpostmaster.
Post Office has considered the circumstances of this case very carefully and, on the basis of the
information provided by the applicant, in its own investigation and in the draft CRR, does not
consider that it has in acted in breach of contract or caused the Applicant the harm now claimed as
consequential loss.
Summary
All available information lends itself to the view that the Applicant is the cause of the losses, in
particular:
e Post Office records show that the Applicant made on average one call amonth to the
helpdesk between November 2004 and November 2005 (rather than one call a week as
claimed by the Applicant);
e Post Office records show that no requests for additional training were made by the Applicant
to the NBSC indicating that the Applicant was adequately trained on how to operate Horizon;
e The Applicant advised during an interview that he thought that the losses at the branch were
due to basic mistakes on Horizon, him not understanding Horizon and his concerns regarding
zero entries on Card Account withdrawals (in respect of which customers had received
money). However, Post Office investigations conducted in 2005 on zero entry transactions
conducted over a twelve month period revealed that all of the transactions examined had
valid reasons for their nil value;
«The Applicant stated in his Initial Application that he "could not properly operate the computer
system"; and
«The Applicant admitted to making false entries on Horizon meaning that even if the records in
question were available, it would not be possible to distinguish between genuine errors and
intentionally false entries.
The original Scheme FAQs (at page 5) make clear that old cases, where little information is available,
may not be suitable for mediation. Given that the CRR could not reach a conclusion, there is little that
can be discussed at mediation as there is no information for the parties to consider.
Given the lack of information, that the Applicant has previously pleaded guilty to false accounting and
that the CRR does not set out any conclusion about the cause of the loss, Second Sight is invitedto
reconsider its recommendation that this case is suitable for mediation.
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If you have any questions about this response, please do not hesitate to contact me.
Yours faithfully
Angela Van Den Bogerd
Head of Partnerships
Post Office Limited
www. postoffice.co.uk
Office Ltd is registered in England and Wales, Registered No. 215
trade marks of Post Offi
40. Registered Office 148 Old Street: London, EC1V SHO.
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Appendix
Line-by-line comments
Paragraph in I Post Office comment
CRR
1.11 The CRR states that:
“The matters raised by the Applicant occurred in the period 1994 to 2005 and
therefore fall outside the Post Office document retention period. Although some
evidence has been provided by Post Office and the Applicant, including his
chronology of events covering the period June 1994 to October 2005, the source
documents are so limited, that it is now impossible to establish the real cause of
the losses that arose."
However, the Applicant admitted to making false entries in Horizon (and consequently the
Applicant's accounts were falsified) meaning that even if all applicable documents were
available, it would not be possible to distinguish between genuine errors and intentionally
false entries.
1.13 The CRR states as follows:
"In regard to how the shortfall arose, the Applicant states that he received
inadequate training in handling problems and a lack of support when he needed it,
despite his numerous requests to the Helpdesk, especially given the remote
location of the branch."
Although the Applicant claims that he received inadequate training in handling problems
and a lack of support when he needed it, there are no calls recorded on the NBSC helpdesk
call logs from the Applicant requesting any additional training.
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1.13 The CRR states as follows:
"In regard to how the shortfall arose ..... He also refers to the potential impact of
power failures, hardware problems and to the possibility of ‘nil transactions' being
the cause. The latter is further developed and considered below’.
However, on 13 October 2005 (i.e. the day an audit of the Gaerwen branch revealed a cash
shortage of £48,454.87), the Applicant was asked during an interview with Post Office
Security as to what he thought was causing the losses in the branch. The Applicant replied
by stating that the losses were due to basic mistakes on Horizon and not understanding it
(rather than the potential impact of power failures and hardware problems as claimed by
the Applicant in his CQR). The Applicant did state during the aforementioned interview
that he was concerned over the number of zero entries on his Card Account withdrawals
summary and although the report showed nil entries on some of the transactions, he had
handed the money over the counter to the customer.
The Applicant also stated in his Initial Application in response to the question "What is
your explanation for the events forming the main issue or issues you are now reporting?" as
follows:
"I could not properly operate the computer system".
2.1 The CRR states as follows:
"It is also agreed that documents, including personal items, were removed from
the branch during the Audit, as it is "Post Office policy to remove items that are
believed to be pertinent to any investigation".
It is not agreed that "documents, including personal items, were removed from the branch
during the audit". There is no documentation available relating to items taken by Post
Office personnel during the branch audit. Post Office records do show that the Applicant
removed personal belongings from the branch on the day following the audit of the
branch.
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2.2 The CRR states as follows:
"2.2. It is also common ground that there were problems with the Horizon
hardware, including the need for a new base unit in December 2001, and that all of
the equipment was replaced prior to the branch re-opening after the suspension of
the Applicant. The suggestion by the Applicant that this indicated that there were
faults with the system and that these could have been the cause of differences
suffered is however disputed by Post Office which maintains that the old
equipment was removed for testing, although there is no record available as a
result of any such testing."
Anew Horizon base unit was installed in the re-located Gaerwen branch prior to its
opening in January 2006 (rather than 2001).
2.3 The CRR states as follows:
"The Applicant states that he made frequent calls to the Helpline, averaging
approximately one per week over an extended period. The Post Office notes that
the Horizon Helpdesk call logs are no longer available but that such of the NBSC
call logs that could be accessed "show a high volume of calls from the office on a
variety of subjects".
However, the witness statement of Andy Paul Dunks of Fujitsu Services which was
produced as part of the Applicant's prosecution (which the Applicant exhibited to his CQR—
see Tab 3) states as follows:
"I have reviewed the helpdesk calls pertaining to this office and during the period f*
November 2004 to the 30” November 2005 there were 13 calls from Gaerwen Post
Office - FAD Code 160601 to the Helpdesk. I am of the opinion that none of these
calls relate to faults which would have had an effect on the integrity of the
information held on the system".
Although call logs for the period in question are no longer available, it is clear that the
Applicant's calls between November 2004 and November 2005 averaged one call a month,
rather than one call a week.
3.3 The CRR states as follows:
"The Applicant maintains that the problems with the hardware, including screen
freezing, power cuts, transfer interruptions and the need for remote rebooting of
the system, of which he kept comprehensive records, could have been the
underlying cause of the discrepancies but Post Office disputes this’.
However, during the Applicant's interview with Post Office Security which was held on 13
October 2005 (i.e. the day an audit of the Gaerwen branch revealed a cash shortage of
£48,454.87), the Applicant did not raise any of the aforementioned issues and instead
advised that the losses were due to basic mistakes on Horizon and him not understanding
it.
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3.4 The CRR states that:
“The Applicant comments in his CQR on the limitations on the extent to which he
could review the audit trail and compare data in order to determine the source of
the differences, which appeared to have accumulated over a period of time."
However, it is of note that due to the Applicant's false accounting, it would not have been
possible at the time of the erroneous transactions to distinguish between genuine errors and
intentionally false entries.
3.7 The CRR states as follows:
"3.7. A further possible cause for the discrepancy is stated by the Applicant as
being problems with cheques ‘doubling up' on the system and the process for
‘cutting off' Giro deposits".
However, during the Applicant's interview with Post Office Security which was held on 13
October 2005 (i.e. the day an audit of the Gaerwen branch revealed a cash shortage of
£48,454.87), the Applicant did not raise either of the aforementioned issues and instead
advised that the losses were due to basic mistakes on Horizon and him not understanding
it.
3.13 The CRR states as follows:
"In his CQR the Applicant also refers to a difference of approximately £3,000 that
arose in 2003/4 and that, although he did not know why the difference arose, he
maintains that it was settled on a 50:50 basis with Post Office. Although Post Office
notes that an amount of approximately £1,200 was written off in the immediate
months after migration to Horizon, as part of an exceptions process, they have no
record of any 50:50 agreement or payment."
It is of note (and is not detailed in the draft CRR) that an incident involving the Applicant's
daughter — Sian Thomas ("Sian") — resulted in the Applicant repaying Post Office the sum of
£11,000. The terms of the Applicant's settlement with Post Office included a commitment
that Sian would no longer work in or have access to the branch. However, at the audit of the
branch on 13 October 2005, Sian was still listed as a user on Horizon.
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6.1 The CRR states as follows:
"In our opinion and notwithstanding the Applicant's guilty plea, this case is suitable
for mediation and the following issue should be considered:
a) whether Post Office or the Applicant is responsible in part or whole for the
overall loss of £50,257.89."
The content of the draft CRR does not support this view on mediation. Principally, the
findings of the draft CRR are that there is insufficient information on which to form a
logically reasoned view on the cause of the losses in this case.
www. postoffice.co.uk
Office Ltd is registered in England and Wales, Registered No. 215
trade marks of Post Offi
40. Registered Office 148 Old Street: London, EC1V SHO.
Post Office and the Post Office logo are regist