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To Edward Davey
From Mike Whitehead
Date 5 October 2010
Meeting with Alan Bates: Chairman of Justice for SubPostmasters
Alliance (JFSA)
Purpose
(Rescheduled) meeting with Alan Bates (JFSA) on Thursday 7 October at his request to
discuss the JFSA’s claims that endemic flaws in POL’s Horizon system have resulted in a
number of subpostmasters having their contracts wrongly terminated by POL and in many
cases prosecuted for false accounting.
Attendees
Alan Bates JFSA Chairman (and former subpostmaster whose contract was terminated by
POL in 2003). He will be accompanied by 2 lawyers: Amanda Glover, Department Head for
Legal Disputes at Shoosmiths (a national firm of solicitors) and Issy Hogg, partner at
Coomber-Rich (Basingstoke based solicitors who have defended a number of
subpostmasters who have been prosecuted by POL in recent years).
Mike Whitehead (ShEx).
Background to the meeting
Mr Bates has written twice requesting a meeting with you (Annex A). In response to his first
letter of 20 May, the request was declined on the grounds that the issues raised were
operational and contractual matters for POL. His second (more confrontational) letter of 8
July was followed by reports that Channel 4 were planning to run a news item on the JFSA
campaign. We then recommended offering a meeting in response to this 2nd request for
presentational reasons against the background of potential publicity (C4 News item) playing
heavily on Government Minister 'refusing to meet victims of Govt owned Post Office Horizon
IT system which has systemic faults resulting in wrongful accusations of theft/false
accounting’. The JFSA has also mounted a substantial lobbying campaign with MPs and
several (George Osbome, Priti Patel, Keith Simpson, Valerie Vaz, Alun Michael) have written
to you or tabled PQs on behalf of constituents who are members of the JFSA.
Our objectives
Tactically we would advise that you seek to establish at a very early stage whether legal
action against POL is imminent/planned. If so, it would be prudent to adopt a ‘sub judice’
approach in the comments you make.
o Emphasise that the issues raised by the JFSA are operational and contractual matters for
POL.
o Make clear that, as the shareholder, Government has an arm’s length relationship with
the company and does have any role in its day to day operations.
o Establish whether, as reported, the JFSA is committed/planning to initiate legal action
against POL.
©. If so, note that it will be for the relevant legal process to decide on the JFSA case and that
the issues are effectively sub judice.
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o Demonstrate that you are prepared to hear the JFSA’s side of the story (JFSA claim both
POL and officials are covering up the problems with Horizon) but make clear that it you
are not in a position to offer substantive comment.
o Avoid committing to set up an independent/external review of Horizon.
JFSA objectives
o Topress for Govt to require a fundamental change in the way sub post offices are
managed by POL.
o Topress for an independent investigation into the reliability and integrity of the Horizon
system
o Topress for a new and fairer contract between POL and subpostmasters which reflects
the use of IT systems in sub post offices.
o To press for an ombudsman or independent third party to hear appeals in cases of
disagreement between POL and subpostmasters.
o Topress for the establishment of a new representative body for subpostmasters as an
alternative to the cosy relationship between POL and NFSP.
Issues or elephant traps
A report in ‘Accountancy Age’ on 5 August indicated that the JFSA was intending to bring
legal action against POL and to file Court papers in the coming weeks. POL has advised that
no such action has yet been initiated. However we recommend that you should be
primarily in listening mode on the basis that any statements or comments made at the
meeting may be subsequently quoted in any legal process involving the JFSA or its
members.
Avoid any commitment to adopting any of the JFSA’s objectives in the terms these are set.
Substantial changes to subpostmasters’ contracts and the branch operating model are a key
element of POL’s 2011-16 business strategy.
An independent review/audit of the integrity of Horizon would be expensive (and time
consuming). POL’s view is that if there were systematic integrity issues, as claimed by
JFSA, there would have been a higher incidence than is claimed, there would have instances
of Crown offices being affected as well as sub post offices as the identical system is used.
Subpostmasters are contractually entitled to be accompanied at appeal hearings by an NFSP
representative or friend. Appeals are heard by a senior POL manager not previously
involved in the case and legal avenues are also available if the subpostmaster continues to
feel his contract has been wrongly terminated.
The NFSP is a recognised trade union subject to all relevant legislation. Subpostmasters are
free to form any other association they wish.
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_ Issues to raise and points to make:
JFSA’s concerns
and accusations
Noted the JFSA concerns as expressed in Alan Bates’ letters
and representations from MPs. But willing to hear the JFSA ‘s
side of the case about Horizon.
Emphasise that the JFSA’s concerns relate to operational and
contractual matters.
Govt has an arm’s length relationship with POL and does not
have any role in the day to day operations of the network.
Aware of reports that JFSA is planning to initiate legal action
against POL. If this is so, it will be for the relevant legal process
to decide on the JFSA case and any remedy and in effect the
issues are ‘sub judice’.
In any case I am not in a position to offer any substantive
comment.
POL continue to express full confidence in the integrity and
robustness of the Horizon system which has been operating for
10 years and typically processes 230 million transactions a
month from over 30,000 counter positions in nearly 12,000 post
office branches.
JFSA background
The JFSA was established by Alan Bates, a former North Wales subpostmaster whose
contract was terminated at 3 months notice by POL in 2003 following a total break down in
the relationship. Its website claims around 100 members but details only 8 specific ‘case
studies’.
The NFSP are dismissive of the JFSA’s claims. They have suggested that if there were
systemic faults with Horizon as claimed, there would be incidents of ‘overages’ as well as
‘shortages’. NFSP are also of the view that in some of these types of cases the
subpostmaster genuinely is not to blame but that a member of his/her family or other
employee is. Contractually however the subpostmaster is personally liable.
Horizon system and POL process on accounting irregularities
Integrity of the Horizon system
The Horizon system has been in place for over 10 years. In a typical month the system
conducts around 80 million customer sessions with 230 million transactions across the
system. This is delivered through around 35,000 counter positions in around 12,000 Post
Offices which perform weekly and monthly accounting balances. Around £175m per day is
settled to over 700 client companies who use Post Office Ltd — a substantial flow of data to
and from organisations with regularly audited accounts. Over its extensive period of
operation the system has proved robust. The cases identified by JFSA where there is some
kind of allegation in respect of the system are a miniscule proportion of the many millions of
accounting events that subpostmasters have done within the system. Furthermore around
15% of POL’s transactions have been conducted over Crown Office terminals which run
exactly the same system yet no issues have been identified. If there were any systematic
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integrity issues within the system they would have been evident over the past 10 years.
NFSP and CWU have expressed confidence in the system.
The system is currently being updated to ‘Horizon Online’. This is to achieve benefits in
running costs and change management. It is not being done because there are any doubts
about the robustness of the original Horizon system.
The integrity of both Horizon and Horizon online is built on tamper proof logs, real time
back ups, and absence of ‘backdoors’ so that all data entry or acceptance is at branch level
and is tagged against the log-on ID of the user. This means that ownership of the
accounting is at branch level and it is impossible to make changes to branch accounts
remotely.
Critically, Horizon creates a separate audit file of every transaction done with every record
written to the log having a unique incrementing sequence number. This is retained remotely
for seven years and cannot be altered in any way. Therefore, in any legal case relating to
the system or allegations that data was missing, this audit log can be produced to identify
exactly what was recorded onto the system in the branch concerned at the time concerned.
Subpostmasters are trained on the system, there is material to support in branch and
helplines are available. If an error occurs through a user mistake — there is a full system in
place for investigation and error resolution. If there is a local disconnection of the system at
a branch for any reason, IT controls detect the outages and raise recover alerts to the
branch to check and update the accounts.
As with any large organisation, Post Office Ltd has and continues to implement a range of
mechanisms whereby accounting processes and outputs are regularly reviewed to ensure
ongoing accuracy.
Action taken with subpostmasters for accounting irregularities
Post Office Ltd has a regular system of auditing subpostmasters’ accounts. If irregularities
are discovered, then a formal and thorough investigation is triggered and, if necessary,
action can be taken in accordance with the subpostmaster’s contract. Subpostmasters
have the right of representation throughout internal disciplinary procedures — and if the
case leads to summary termination of contract, there is the right of appeal to an appeals
manager who considers the case. Again there is a right to representation through this
process -— this role is often undertaken by the NFSP.
In certain cases, following consultation with legal advisors, a decision may be made by
POL to pursue a criminal case. Since 2005 there have been 230 criminal cases that have
proceeded to Court. Of these 169 have been found guilty and 18 defendants cautioned. Of
the remaining 43, 1 was found not guilty but this was nothing to do with any Horizon
challenge. 42 cases were not carried forward for a variety of reasons (but there is no
suggestion that any of these reasons were related to concerns about Horizon).
As there is a legal contract between the subpostmaster and Post Office Ltd, if a
subpostmaster believes that his/her contract has been terminated inappropriately; he/she
can also refer the process into the legal system.
No court has ever ruled that there have been problems with the Horizon system.
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ResTR ANNEX A
Justice For Subpostmasters Alliance
Mr Edward Davey MP
Minister for Postal Affairs
Department for Business, Innovation & Skills
1 Victoria Street
LONDON
SWI1H OFT
20" May 2010
Dear Mr Davey
Tam writing to you with regard to your position as Minister for Postal Affairs on behalf of the
Justice For Subpostmasters Alliance (JFSA).
We are an independent group of ex and Serving subpostmasters who have suffered at the
hands of the Post Office and their Horizon system ever since it was first installed. Our website
Jfsa.org.uk outlines how we came about and our aims, as well as offering sample cases that
were provided by some of the group. Currently the group numbers close to 100, though we
Continue to be joined by others who have learnt of JFSA and have found that there is nowhere
else to turn for help.
In every instance the Post Office acts as Judge, jury and executioner and the individual is
deserted by their reputedly representative organization The National Federation of
Subpostmasters. Invariably these cases all stem from the flaws of the Horizon system the
Post Office introduced and which they refuse to admit has ever suffered from a single
problem.
The evidence is there to be found by anyone in a position of being able to unlock doors
instead of placing barriers in the way of those Pursuing the information. Our organization has
access to a number of specialists who could provide the questions and analyze the resulting
data if required. Though an independent external investigation instigated at Ministerial tevel
would be the most appropriate, and would without any doubt easily find evidence of the error
ridden system.
Tam sure that you appreciate that there is not a single computer system that does not from
time to time suffer from errors, especially when at the size and the level of complexity of the
Programs associated with the Horizon system. The Post Office blindly state that there are not,
nor have there ever been any system érrors, So subsequently anything wrong is entirely the
responsibility of the subpostmaster as that is what they have agreed to when signing their
contract. This is a contract that was produced in 1994 and does not address nor indentify new
technology, but they are stil using It to intimidate and prosecute subpostmasters,
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‘The weight of evidence we have been collating over the years continues to grow and gain in
standing, it is only the flat refusal of the Post Office to allow experts to examine the system
which is holding back this major scandal from breaking. But with the growing numbers in
JFSA and the support we are now finding from the IT community and the media it is just a
matter of time until the real truth about the Post Office and Horizon is exposed,
Over the years I have personally submitted written Getails of all this to the select committee of
the DTI, and then on two other occasions to that of BERR, and put simply, the information has
either been buried or disappeared, Others of JFSA have followed the route of contacting their
MP's who would take the matter up with the Post Office on their behalf. Subsequently they
are stonewalled or ‘handled’ by the Post Office often with off the shelf answers where they
only change the name and address.
In writing to you on behalf of the group, T am asking for a meeting where we can present our
case to you. Much has appeared in the press over the last few days that Government is going
to change, I only hope that is true, If it is, the abuse of subpostmasters that has been going
on under the protection of the previous Government may well come to an end.
I look forward to hearing from you. j
Yours. sincarabe....-
Alan Bates
Chairman
Justice For Subpostmasters Association
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-_ Justice For Subpostmasters Alliance
Mr Edward Davey MP Alan Bates
Minister for Postal Affairs
Department for Business, Innovation & Skills
1 Victoria Street
LONDON
SW1H OET
8" July 2010
Dear Mr Davey
I have to say your response to me dated 31% May 2010 regarding the very serious Issues Thad
raised was not only disappointing but 1 actually found your comments Offensive. It seems that
though there are new politicians in Post, the Government has not changed. The letter you
sent is little different to the one I received seven years ago from the minister responsible for
Post offices at that time, and so Many more lives have been ruined in the interim because of
that same attitude,
It’s not that you can't get involved or cannot investigate the matter, after all you do own
100% of the shares and normally shareholders are concerned about the morality of the
business they own. It is because you have adopted an arm’s length relationship that you have
allowed a once great institution to be asset stripped by little more than thugs in suits, and you
have enabled them to carry an with impunity regardiess of the human misery and suffering
they inflict.
your civil servants telling you these issues are really an operational matter for
You can fisten to
POL to deal with. You can even listen to POL telling you Horizon is wonderful, that there has
never ever been a problem, it is inherently robust and these are Just a few maicontents trying
to cause trouble. Or you can meet with us and hear the real truth behind Horizon and what
the Post Office is actually up to,
Your civil servants and POL will not telf you about POL staff harassing sick ex-subpostmasters
demanding written promises of money or they'll send the police around, They won't tell you
that POL watches post offices heading into trouble, fails to provide any help, and then waits
Neither will they tell you of the cases where POL have run an audit, closed a post office
bankrupting the owner who loses his business, house and family, holds a pending court case
‘over him for 18 months, then drops the charges and walks away. Nor will they tell all about
how they are stopping subpostmasters selling on the post office side of their business in order
Sissi eaten ne
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to recover their original investment, They won't even tell you that the Horizon system is
Gesigned to entrap subpostmasters So that they can easily finish up in prison, just by trying to
open up the day after a trading period balance.
This is just a taste of some of the Practices your company is carrying out in your name, day
after day. They brandish a big legal stick, fail to Provide evidence in court and rely on the
Clause in the 1994 contract, about a subpostmaster being fiable for any loss from their office
however it occurs, yet it is their shoddy Horizon system that is the root cause of aif this. POL
themselves lose thousands of Pounds from each of the Crown offices that they run using
Horizon, though their staff are not treated as gulity until proven innocent, but a subpostmaster
is!
Justice For Subpostmasters Alfiance
iaorguk
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