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Witness Name: Alasdair Marnoch
Statement No.: WITN11570100
Dated: 31 October 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF ALASDAIR MARNOCH
I, Alasdair Marnoch, will say as follows:
INTRODUCTION
I held the position of Non-Executive Director (“NED”) at Post Office Ltd (“POL”)
from 23 May 2012 to 31 July 2015.
This witness statement is made to assist the Post Office Horizon IT Inquiry (the
Inquiry”) with the matters set out in the Rule 9 Request dated 25 September
2024 (the “Request”.
The facts within this witness statement are either within my own knowledge or
belief, or derive from the records provided by the Post Office Horizon IT Inquiry
or POL. However, as this statement relates to events that occurred in some
cases up to twelve years ago, there are several areas that I do not recall. Where
that is the case, I have said so.
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I have had limited disclosure of documents from the Post Office Horizon IT
Inquiry and POL. Unfortunately, the documents provided to me are incomplete
and therefore have assisted me in only a limited manner. Nonetheless, I have
endeavoured to answer all questions in the Request to the best of my ability.
I have been assisted in preparing this witness statement by Kingsley Napley
LLP.
PROFESSIONAL BACKGROUND
I graduated from the University of Dundee in 1984, with an MA in Accountancy.
Following training at the Royal Military Academy, Sandhurst, I joined the
Parachute Regiment as a Commissioned Officer and served from 1985 to 1990.
I started my finance and accounting career in 1990, as a Financial Accountant.
I qualified as a Chartered Accountant (ACMA) in 1993. Over the last twenty
years I have held a number of Group Chief Financial Officer (“CFO”) roles in a
range of largely private equity companies, during which time I have led
numerous bank re-financings, M&A projects and private equity exits.
From 2006 to 2008, I was a NED and Chairman of the Audit Committee at a
publicly listed education company. In the same period, I was also Group
Finance Director for a private equity pension group.
In 2012, I was headhunted to join POL as a NED. I joined POL as a NED and
Chairman of the Audit, Risk and Compliance Committee on 23 May 2012. My
initial term was three years, but this was extended by two months in May 2015.
I left POL on 31 July 2015 because of my commitments to the CFO position I
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held at another company (see below) at the time. I was reluctant to leave POL,
but my other employer wanted me to focus more of my time on my CFO role.
During my tenure at POL, I held two CFO positions: From 2012 to 2013, I was
CFO of a software group. From 2013 to 2016, I was CFO of a global IP
administration company. From 2016 to 2024, I have held Group CFO roles at a
range of companies in the technology and software industries. I left my latest
CFO role in September 2024.
Since leaving POL, I have not held any other NED positions.
I have never been made subject to any warnings, reprimands or disciplinary
action in my career. I do not have any previous criminal convictions or cautions.
ROLE AS ANED AT POL
I was head hunted by Egon Zehnder in 2011 to join POL as a NED. During the
recruitment process, I met with Alice Perkins (Chair) and Neil McCausland
(Senior NED). I understood that I would be joining POL in a period of transition
with many challenges. POL was separating from Royal Mail Group (“RMG”) and
required a new governance structure and processes. I understood that the
objective was for POL to develop into a mutual organisation, which in due
course, would be separate from the government. This would require POL to be
financially sustainable and self-supporting. I believed I had relevant experience
to bring to the role, having worked primarily in private equity backed companies,
where I was responsible for financial reporting and compliance, internal
controls, audit process oversight, financial & operational insights, crises
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management & financial resilience, and stakeholder communication. I was
delighted to be asked to join POL as a NED.
As a NED, I was responsible for supporting POL and the Board on strategy,
holding the executive team to account, setting priorities, providing independent
oversight and assessing the performance of the Board. I was also responsible
for providing support and a sounding board to the executive team, and
challenging and advising on decision making. I understood that I was subject
to statutory directors’ duties.
I was asked to Chair the Audit, Risk and Compliance Sub-Committee (the
“ARC’). As discussed above, I had previously been Chairman of the Audit
Committee at a publicly listed education company and therefore had relevant
experience to bring to the role. The ARC had just commenced operating when
I joined POL. As a result, when I joined, the main focus of the ARC was to
support the six-monthly financial reporting and sign off the POL accounts in the
published financial statements at the half year and full year. This included
making decisions on accounting matters, and confirming policies, accounting
questions and judgements.
When I joined the POL ARC, my main focus was ensuring the external audit
function was working properly and that the internal controls were adequate. I
therefore focused on ensuring that: (i) the accounting controls were sufficient;
(ii) we were satisfied with our auditors; and (iii) we were satisfied with our
published financial reporting. When I joined, I reviewed the Terms of Reference
and scope of work and ensured that they were appropriate for POL. I also
approved the members of the ARC (proposed by Ms Perkins).
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I believe the Board operated effectively. When I joined POL, the Board was
newly formed with clear responsibilities and direction. Board meetings were run
efficiently by the Chair who would ensure that all papers were circulated and
read in advance of meetings and key input and questions for each agenda items
were collected from the NEDs. Ms Perkins and Paula Vennells (CEO)
encouraged an open discussion at board meetings, with healthy debate,
feedback and challenge to the executive team. Alwen Lyons (Company
Secretary) circulated comprehensive minutes after the Board meetings with
requests for comments. Feedback on the minutes was provided in a timely
manner and the Chair always reviewed the prior minutes at Board meetings
and sought any final comments or changes.
I observed that the NEDs were very independent in their thinking and direct in
their feedback to the executive team. I also observed that the NEDs were
diverse in their experience and skillset, coming from backgrounds including
retail, financial services and the public sector. To my mind, this ensured that the
Board had a broad range of perspectives in discussing matters.
I attended monthly Board meetings and ARC meetings during my time at POL.
I was also a member of the Mutualisation Committee and, later, the Project
Sparrow Sub-Committee. Preparation for the meetings would depend on the
length of the agenda, but for a full Board I would spend about half a day
preparing for each meeting, meaning I spent about two to three days per month,
on average, in my role. For most of my tenure I was in a full time CFO role. But
as I will discuss in further detail later in this statement, I had more time in the
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summer of 2013 due to being between jobs, and spent more time on my NED
role at POL during this period.
INITIAL PERIOD OF TIME AT POL
Prior to my appointment as a NED, I cannot now recall any discussions about
the Horizon IT system.
I do not recall when I first became aware of either (i) bugs, errors or defects in
the Horizon IT System (“BEDs’); (ii) a lack of integrity in the Horizon IT System;
or (iii) complaints addressing BEDs or concerns with integrity.
I have been shown the Board minutes dated 23 May 2012, [POL00021507]
which contains Ms Vennells’ and Ms Perkins’ update to the Board about issues
being raised by MPs and others relating to the Horizon IT system. I do not recall
this discussion. I note that this Board meeting took place on my first day at POL.
I can see now that the tone of the update was positive: “the meeting [with James
Arbuthnot MP and Oliver Letwin MP] had been a success” and the business
had “agreed to use a forensic accountant to investigate the system and give
further comfort to those concerned about these cases”. I believe I would have
been reassured that the MPs were satisfied with the meeting, and POL was
addressing any remaining concerns with an independent forensic accounting
investigation.
I have been shown the Significant Litigation Report dated May 2012
[UKGI0044255], and the email from Ms Vennells to me and others on 21 June
2012 [POL00295355]. I can see that I was told that POL had been notified of
five claims from former subpostmasters (“SPMs”) for wrongful termination of
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contract based on defects in POL’s internal processes and defects within the
Horizon system. I can see that Ms Vennells informed the Board that POL had
agreed to set up an independent investigation into these claims. While I do not
remember these specific updates, I believe I would have been content with the
response by POL to these claims. Again, POL was instigating an independent
review of its own volition.
I have been asked by the Inquiry to describe the IT issues considered by the
ARC. As discussed above, the ARC was primarily responsible for the review
and management of POL’s financial audit. As part of this, the ARC did consider
the IT audit, however, this was focused primarily on IT controls. This is evident
in the minutes of the ARC meeting on 23 May 2012 [POL00021431], which
summarises EY’s IT audit: “It was recognised that the IT controls in the business
had improved and that there had been a change in the governance and
management of the Fujitsu contract.” EY’s audit was controls based, meaning
that EY used sample testing to establish whether the control environment was
working appropriately.
I have no independent recollections of the ARC discussing the complaints or
claims about the Horizon IT System. However, I have been shown the
document pack for the ARC meeting on 13 November 2012 [POL00158012].
This pack contains the ARC Briefing Book for the half year ended 23 September
2012. It describes POL’s approach to making a provision in relation to the
potential claims regarding Horizon. While I do not remember the conversations
about this, I can see we decided not to make a provision.
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I have been asked by the Inquiry to describe my knowledge of the ability of
Fujitsu employees to alter transaction data in branch accounts without the
knowledge or consent of SPMs (“Remote Access”). I have no recollection of
ever acquiring this knowledge, however, I can see now that this possibility was
raised by the Deloitte reports in 2014 (see further para 75 below).
I do not recall taking any specific steps to increase my knowledge of the Horizon
IT System. I believe this was because of the reassuring updates I received from
the executive team and the understanding I had that Ms Vennells and Ms
Perkins were personally dealing with the complaints/challenges in relation to
the Horizon IT System.
Second Sight’s appointment and updates to the Board on the investigation
I do not recall the circumstances surrounding Second Sight’s appointment. I do
not believe I was provided with their Terms of Reference or given any oversight
over the work that they were doing, outside of periodic Board meeting updates.
My understanding from the documents the Inquiry have provided is that the
work towards appointing Second Sight took place before my appointment (see
para 22 above regarding Ms Vennells’ update regarding instructing an
independent forensic accountant, provided on my first day at POL).
I have been provided with the Board meeting minutes of 21 November 2012
[POL00027553], 23 January 2013 [POL00021510] and 21 May 2013
[POL00021513]. I do not recall these Board meetings, or the updates on
Second Sight’s investigation contained therein. As a NED, I believe I would
have been of the view that the relevant senior member of the executive team
(Ms Vennells) was taking forward the Second Sight investigation, and I would
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have expected her to provide updates to the Board. We were being told by the
executive team that the investigation was going well and “there was no
evidence to suggest fault” [POL0021510].
THE SECOND SIGHT INTERIM REPORT
I have no independent memory of reading the Second Sight Interim Report.
I have been shown the minutes of the Board meeting on 1 July 2013
[POL00021515]. I do not remember this meeting, and cannot recall what I was
told about Second Sight’s work beyond what is in the minutes. I can see that
the Board meeting was called at “short notice” and Horizon was top of the
agenda, for the first time in this period. Clearly by this point, Horizon was an
important issue for the Board.
I have been shown the emails from Ms Vennells dated 4 July 2013
[POL00145185], 6 July 2013 [POL00115961], and 8 July 2013
[POL00099121]. I do not remember receiving these emails, but I believe I would
have been reassured that the executive team was taking what looked like
effective actions in response to the Second Sight Interim Report: Ms Vennells
was having “constructive telephone conversations with Alan Bates”, Ms
Vennells and Ms Lyons were having meetings and calls with James Arbuthnot
MP and Jo Swinson MP; POL was engaging carefully with stakeholders and
preparing a media strategy; and POL was setting up three initiatives ((i)
establishing a working party to complete Second Sight’s review process and to
look at thematic issues; (ii) conducting a review of how to set up an independent
‘safety net’ to adjudicate in disputed cases in the future; and (iii) setting up a
‘Branch User Forum’ for SPMs and other relevant stakeholders to provide
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feedback on training and support processes). I would have seen these as
substantive actions being implemented at pace, to deal with a fast-moving
situation. The updates also emphasised that Second Sight “have not found any
evidence yet of systemic issues with the Horizon system” and “the main issue
is not ‘the computer’ but the human aspect”. I believe I would have found this
conclusion to be reassuring.
I do not now recall any one to one conversations with senior management or
other Board members about or in relation to the Second Sight Interim Report.
I can see that the NEDs were not provided with a copy of the Second Sight
Interim Report until 8 July 2013, and therefore were not provided with the
opportunity to comment on the report before it was finalised. I think this was the
correct process. It would not have been appropriate for the NEDs to interfere
with the report at this stage until the executive team had completed their work
and were able to bring the final version to the Board.
I can see that on 12 July 2013, Ms Lyons shared the Horizon Board Paper with
the Board [POL00191985]. I do not recall this paper, but I can see that we were
being updated on the latest events relating to the Second Sight Interim Report,
and being asked for input on how POL should move forward with its response.
Looking at this document now, I believe I would have been reassured at how
swiftly the actions in section 3 (3.1 — 3.7) had been put into place.
I have been shown Simon Clarke’s advice of 15 July 2013 [POL00006357]. I
do not recall seeing this advice or discussing it with anyone. I am surprised it
was not raised at the 16 July 2013 Board meeting [POL00021516]. However, I
do not recall anything about this meeting. I did not know, or do not remember,
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that Susan Crichton (General Counsel) was not called to attend this Board
meeting. I have since heard reports from the Inquiry and in the media as to why
she was not called to attend, but I have no independent knowledge or
recollection of the reasons myself.
Insurance
I can see that at the Board meeting on 16 July 2013 [POL00021516], “The CFO
was asked what the insurance position was. He promised the Board a note on
this. He was also asked to ensure the both RMG [sic.] and the Business
insurers were given notice of the review findings”.
I can see that Chris Day (CFO) emailed the Board on 19 and 20 July 2013 with
his view on the “impact the current Horizon issues might have on our insurance”
[POL00099331]. I do not recall this discussion specifically, but I had a good
understanding of insurance from my finance career and I likely felt I had the
expertise to challenge and assist Mr Day on this issue. The email exchange
shows that I did not think Mr Day's response was clear enough (“/’m afraid
Chris’s answer does not address the key question as to whether or not we have
got cover”). My email to Ms Vennells shows how I believed the issue should be
thought through — first, establish whether we have Professional Indemnity (“PI”)
insurance which covers POL, and/or Directors and Officers (“D&O”) insurance
which covers the directors of POL (my email on 28 July 2013 also presses this
point [POL00192987]). Second, consider how to notify POL’s brokers. My view
was that we needed to keep POL’s broker and underwriters apprised of
developments to ensure we maintain cover, but this must be balanced against
risks in prejudicing our position by providing incorrect or irrelevant information.
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This was why I suggested that Mr Day should be discussing this with Ms
Crichton.
My role in relation to considering whether POL had appropriate insurance in
place to cover the matters arising from the Second Sight Interim Report was
consistent with my role as a NED: to use my experience and expertise to
challenge and advise the executive team. To my recollection, I was not involved
in the drafting of any insurance notifications, including the one at
[POL00112856].
Work programme arising from the Second Sight Interim Report
I can see that on 21 July 2013, I was asked by Ms Vennells to “cast an eye”
over the programme of work being proposed to deal with the issues following
the Second Sight Interim Report [POL00116097]. My recollections of this are
poor. However, I do recall that around this time, I had finished my current full-
time role as CFO, and had a month or so before I started my new position as
CFO at my next place of full-time employment. As a result, I had some spare
time and I offered my assistance to POL. I cannot recall specifically what work
I carried out for POL pursuant to this email. However, as Ms Vennells raised in
her follow up email, my role was “to challenge and support’ the executives. Ms
Vennells used the phrase “sufficiently vague” so as to not compromise my role
as Chair of the ARC. I take her to have meant that as Chair of the ARC, it was
my role to provide independent oversight of risk issues. I could not provide this
independent oversight if I was involved in the detail of designing initiatives and
programmes. This interpretation of Ms Vennells words accords with my own
expectation that I would have not been directing the executives on what these
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initiatives should look like, but rather offering advice and challenge as to how
they might best be run.
As Ms Vennells noted in her email of 21 July 2013, I had professional
experience of managing large and complex projects. I would imagine that it was
this experience that I was being asked to share with the executives responsible
for running the various initiatives.
I cannot remember the day of 24 July 2013, which my email at [POL00297942]
relates to. However, I can see that I spent a day at POL assisting with a range
of issues, including general advice and support to the CFO function,
negotiations with Fujitsu, and Second Sight. I do not recall what the “very
challenging but reassuring discussion with Susan/Alwen’ related to and I have
not been provided with any documents relating to this day that could assist my
memory. I cannot recall the context to any of my statements in this email.
Reflecting on this email now, I believe I was asked to spend some time with the
executive team, to give guidance and thoughts around the way the Horizon
‘programme’ should be run. I would have given encouragement and support,
and challenge, where appropriate and fed back my views to Ms Vennells
afterwards. I cannot, however, recall the substance of what we discussed.
I can see from the email dated 27 July 2013, from me to Ms Lyons and others
[POL00192974] that I had a discussion with Ms Crichton about the timescales
for the criminal cases review. I can also see from the email dated 26 July 2013
between myself and Angela van den Bogerd (Head of Partnerships) that I
attended meetings with Ms van den Bogerd, Ms Crichton and Ms Alwen relating
to the Second Sight Interim Report [POL00192969]. However, I have no
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recollections of these meetings or any other discussions about work arising
from the Second Sight Interim Report.
The ARC's role in relation to the Second Sight Interim Report
During my first 12 — 18 months the main focus of the ARC was on the audit side
of the role, as the ARC established a new governance process separate from
the RMG processes. This included signing off the six-monthly financial
statements and assessing the performance of the auditors. During this time
POL also strengthened its Internal Audit department (including hiring a new
Head of Internal audit). In the first half of my tenure, there were risk processes
in place but these were owned by the CEO, Ms Vennells, and she reported on
risk to the Board. During the second half of my tenure we started to develop the
risk part of the ARC role. This concerned risk more generally, and, as I recall,
was not in direct response or related to the Second Sight Interim Report. I
believe this led to Ms Perkins’ email of 10 July 2013, where she asked Board
members to share their views of the top five business risks, for consideration at
the ARC [POL00099164].
I have reviewed the minutes from the ARC meeting dated 19 November 2013
[POL00198199], where “Allegations relating to the integrity of the Horizon
systems’ is listed as one of the “top six risks as identified by the Business’. I
am reminded that Ms Vennells told the ARC that “the Business had owners for
all the risks” and “the Business would also be reviewing the top risks at the
ExCo on a quarterly basis”. I now do not remember this discussion, but on
reflection I believe that the Second Sight Interim Report and the risk issues
arising from it would have been considered too serious to be discussed only at
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an ARC level — which is why it was escalated to Board level for consideration
directly by the CEO. Given the significance of the risks, and the potential
ramifications for the business, I believe it was appropriate that these were
considered by the Board rather than solely by the ARC.
Review of the Second Sight investigation
I have been shown the email from Malcolm Zack (Head of Internal Audit) dated
29 July 2013 [POL00298030], which says that Ms Vennells and I asked Mr
Zack to provide independent assurance over the activity Ms van den Bogerd
was leading “to improve the culture and change process in light of the draft
Second Sight report”. I do not recall this email or asking Mr Zack to undertake
this work.
I have been shown emails (dated 2 August 2013 to 7 August 2013) between me
and Richard Hatfield in relation to a ‘Lessons Learned Review’ [POL00298143].
I! can see that I was involved in the initial discussions with Mr Hatfield and I
reviewed the earlier Terms of Reference [POL00298144]. I provided comments
to Ms Vennells and Ms Perkins [POL00193835]. I can see that following
discussions between myself, Ms Perkins and Ms Vennells, and a further draft
Terms of Reference being prepared [POL00298437], Ms Vennells decided not
to proceed with the review by Mr Hatfield [POL00108113]. I do not recall why
Mr Hatfield was stood down, but I can see from the email dated 11 September
2013 that Ms Vennells decided that the review should be conducted internally.
I believe, on reflection, that perhaps Ms Vennells decided that there were too
many overlapping external investigations/reviews being undertaken (Second
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Sight, Richard Hatfield, etc) and it would be more efficient to keep the review in
house. However, I have no independent recollection of this.
Legal advice
49 I have been shown the following legal advice provided to POL:
49.1 Simon Clarke’s advice dated 15 July 2013, titled ‘Advice on the use of expert
evidence relating to the integrity of the Fujitsu Services Ltd Horizon System’
[POL00006357];
49.2 Simon Clarke’s advice dated 2 August 2013, titled ‘The Duty to Record and
Retain Material’ [POL00006799);
49.3 Brian Altman KC’s advice dated 2 August 2013, titled ‘Interim Review of
Cartwright King’s Current Processes’ [POL00006583]; and
49.4 Brian Altman KC’s advice dated 15 October 2013, titled ‘General Review’
[POL00038538).
49.5 These documents are not familiar to me. I do not remember receiving, reading,
or being briefed on any of these notes of advice. I have no recollection of ever
being provided with any notes of advice from lawyers instructed by POL, with
the exception of the Linklaters advice which I discuss later in this statement.
Susan Crichton’s departure
50 I have been asked to comment on any discussions about Ms Crichton’s
departure from POL. I do not recall Ms Crichton’s departure. I have been shown
the emails between Ms Vennells and me dated 7 September 2013
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[POL00116124] in which a reference might have been made to Ms Crichton’s
departure (“in the meanwhile I hope all goes ok with Susan on Monday’), but I
do not recall the context to this comment, or my conversation with Ms Vennells
that day. I may have been involved in some discussions about Ms Crichton’s
competence, as part of my role as NED was to challenge and support individual
executive directors. However, I have no specific memories of discussions about
Ms Crichton, or about her departure.
THE MEDIATION SCHEME AND REVIEW OF CRIMINAL PROSECUTIONS
Establishment of the Mediation Scheme
I have been asked to provide an account of the nature and extent of my
involvement in the establishment, running, oversight and changes to the
Mediation Scheme and the Working Group.
I do not have a detailed recollection of the establishment of the Mediation
Scheme. However, from the documents provided to me by the Inquiry, it would
seem that the Mediation Scheme developed from the “three key strands” of
POL’s response to the publication of the Second Sight Interim Report that Ms
Vennells set out for the Board in her email of 8 July 2013 [POL00297494]. In
that email, Ms Vennells wrote that POL was intending to establish a working
party “to complete the review process and look at the thematic issues which
have emerged (particularly related to training and support)” and conduct a
review of “how we might set up an independent ‘safety net’ to adjudicate cases
in the future.”
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I have been provided with a copy of a detailed note from Ms Crichton to the
Board dated by 26 July 2013, in which Ms Crichton provided an update on the
“work programme arising from the Horizon Report’ [POL00192962]. It is clear
from this note that by 26 July, the executive team were of the view that the
“safety net’ announced on 8 July should be a “process of mediation” overseen
by an “independent adjudicator’.
I did meet with Sir Anthony Hooper as part of the process by which he became
Chair of the Working Group. A note of our meeting, which took place on 24
September 2013 and was attended by Ms Vennells and her Chief of Staff,
Martin Edwards, can be found at [POL00381770]. In an email to Ms Vennells
on 25 September 2013 [POL00158066], I noted that I had been “very
impressed with Tony and think he will do a really good job” and that “I'd certainly
encourage him to come forward with his views not just on his part but the wider
process’. I cannot recall the details of the meeting on 24 September, but I do
recall being of the view that Sir Anthony was a highly accomplished professional
and had just the sort of experience that we needed in a chair of the Working
Group.
I have been asked by the Inquiry who was responsible for strategy and/or
decision making in respect of the Mediation Scheme and the Working Group.
From the documents provided to me by the Inquiry, it would seem fair to
conclude that other than the CEO, who would have had overall responsibility
for such matters, Ms Crichton and Ms Lyons were actively involved in
establishing the Mediation Scheme and ultimately the Working Group.
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I have been asked by the Inquiry who was responsible for the strategy of
responding to concerns raised about the Horizon IT system by MPs and
journalists. The Board was responsible for overall strategy. Turning to
communications strategy, I cannot recall for certain who had such responsibility,
but I would expect that Ms Vennells as CEO, and Mark Davies as the Head of
Communications, would have played the key roles in responding to enquiries
from the media and members of Parliament. I am also aware that Ms Vennells
and, on occasion, Ms Perkins, met with certain members of Parliament.
Review of past convictions and post-conviction disclosure
I have been asked by the Inquiry to describe the nature and extent of my
knowledge of and/or involvement with POL’s review of past convictions and
post-conviction disclosure. This review was undertaken by POL’s criminal
solicitors, Cartwright King. It is clear from the papers provided to me by the
Inquiry, that Ms Crichton and Chris Aujard (the new General Counsel) kept the
Board informed of the progress of this review. However, decisions made about
what documents needed to be disclosed and to whom were properly matters
for Cartwright King and not for the Board.
Review of the Prosecutions Policy
Ms Crichton’s note to the Board of 26 July 2013 also referred to the executive
team developing an “initial position on the pros and cons of continuing to bring
prosecutions ourselves” [POL00192962]. I have mentioned above the meeting
I had on 24 July 2013 with Ms Crichton and Ms Lyons in which, according to
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the email I sent to Ms Vennells following that meeting, we discussed the need
to consider revising POL’s approach to prosecutions.
From the papers provided by the Inquiry, I can see that the Prosecution Policy
was discussed when the ARC met on 19 November 2013 [POL00198199].
Ahead of the meeting, the ARC was provided with a detailed note from Mr
Aujard on POL’s approach to prosecutions [POL00027143]. Mr Aujard provided
a useful summary of the background to POL’s practice of bringing prosecutions
and then set out four options for the committee to consider. Mr Aujard advised
that the preferred option was to “cease all prosecutorial activities” alongside a
project to improve the overall control framework across the branch network. I
cannot recall reviewing this paper, but I know that I would have done so, as it
was included in the pre-reading for the ARC meeting that I was to chair.
The minutes for the meeting of the ARC on 19 November 2013 record the
committee’s discussion of Mr Aujard’s paper [POL00198199]. I do not recall
this meeting. I note that the minutes record that the ARC was “nervous about
changing the approach to prosecutions as in their view this acted as a
deterrent”. I know that the Board was cognisant of the fact that POL was
entrusted with a great deal of public money and therefore it was essential to
ensure that there were adequate procedures in place to keep that money safe.
As I now re-read the minutes for the ARC meeting on 19 November 2013, I
think it likely that it was this consideration that had given the committee cause
to pause before agreeing with Mr Aujard’s recommendation that all
prosecutions should stop. I believe the ARC also asked for further information
on the likely consequences of a change in policy. POL had a very long history
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of private prosecutions, so any significant departure from this policy needed to
be given serious consideration. Given the gravity of the question, I am not
surprised that the ARC wanted the executive team to explore the implications
of the various options further. It was decided that the Board should consider the
prosecutions policy at the Board meeting on 21 January 2014 [POL00021521].
The policy was then revisited during the ARC meeting on 11 February 2014
[POL00038679].
I have been provided with a copy of a note that Mr Aujard wrote for the ARC on
7 February 2014 ([POL00030900)). In this note, Mr Aujard provided the ARC
with far more detail about the costs and other implications of the various
proposals, which I assume was in response to the discussion at the ARC
meeting on 19 November 2013 and, I believe, the ARC’s request for further
information. Unlike on 19 November 2013, where Mr Aujard recommended that
POL stops all private prosecutions, here Mr Aujard recommended pursuing a
prosecutions policy that was focussed on prosecuting “egregious” conduct. I do
not know or now recall why Mr Aujard’s recommendation changed.
The Inquiry has provided me with copies of emails that were exchanged
between members of the ARC over the weekend of 8 and 9 February 2014
[UKG100043711, POL00104233, POL00027687, POL00100224]. I do not
recall these emails but on reviewing them now, I am reminded of the fact that
directors’ deliberations were not confined to meetings. We did give further
thought to key issues outside of meetings and the fact that this paper gave rise
to an exchange of emails over a weekend is an indication of how seriously this
matter was being taken by the Board. A range of views are expressed by
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various directors in these emails, but taken in the round, it is evident that nobody
had any interest in maintaining the status quo. It was clear to the Board
following the Second Sight Interim Report that POL’s approach to prosecutions
had to change. The question the directors were grappling with was should
prosecutions be ceased all together (it would seem that Ms Perkins and
Susannah Storey (NED) were of that view) or was there a place for prosecuting
in some circumstances in order to provide a deterrent and ensure that every
step was being taken to protect public money (as it would seem Mr McCausland
thought).
The minutes for the meeting of the ARC on 11 February 2014 record that the
committee agreed with Mr Aujard’s suggestion that the prosecution policy
should be revised such that only “egregious misconduct” would be prosecuted
[POL00038679]. The matter was considered by the full Board when it met on
26 February 2014. The minutes for that meeting record that the Board approved
Mr Aujard’s proposed changes to the prosecution policy [POL00027337].
I cannot recall in any detail the discussions that were had at either the 11
February ARC meeting or the 26 February 2014 Board meeting. However, the
documents I have seen show that the ARC and the Board gave a lot of thought
to this important question before ultimately deciding to end POL’s long-standing
practice of regularly prosecuting SPMs.
Project Sparrow sub-committee
I have been asked to describe the nature and extent of my involvement with the
Project Sparrow sub-committee.
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66
67
68
69
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The Board agreed to set up the Sparrow sub-committee in the Board meeting
held on 26 March 2014 [POL00021523]. I can see from these minutes that it
was proposed that the Sparrow sub-committee would involve the CEO, Richard
Callard and myself. Other NEDS were invited if they wished to join.
My memories of this are vague. On reflection now, I believe the Board felt the
different workstreams and projects relating to Project Sparrow were too
disparate — there were different focus areas, including legal, financial,
operational, communications — which all needed to be joined in one forum, to
enable proper oversight over a serious issue.
I do not recall being consulted on the formation of the Sparrow sub-committee,
but I remember that Ms Perkins asked me to join the Sparrow sub-committee.
I believe I was asked to join because I was Chair of the ARC and therefore
could bring an audit and risk perspective to the sub-committee. On reflection, I
also think I may have been asked to join because of my experience in business
crisis and rescue situations. There was clearly a great deal of complexity to the
Sparrow issues, particularly relating to corporate liability and insurance, and I
may have been seen as someone with expertise in this area.
I have reviewed the minutes of the Project Sparrow sub-committee meetings
on 9 April 2014 [POL00006565], 30 April 2014 [POL00006566], 6 June 2014
[POL00205498], 12 January 2015 [POL00022293] and 18 February 2015
[POL00006574]. I have also reviewed the document packs for the Project
Sparrow sub-committee meetings on 30 April 2014 [POL00414087], 6 June
2014 [POL00022128] and 12 January 2015.
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71
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I have no independent recollections of these specific meetings. However,
around the time when the Sparrow sub-committee was set up, I do recall feeling
that the Initial Complaint Review and Mediation Scheme was not going well and
I felt frustrated by its slow progress. This is reflected in the Project Sparrow sub-
committee minutes of 9 April 2014 [POL00006565]: The Mediation Scheme was
supposed to come to an end in March 2014, however, by April 2014, Second
Sight had only produced three case reviews which had all been rejected by the
Working Group as not sufficient for mediation. We believed that Second Sight
was struggling to deal with the complexity and volume of the task. There was
also a significant “expectation gap” between what SPMs expected to receive as
compensation, and what POL was willing, and able, to pay, as a company
reliant on public money. Separately, costs of the scheme had greatly exceeded
expectations.
I do not have any independent memories of any other discussions within the
Project Sparrow sub-committee.
Linklaters Advice and Deloitte’s Project Zebra reports
I have been asked to set out what my thoughts were on the advice provided by
Linklaters [POL00107317]. I do not have a detailed recollection of how I reacted
to Linklaters’ advice when I read it in March 2014. I have, however, re-read it
as part of the process of preparing this statement. I am struck by Linklaters
criticism of the approach adopted by Second Sight, which they described as
“idiosyncratic”, and their recommendation that POL should obtain a “baseline”
assessment of the Horizon system. My recollection is that the Board responded
to the suggestion of a “baseline” review by instructing Deloitte. The minutes for
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the Board meeting on 26 March 2014 support this recollection. The minutes
record that “the Board agreed that they needed to commission a piece of work,
to complement that undertaken by Linklaters, to give them and those concerned
outside the Business, comfort about the Horizon system” [POL00021523].
73 Turning to the work performed by Deloitte, I recall that the partner responsible
for the work attended a meeting of the Board and gave us comfort that Horizon
was performing as expected. Having reviewed the documents provided by the
Inquiry, I can see that this meeting took place on 30 April 2014, and that the
Deloitte partner, Gareth James, told the Board “that all work to date showed
that the system had strong areas of control and its testing and implementation
were in line with best practice” [POL00021524].
74 As with the Linklaters advice, I cannot recall my reaction to Deloitte’s ‘Board
Briefing’ when I first read it in June 2014 [POL00138402]. On re-reading it now,
I noted the following:
74.1 It is not clear to me now that the work undertaken by Deloitte constituted the
“baseline” review originally suggested by Linklaters. Deloitte made it clear in
the Board Briefing that they had conducted a “desktop review’ and had not
conducted any testing of the system.
74.2 Deloitte had identified that, contrary to POL’s understanding, it was possible
for a rogue administrator to delete data from the Audit Store.
74.3. The Balancing Transaction process did allow administrators to directly input
transactions into a Branch’s ledger without the SPM knowing.
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75 I have reviewed the minutes for the meeting the Project Sparrow sub-committee
on 6 June 2014 and the meeting of the Board on 10 June 2014, and I am
surprised to see that at neither meeting did we discuss the Deloitte ‘Board
Briefing’. In light of the important matters identified by Deloitte in that Briefing,
this seems like a missed opportunity for the Board to press the executive team
on what was being done about Deloitte’s findings. Given that the Deloitte
partner had attended a Board meeting following the publication of his initial
report, then on reflection I think he should have attended a Board meeting
following the publication of the 4 June “Board Briefing”. Such a session would
have provided the Board with an opportunity to explore the issues around
remote access with Deloitte and the executives responsible for commissioning
Deloitte’s work.
NFSP
76 As far as I can recall, I had no direct involvement with the NFSP. This
relationship would have been managed by the CEO and other executives. It is
evident from the documents provided by the Inquiry that the Board was updated
from time-to-time on matters relating to the NFSP.
vil. CONCLUSION
77 I have been asked to reflect on my time at POL and set out whether there is
anything I would have handled differently with hindsight, in relation to the
Horizon IT System and its associated issues.
78 When I joined POL the Horizon IT System had been in place for over ten years
and used by thousands of SPMs for millions of transactions on a daily basis. In
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addition, POL’s custom and practice of carrying out private prosecutions pre-
dated the Horizon IT System by many years. Against this backdrop, I was
persuaded by the constant reassurances to the Board that the Horizon IT
System was reliable. This was further justified by external independent
reporting (Second Sight) that there were ‘no systemic failings’ within Horizon.
The challenges by stakeholders and SPMs to the Horizon IT System pre-dated
the separation of POL and RMG. But I believe in the circumstances, and once
the POL Board understood the gravity of the situation, that the Board responded
at pace. The Board commenced a series of important investigations, through
the summer of 2013, which sought to address many of the key issues (this
included the Second Sight review, the review of past prosecutions, the
Linklaters review and the Deloitte review). This significant action took place
against a backdrop of other existential operational risks and issues in the
business, including network transformation, mutualisation, weak financial
performance and industrial action.
Looking back at this period with the benefit of hindsight, I believe the approach
taken by the Board may have lacked sufficient coordination and a holistic
perspective. While there were numerous investigations, programmes and
reviews, the Board failed to identify and resolve the key issues: (i) was the core
Horizon IT System working properly; and (ii) had POL complied with its
obligations and responsibilities as a prosecutor. I regret that our efforts did not
reach the desired or effective outcome. I do nonetheless believe that the Board
genuinely intended to establish the truth and resolve the problems related to,
and arising from, the Horizon IT System.
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STATEMENT OF TRUTH
I believe the contents of this statement to be true.
Dated: 31 October 2024
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Index to First Witness Statement of Alasdair Marnoch
No.
URN
Document Description
Control Number
POL00021507
Meeting minutes: minutes of Board
meeting held on 23 May 2012
POL0000040
UKG100044255
Significant Litigation Report
UKG1I052799-001
POL00295355
Email from Paula Vennells to Neil
McCausland, Virigina Holmes,
Susannah Hooper and others re
News coverage.
POL-BSFF-0133405
POL00021431
Post Office Limited Audit, Risk and
Compliance Committee Minutes of
23 May 2012
POL-0018061
POL00158012
Meeting of the AUDIT, RISK AND
COMPLIANCE SUB-COMMITTEE
to be held at 14.00 on Tuesday 13
November 2012
POL-0146368
POL00027553
Post Office Minutes: Board
Meeting held on 21 November
2012
POL-0024194
POL00021510
Meeting minutes: Board meeting
minutes of meeting held on 23
January 2013
POL0000043
POL00021513
Meeting minutes: minutes of Board
meeting held on 21 May 2013
POL0000046
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POL00021515
Post Office Limited Board Minutes
of 01 July 2013
POL0000048
10.
POL00145185
Email from Paula Vennells to Alice
Perkins CB, Neil McCausland,
Virginia Holmes and others RE:
Second Sight update 4/7/13
POL-BSFF-0004312
11.
POL00115961
Email from Paula Vennells to Alice
Perkins, Neil McCausland and
others RE: SS 5 July update
POL-0116963
12.
POL00099121
Email from Sarah Paddison to
Paula Vennells, Alice Perkins, Neil
McCausland and others re Update
on SS review - 7 July
POL-0098704
13.
POL00191985
Post Office Ltd Board - interim
report on Horizon
POL-BSFF-0030048
14.
POL00006357
Advice on the use of expert
evidence relating to the integrity of
the Fujitsu Services Ltd Horizon
System
POL-0017625
15.
POL00021516
Meeting Minutes: minutes of Board
meeting held on 16 July 2013
POL0000049
16.
POL00099331
Email from Alasdair Marnoch to
Paula Vennells Re: "Insurance
reply".
POL-0098914
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17.
POL00192987
Email chain from Chris M Day to
Charles Colquhoun cc Susan
Crichton, Martin Edwards RE:
Board note on Horizon
POL-BSFF-0031050
18.
POL00112856
Email between Stuart Corney and
Claims DO Re: New D&0
Circumstance Notice
POL-0110268
19.
POL00116097
Email from Alasdair Marnoch to
Paula Vennells, Susan Crichton,
Martin Edwards and others RE:
JFSA/SS
POL-0117097
20.
POL00297942
Email from Alasdair Marnoch to
Paula Vennells RE; Today -
summary of board meeting
/Second Sight thoughts
POL-BSFF-0135992
21.
POL00192974
Email from Alasdair Marnoch To:
Alwen Lyons CC: Alice Perkins,
Neil McCausland and others re
Board note on Horizon
POL-BSFF-0031037
22.
POL00192969
Email from Alasdair Marnoch to
Angela Van-Den-Bogerd re:
Horizon report - review of support
for agents.
POL-BSFF-0031032
23.
POL00099164
Email from Alwen Lyons to Alice
Perkins, Neil McCausland, Virginia
POL-0098747
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Holmes and others re 2013 07 16
Post Office Limited Board and
Mutualisation Committee Meetings
24.
POL00198199
Post Office - Minutes of a meeting
of the AUDIT, RISK AND
COMPLIANCE SUB-COMMITTEE
held on Tuesday 19 November
2013 by conference call
POL-BSFF-0036262
25.
POL00298030
Email from Malcom Zack to Angela
Van- Den-Bogerd re: Horizon
POL-BSFF-0136080
26.
POL00298143
Email from Tracy Cox to Angela
Van- Den-Bogerd CC'd Larissa
Wilson RE;MEETING UP - Post
Office Second Sight review
POL-BSFF-0136193
27.
POL00298144
Post Office Investigation Second
Sight’s Horizon review
POL-BSFF-0136194
28.
POL00193835
Email from Alisdair Marnoch to
Paula Vennels cc'd Alice Perkins
re: In confidence: follow up to our
meeting
POL-BSFF-0031898
29.
POL00298437
PO Lessons Learned Review
POL-BSFF-0136487
30.
POL00108113
Email from Paula Vennells to
Theresa Illes re Lessons learned
ToR
POL-0110938
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31.
POL00006357
Advice on the use of expert
evidence relating to the integrity of
the Fujitsu Services Ltd Horizon
System
POL-0017625
32.
POL00006799
Advice on Disclosure and the Duty
to Record and Retain Material
POL-0017591
33.
POL00006583
Interim Review of CK Processes
by Brian Altman QC
POL-0017668
34.
POL00038538
Post Office - General Review,
Brian Altman QC
POL-0027849
35.
POL00116124
Email chain from Paula Vennells to
Alasdair Marnoch cc Alice Perkins
CB re: Follow up
POL-0117123
36.
POL00297494
Email from Martin Edwards To:
Paula Vennells re Update on SS
review — 7 July
POL-BSFF-0135544
37.
POL00192962
Update on the work programme
arising from the Horizon Report
POL-BSFF-0031025
38.
POL00381770
Notes from meeting between Paula
Vennells and Sir Anthony Hooper
MP on 24 September 2013 and
next steps.
POL-BSFF-0208657
39.
POL00158066
Email thread from Alasdair
Marnoch to Paula Vennells Re:
Thank you
POL-0146411
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40.
POL00192962
Update on the work programme
arising from the Horizon Report
POL-BSFF-0031025
41.
POL00198199
Post Office - Minutes of a meeting
of the AUDIT, RISK AND
COMPLIANCE SUB-COMMITTEE
held on Tuesday 19 November
2013 by conference call
POL-BSFF-0036262
42.
POL00027143
PO Ltd meeting of AUDIT, RISK
AND COMPLIANCE
SUBCOMMITTEE
POL-0023784
43.
POL00021521
Meeting Minutes: minutes of Board
meeting held on 21 January 2014
POL0000054
44,
POL00038679
Post Office Limited Minutes of a
meeting of the Audit, Risk and
Compliance Sub-Committee held
on Tuesday 11 February 2014 by
conference call
POL-0027990
45.
POL00030900
Meeting Agenda for the Audit, Risk
and Compliance Sub-Committee,
including paper on the Post
Office's Prosecuting Policy
POL-0027382
46.
UKGI000437 11
Email chain from Paula Vennells to
Alasdair Marnoch, CC Alice
Perkins and Larissa Wilson and
others re: 2014 02 11 ARC
UKGI051943-001
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teleconference - concerning the
impact of BIP
47.
POL00104233
Email chain from Neil McCausland
to Alice Perkins, Larissa Wilson,
Tim Franklin and others re: 2014
02 11 ARC teleconference
POL-0103816
48.
POL00027687
Email from Susannah Hooper to
Alice Perkins, cc'ing Larissa
Wilson, Tim Franklin, Alasdair
Marnoch and others, re: ARC
Teleconference
POL-0024328
49.
POL00100224
Email from Chris Aujard to Neil
McCausland, RE: 2014 11 ARC
Teleconference
POL-0099807
50.
POL00027337
POL Board Meeting Minutes of 26
February 2014
POL-0023978
51.
POL00021523
Meeting Minutes: minutes for
Board meeting held on 26th March
2014
POL0000056
52.
POLO0006565
Project Sparrow Sub-Committee
Minutes 9 April 2014
POL-0017844
53.
POL00006566
Project Sparrow Sub-committee
Minutes 30 April 2014
POL-0017845
54.
POL00205498
Minutes of a meeting of the Project
Sparrow Sub-Committee of the
POL-BSFF-0043561
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Board held at 148 Old Street,
London EC1V 9HQ on 6 June
2014
55.
POL00022293
Agenda for Sparrow sub-
committee meeting to be held on
the 12 Jan 2015 to discuss the
initial compliant and mediation
scheme.
POL-0018772
56.
POL00006574
Sparrow Sub-Committee Minutes
18 Feb 2015
POL-0017848
57.
POL00414087
Post Office Ltd Board Meeting of
the Sparrow Sub-Committee
between Alice Perkins, Paula
Vennells, Alasdair Marnoch and
others.
POL-BSFF-0234195
58.
POL00022128
Minutes of the Sparrow sub-
committee held on the 6 June 2014
POL-0018607
59.
POL00006575
Sparrow Sub-Committee Minutes
12 January 2015
POL-0017849
60.
POL00107317
Legally privileged report prepared
by Linklaters on behalf of Post
Office into initial complaint review
and mediation scheme legal issues
POL-0105625
61.
POL00021524
POL Board Meeting Minutes:
minutes
POL0000057
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for Board meeting held on 30 April
2014
62.
POL00138402
Deloitte Board Briefing: Document,
further to our report “Horizon:
Desktop review of assurance
sources and key control features”
dated 23/5/14, responding to five
specific matters identified by POL
as critical to POL’s legal position.
POL-BSFF-0000626
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