Anthony Brown -

Post Office scandal – cover-up a ‘dark chapter’ in government, corporate and legal history

Third phase of public inquiry into Horizon IT scandal reveals extent of Post Office and Fujitsu cover-up of software problems that went on to write ‘as dark a chapter in our governmental, corporate and legal history as can be imagined’

The latest stage of a statutory public inquiry into the Post Office IT scandal heard evidence that exposed the methods used by the Post Office and supplier Fujitsu to cover up software errors and push the blame and costs for the accounting discrepancies they caused onto the desperate users in Post Office branches, destroying their lives.

Phase three of the inquiry focused on the operation of the controversial IT system at the centre of a national scandal. It mapped out how Fujitsu and the Post Office, in lockstep, covered up huge problems to protect their reputations and financial performances, while allowing the subpostmasters who relied on the software to be “sacrificed”.

The statutory public inquiry was set up to ascertain how and why subpostmasters were wrongly blamed and punished for accounting discrepancies in their branches. After the introduction of software from Fujitsu in 2000 to automate mainly manual practices in Post Office branches, subpostmasters began to see unexplained shortfalls in their accounts. They were subsequently blamed for the shortfalls, which didn’t actually exist, and were made to repay them. More than 700 were prosecuted for financial crimes, with many serving prison sentences. Thousands more suffered life-changing hardship as a result of failed businesses and repaying unexplained shortfalls.

In 2009, a Computer Weekly investigation first revealed that subpostmasters were being blamed for unexplained accounting shortfalls, which they believed to be caused by software errors (see timeline of Computer Weekly articles below). It has become a national scandal involving the government, the Post Office and IT supplier Fujitsu.

In the closing statement to phase three of the public inquiry into the Horizon IT scandal, the government’s handling of the Post Office over the years was likened, by a KC representing former subpostmasters, to a dog owner standing by as their vicious pet “mauled a defenceless child”.

From January this year until last week, phase three heard from former Post Office and Fujitsu executives to examine how subpostmasters ended up paying such a heavy price for the failing of a computer system and the support infrastructure around it. Although the latest phase has more evidence to hear in July, closing statements from participating barristers were heard.

Dark chapter

In closing, Edward Henry, representing former subpostmasters, said it was “undisputable” that the Post Office and Fujitsu had known for years by 2010 that there were serious problems with the Horizon system. “From the very beginning, around the country, subpostmasters, baffled and bewildered, could not cope with the [IT] system,” he said.

In fact, the Post Office and Fujitsu already knew of serious problems when the system was rolled out in 2000, as phase two of the inquiry proved.

Read a round-up of phase two of the inquiry

“What the Post Office did in common with Fujitsu, their mutual connivance, was to deny this,” Henry told the inquiry. “Not simply to deny this in fact and to dispute it vigorously, but to deny it almost psychologically.”

Exposure of the problems with Horizon would have been an existential threat to the Post Office and “fatal” to Fujitsu’s valuation. Henry said if the Post Office had not modernised through automation, it would have been “curtains” for the business, but if new technology had been implemented and failed, the consequences would have been “catastrophic”.

“This is as dark a chapter in our governmental, corporate and legal history as can be imagined, and sadly it will get darker yet”
Edward Henry, KC

He said that was the beginning of a common interest in keeping problems secret, between the Post Office and Fujitsu, which “conspired to arrive at a position of mutual interest” and decided that it was better that some subpostmasters “were put on the rack rather than the Post Office collapse and a corporate’s reputation be ruined”.

Henry highlighted the government’s role in the scandal as the only shareholder in the Post Office, which was given “unfettered operational control”.

“The government is like the owner of a dangerous dog mauling a defenceless child, saying, ‘Sorry, so sorry, but it has nothing to do with me’,” he said. “The government is responsible because it failed to properly manage the Post Office. This is as dark a chapter in our governmental, corporate and legal history as can be imagined, and sadly it will get darker yet.”

Deliberate actions

In his closing statement to phase two of the inquiry, Sam Stein KC, also representing victims of the scandal, asked whether the suffering caused to many hundreds of victims was the result of was a “cock-up or cook-up”. He told the inquiry that he is confident phase three has provided evidence that the answer is the latter.

“I posed the question as to whether what we might find within phase three was cock-up or cook-up. My respectful suggestion is there can be no doubt that the answer is cook-up,” said Stein.

He added that the Post Office had made little reference to its own failures in the latest phase of the inquiry, but had “turned its tank turret gun on Fujitsu”, accusing the supplier of failing to share information about computer problems with it.

“The Post Office has considerable form for blaming others,” said Stein. “It blamed and criminalised subpostmasters throughout the history of Horizon. It now seeks to blame Fujitsu. But the truth is, Fujitsu and the Post Office are equally to blame.”

“The Post Office has considerable form for blaming others. It blamed and criminalised subpostmasters throughout the history of Horizon. It now seeks to blame Fujitsu. But the truth is, Fujitsu and the Post Office are equally to blame”
Sam Stein KC

He described a “partnership of deception” in which the Post Office was the senior partner: “The Post Office planned the heist, gave the orders, while Fujitsu brought the shooters to the scene.”

KC Tim Moloney, representing victims, said the evidence heard in phase three echoed the experiences of the subpostmasters he represents. “The problems experienced in the operation of Horizon had been well signposted in its development. Poor quality had, to a degree, been acknowledged by Fujitsu and the Post Office,” he said.

Moloney said evidence from the latest phase exposed how some errors, which were identified in the development, were never fixed. “Bugs, errors and defects continued to appear throughout the roll-out of Horizon and beyond. Bugs, errors and defects appeared in both legacy Horizon and Horizon online,” he added.

Details of the errors identified during development were not passed onto the tech teams supporting subpostmasters. “There had been limited dissemination or appreciation of the knowledge of bugs, errors and defects identified in development to those individuals working in support,” said Moloney.

“At a senior level, there was an awareness that the genesis and development of Horizon had been difficult. But down below, with those involved in support, there was no such appreciation,” he added. “The implications of this lack of institutional memory are clear [in phase three evidence].”

As a consequence, the Horizon system tech support operations became the first line in the Post Office’s strategy to keep details of Horizon problems secret from the subpostmasters using the system.

Post Office executive given inquiry-related bonuses on false premise

During phase three of the Horizon IT public inquiry, the Post Office was forced to apologise after it was revealed it had paid executives, including CEO Nick Read, bonuses for providing the inquiry with all the information it needed, on time.

The inquiry stated there was a “misleading and inaccurate statement within the Post Office’s annual financial report”, which said executives received bonuses for “all required evidence and information supplied on time, with confirmation from Sir Wyn Williams and team that Post Office’s performance supported and enabled the inquiry to finish in line with expectations”.

But Williams said in a statement: “…neither myself, nor any member of my team, agreed to participate in any way in the confirmation (or otherwise) that POL’s performance in the inquiry was such that it ought to lead to bonuses being paid to POL executives. Nor did I or any of my team provide confirmation that POL’s participation (or ‘performance’) in the inquiry supported and enabled the inquiry to finish as at February 2022 (not least because no such statement could ever have been made in circumstances where the inquiry continues to this day).”

Read has since repaid the part of his bonus related to the supply of evidence and the government has announced it is carrying out an investigation.

Yet more damning evidence

What is known is that the Post Office and Fujitsu knew about problems with the Horizon system that could cause unexplained losses. What phase three of the public inquiry did was reveal a concerted effort to keep this knowledge out of the subpostmaster network.

Senior Post Office executives told staff, as part of internal messaging, not to reveal problems caused by the Horizon IT system due to concerns that the organisation would face serious business and legal difficulties.

Speaking in a phase three hearing in February, Shaun Turner, a former executive working in the Post Office National Business Support Centre (NBSC), which supported subpostmasters using the controversial accounting system, said he was aware “as a general theme” of concerns in the organisation that if the problems were known it would cause a lack of confidence in Horizon.

He said this was “largely [formed] from the messaging that was coming out of the business, particularly in the post-2009 period, around the robust nature of the Horizon system, which led to particular sensitivities around any perceived issues with the system”.

“From my recollection, the Computer Weekly article and the early days of the Justice for Subpostmasters Alliance [campaign group] were ... mentioned in the business, and messaging was coming out to internal staff, like myself, around the robust nature of Horizon. My impression was that messaging was coming from senior leadership. I imagine that messaging was coming from board level down.”

Read more about the Post Office’s Horizon messaging strategy.

The secrecy breached

But word was getting out, and desperate subpostmasters began asking questions. In 2009, Computer Weekly published the first investigation into reported Horizon problems and its effects. This and other questions forced the Post Office, desperate to protect Horizon’s reputation, to commission a report to assure those interested that the software was reliable. The latest phase of the inquiry featured Rob Ismay, the author of the report.

The inquiry heard how the report lacked objectivity and was designed to falsely provide the software with a clean bill of health. The report’s author admitted he did not even investigate alleged problems with the software, but simply talked to the IT team and staff from Fujitsu, the supplier of the software, who reassured him it was reliable.

There were no terms of reference for the report, which was instigated by then Post Office managing director David Smith, but it was made clear to Ismay that he should just report on “positive reasons to be assured about Horizon” to give the software a clean bill of health.

The Post Office had considered an external review and report, according to Ismay, but decided against that for reasons including that people would still have doubts over the system and ask questions regardless of the outcome, and that the companies that would carry out the audit would have “significant caveats” in their report, which would sow doubt about conclusions.

Read more about Rod Ismay’s report into the Horizon system

Sinister motives

Giving the Horizon system a clean bill of health meant, according to the Post Office, that any unexplained accounting discrepancies were the fault of the subpostmasters, whether deliberate through theft and false accounting, or caused by human error, with the latter becoming a default option.

Subpostmasters who challenged the Post Office’s stance on Horizon, threatening to expose its dark secret, were made examples by the Post Office, which used its legal and financial resources to shut them up and deter others from speaking out.

The harm done by the Post Office’s methods of silencing subpostmasters who suffered losses cannot be depicted better than in two cases featured in phase three, which saw the Post Office destroy the lives of two victims of the scandal. The Post Office sent one to prison through criminal action and crushed the other in a civil case.

Subpostmasters who challenged the Post Office’s stance on Horizon, threatening expose its dark secret, were made examples by the Post Office, which used its legal and financial resources to shut them up and deter others from speaking out

In 2006, when his branch showed a loss of £26,000 that he could not explain, the Post Office demanded that former Bridlington subpostmaster Lee Castleton make up the shortfall. Castleton said the losses in his accounts were caused by computer errors, but he had no way of proving it. He demanded evidence of the unexplained loss and the Post Office took him to court to recover what it said he owed.

The Post Office threw everything at the legal challenge brought by Castleton, and the court ruled that the debt was real, not illusory as Castleton argued. Post Office witnesses in his case said there was no evidence of any problem with the system and that they were unable to identify any basis upon which the Horizon system could have caused Castleton’s losses. The judge in Castleton’s case awarded the Post Office damages of approximately £26,000, the amount of the unexplained loss, and costs of £321,000, which bankrupted Castleton.

During phase three, a Post Office document revealed it had sought to use the Castleton case to “send a clear message” to other subpostmasters that it would take a firm line on those raising similar allegations. Barrister Flora Page, representing former subpostmasters affected by the Horizon scandal, referred to a document that will appear in the inquiry at a later date.

Quoting the document, Page said there was a clear intent on the part of the Post Office to defeat Castleton in court and claim heavy costs, “not to make a net financial recovery, but to defend the Horizon system and hopefully send a clear message to other subpostmasters that the Post Office will take a firm line and to deter others from raising similar allegations”.

She told the inquiry: “So that was the purpose. It was not ever envisaged that the Post Office would actually get that costs order back – that was a loss leader, if you like. But the purpose was to send a clear message to deter others.”

Castleton was not alone in being targeted by the Post Office and made an example of.

In 2012, Seema Misra a former subpostmaster in West Byfleet, Surrey, was found guilty of theft after unexplained accounting shortfalls appeared in her branch and, pregnant with her second child, was sent to prison. She had her wrongful conviction overturned in April 2021, after it was proven that the Post Office’s branch software contained errors that could cause phantom shortfalls.

Following Misra’s conviction, an internal email from then Post Office senior criminal lawyer Jarnail Singh, copied to several executives, bragged about the successful prosecution of a subpostmaster for theft despite knowledge of evidence that would have put her prosecution in question. This email was revealed during a recent phase three hearing.

In the email, Singh wrote: “After a lengthy trial at Guildford Crown Court [Seema Misra] was found guilty of theft. This case turned from a relatively straightforward general deficiency case to an unprecedented attack on the Horizon system. We were beset with unparallel [sic] request for disclosure requests by the defence. Through the hard work of everyone, counsel Warwick Tatford, investigation officer Jon Longman and through the considerable expertise of Gareth Jenkins of Fujitsu, we were able to destroy to the criminal standard of proof (beyond reasonable doubt) every single suggestion made by the defence.”

The email also said the legal victory for the Post Office would dissuade other subpostmasters from “Horizon bashing” when they have shortfalls.

A total of 86 former subpostmasters have now had criminal convictions overturned and more are expected to follow.

Read more about the devastating attack on Lee Castleton

Read more about the treatment of Seema Misra

Rudderless support team just following orders

Subpostmasters experiencing problems were in the dark from the start, and calling for help meant a long wait on the helpline – or “hell line”, as users referred to it.

The Horizon helpdesk was the first line in Fujitsu branch tech support operations. According to evidence given to the inquiry, the helpdesk has a toxic, rudderless and resentful work environment, where racism was a daily occurrence and subpostmasters were considered incompetent or corrupt.

Speaking at the inquiry, IT consultant Amandeep Singh, who worked at ICL on the Post Office’s Horizon helpdesk in Wakefield, Yorkshire, from 2000 to 2001, revealed details about life on the other end of the telephone line that subpostmasters turned to for help with the IT system they used in branches.

Singh, who was on a 12-month work placement with ICL as part of his computer science degree, said there was a culture of not trusting the subpostmasters. “People were having genuine software problems,” Singh told the inquiry, but spoke of “a pre-built prejudice that you can’t trust the people and that they are incompetent”.

Asked whether this prejudice contributed to the Horizon scandal, he said: “If you have already made a judgement call [that] the people you are supporting are incompetent or corrupt in some way, it would take a lot for people to think the software has a problem. We were much happier to push down on the subpostmasters and say ‘it’s your issue’ than to push it upwards and ask whether there is an issue or question why we are having so many calls about this.”

Read more about the Horizon helpdesk

Beyond the Horizon helpdesk, there were further levels of support, with the software support centre (SSC) a key proponent that was supposed to investigate and fix problems with the Horizon software.

Later in phase three, evidence emerged that the SSC was well aware of the problems being experienced by subpostmasters from the early days in Horizon’s operational life and the stress it was causing them. During evidence given by Barbara Longley, a former administrator in the SSC team, a quote from one of the team’s call logs was read out. The message about a struggling subpostmaster was from 2001, shortly after Horizon’s roll-out.

“The system seems to lose transactions and the [subpostmaster] is concerned that for every transaction error he notices there is the probability that there are ones he misses, leading to discrepancies. The [subpostmaster] is at present finding the whole scenario very stressful and is suffering sleepless nights due to these problems,” said the log.

In an early sign that legal challenges to Horizon’s reliability were likely, the log continued: “In the light of what has gone on, the PM is prepared to break his contractual obligations with [the Post Office] and refuse to pay any more discrepancies and will take legal action if required.”

Unaudited, unrestricted and unbelievable

Former SSC workers also faced questions over their use of remote access rights to make changes to subpostmaster accounts. The integrity of any system relies on this type of privileged access being tightly controlled.

Although many IT systems include the ability for remote access by suppliers, with proper controls and audit paths, the Post Office was so worried about Horizon’s integrity being questioned that it had, for many years, denied that remote access by Fujitsu was even possible.

In 2015, in written evidence to the BIS Select Committee Inquiry, the Post Office said: “There is no functionality in Horizon for either a branch, Post Office or Fujitsu to edit, manipulate or remove transaction data once it has been recorded in a branch’s accounts.” The Post Office only admitted it was in fact possible when it was left with no choice, during a High Court case in 2019.

Phase three of the inquiry shed light on why the Post Office took this stance. It turned out that not only were Fujitsu staff making changes to branch accounts without the knowledge of the subpostmasters, but they also had “unrestricted and unaudited” access to systems.

Stephen Parker, a former SSC manager who faced the public inquiry in phase three, admitted that control of SSC staff remotely accessing branch systems relied on them being trustworthy and following the access policy, with no policing of their activity.

Parker said that, as far as he remembers, this procedure was related to changes that would have a financial impact on subpostmaster accounts. “It was enforced only by process,” he said. “This means everybody was aware that this was the requirement and whenever an OCR was approved then they knew of the [process] they needed to do.”

Horizon inquiry barrister Jason Beer said: “People are aware of the speed limit – that doesn’t mean they always abide by it, does it?”

Parker admitted that “ultimately they were trusting [people] to follow the process”.

Read more about Fujitsu’s unrestricted and unaudited access to branch accounts

Heads you pay, tails you pay

In closing, barristers highlighted the difficulties experienced by subpostmasters when the IT support couldn’t get to the bottom of a problem. The failure of IT support teams to identify the problem left subpostmasters in a difficult position. They either had to agree to make up the loss to move on to the next trading period or (prior to 2003) they could put the loss in the local suspense account while an investigation was carried out.

However, with the volume of unexplained losses in the suspense account growing, the Post Office decided to make subpostmasters cover the losses themselves, rather than putting them in suspense.

In phase two, the inquiry was told that during an eight-month period from Horizon’s introduction, the amount of money in dispute in the suspense account had jumped from £2m – from when accounts had been handled manually – to £10m. It had never been close to this under the paper-based accounting model, according to evidence from former National Federation of Subpostmasters (NFSP) president John Peberdy.

“The Post Office was rapidly attempting to make these [alleged] losses good, to stop them being in the suspense account for so long, and they wanted to reduce the money that they saw as owed to them,” he told the inquiry in phase two.

He said the Post Office had “nothing to lose” when it came to Horizon causing unexplained losses, because it was subpostmasters who were contractually obliged to make accounts good. This rule was introduced under the Impact programme, which signalled the end of the suspense account, and with it subpostmasters’ ability to dispute unexplained shortfalls.

In closing, Stein KC said: “If the paucity of training and assistance issues were not bad enough, there was a sting in the tail for subpostmasters – the Impact programme, which effectively programmed out the subpostmasters’ remaining chance to dispute phantom Horizon shortfalls.”

He added that this encapsulated everything that was wrong about the Post Office’s treatment of subpostmasters: “The Impact programme abolished the local suspense accounts, and in doing so forced subpostmasters to accept all demands made of them on pain of no longer being able to trade. This created an impossible situation for subpostmasters, the equivalence of heads, you pay; and tails, you pay.”

Moloney added: “The apparent reason for the removal of suspense as an option on rollover is disturbingly lacking in logic, being built on a faulty presumption that use of suspense may be indicative of fraud or dishonesty by postmasters.”

Read more about John Perbedy’s evidence to phase two of the inquiry

Phase four of the inquiry starts on 6 June, but phase three is yet to be completed, with former Fujitsu engineer Anne Chambers to return for questions and the company’s former chief architect Gareth Jenkins to appear for the first time, probably in July. Both former Fujitsu staff are currently under investigation for possible perjury during the trials of subpostmasters prosecuted based on evidence from the Horizon computer system.

Read all Computer Weekly articles about the scandal since 2009

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