Horizon Scandal Update

I know a number of readers outside the UK have been following my reports on this for some time.  Domestic readers may well have been following the updates from Nick Wallis, Computer Weekly or Private Eye.  But as the latest news landed three days before Christmas, you may have missed it.

Both Channel 4 News and the BBC  were among the outlets to produce news items this week about a 2006 contract between Fujitsu and the Post Office, which saw Fujitsu agreeing to fines if it couldn't properly reconcile financial information generated by the Horizon IT system.

The document was only published on the Inquiry website this month. It was spotted by Stuart Goodwillie, who alerted Paul Marshall and Ron Warmington. 

Front page of Fujitsu contract 31 August 2006

 

In short:

On 31 August 2006, Post Office and Fujitsu Services signed a 26-page contractual document that would prove devastating if disclosed to the hundreds of postmasters subsequently prosecuted based on Horizon data. The "Reconciliation Service: Service Description" wasn't a technical manual buried in an archive. It was a formal contract, reviewed by both parties' commercial and operations teams, signed by senior executives, and marked "CONTRACT CONTROLLED."

When postmasters reported discrepancies, they were prosecuted for theft and false accounting. When the same discrepancies appeared in this 2006 contract, they were called "Exceptions," "Errors," and "System Incidents" — with detailed provisions for how Fujitsu would pay Post Office to resolve them.

The postmasters weren't lying about system problems. They were experiencing exactly what the 2006 contract said would happen regularly.

You can read the full 26-page contract here and a good summary (from which the above quote is taken) by Brian Rogers here.  (It's on Linkedin but that shouldn't present any problems.)

Another quote:

The contract establishes detailed financial penalties for system failures — proving both parties knew these failures would occur regularly enough to require standard commercial terms:

"Where an Exception or an Error at a Branch affects the reconciliation within the POL FS System, Fujitsu Services may be liable to pay liquidated damages to Post Office in lieu of any financial cost that Post Office may incur to resolve the Exception or Error either internally within the POL FS System or as part of a settlement adjustment with Clients."

The contractually established amounts:

• Transaction that cannot be delivered electronically - £100 per transaction
• Transaction that cannot be re-delivered after rejection - £150 per transaction
• Debit card exception requiring manual settlement - £353.47
• Processing costs per exception - £125.06

Why establish liquidated damages if you believe the system is reliable?

These aren't provisions for rare, catastrophic failures. These are standard commercial terms for managing expected regular failures at scale.

The "100+ errors per month" assumption

Buried in this section is perhaps the most remarkable admission:

"The Parties acknowledge that the fundamental commercial assumptions underlying the provisions of this section 2.3.4.11 are that (i) the total number of Debit Card Exceptions or Errors in any calendar month shall not exceed 100 and (ii) the total number of Debit Card Exception or Error Reimbursements in any calendar month shall not exceed 20."

Read that again carefully:

• Both parties contractually assumed at least 100 debit card exceptions per month
• This was just for one transaction type (debit cards)
• This was the baseline commercial assumption for normal operations
• The contract requires renegotiation if actual numbers exceed this baseline

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Remote data correction without branch knowledge

Perhaps the most disturbing provision authorises Fujitsu to modify transaction data without branch knowledge or involvement:

"Where there is a need to correct Exceptions or Errors, the Reconciliation Service may make corrective assumptions, based upon the format and content of previous valid records of the same type, if no other detail is available."

The contract explicitly authorises:

• Identification of errors in centrally held transaction data
• Making "corrective assumptions" about what data should contain
• Basing corrections on "previous valid records" rather than actual events
• Modifying transaction records without branch involvement

The contract specifies:

"In such cases, the Reconciliation Service will promptly inform Post Office of the assumption within the Working Day that the assumption has been made."

Post Office would be informed. Postmasters would not.

Once this was published another LinkedIn member pointed out that another evidence document on the Inquiry website shows that this 31 August 2006 document was a renamed version of an earlier document dated December 2001!

If you are remotely interested I suggest you read Brian Rogers' summary in its entirety.

 

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Did pre-Horizon system Capture wrong data, bankrupting postmasters? Fujitsu CEO slaps down POL over new cases.

I know this isn't on the list in my previous post but it's timely and brings attention back to the Post Office Ltd failings, and the unchanged culture.

Two reports, one about the computer system used at PO branches before Horizon was introduced, and the other about Fujitsu's reaction to POL asking for a witness statement and evidence this year for a further prosecution.  A third report covers continuing waste on NBIT, delays to which mean that Horizon will keep being used.

Report 1

In the week after Sir Alan Bates received his knighthood at Windsor Castle, Computer Weekly reveals failings similar to those in the Horizon case with its predecessor, Capture.  Capture was a PC-based accounting system, referred to as 'a glorified spreadsheet'.  There was no centralisation of data, and as with Horizon, too little training if any.

Here's the Computer Weekly article by Karl Flinders (links are to CW and WhatDoTheyKnow websites).

Post Office dramatically increased the number of investigations into subpostmasters after Capture Software was introduced

A change in Post Office behaviour after it introduced software to computerise branch accounts in 1993 mirrors an increase in prosecutions six years later, when the controversial Horizon system was introduced.

Lives were destroyed as the Post Office blamed subpostmasters for unexplained accounting shortfalls that only existed on the error-prone Horizon accounting system used in branches. Former users of Horizon predecessor, Capture, have been campaigning since January when ITV’s dramatisation of the Post Office scandal revealed parallels to problems they experienced.

Data on Post Office prosecutions has revealed worrying similarities to how the Post Office treated Horizon and Capture users who suffered unexplained losses.

According to a Freedom of Information (FOI) request, in the six years before Capture was introduced by the Post Office to automate manual processes, fewer than five subpostmasters were investigated over account shortfalls in four of the years, seven investigations were carried out in 1992, and 11 investigations took place in 1993. But in the following six years, the number of investigations increased dramatically to an average of 191 a year, reaching 378 in 1998.

This mirrors a dramatic change that followed the introduction of the Horizon system to branches in 1999, in relation to the number of subpostmasters convicted of financial crimes. According to a separate FOI request from 2020, in the seven years between 1991 and the year before Horizon’s introduction, an average of six subpostmasters were convicted per year, compared with an average of 52 a year in the 13 years following its introduction, until the Post Office stopped prosecuting in 2013.

After Capture was introduced, prosecutions increased, but to a much smaller extent than investigations. However, the Post Office contract meant subpostmasters who had unexplained shortfalls, which the investigations typically related to, had to cover those shortfalls with their own money or face the termination of their contracts or prosecution.

The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered due to Horizon accounting software, which led to the most widespread miscarriage of justice in British history.

Horizon is a large, complex, networked system connected to centralised services with links to Post Office systems, which all subpostmasters have to use. In contrast, the Capture system was a PC-based application developed by the Post Office and uploaded to a personal computer by subpostmasters to carry out their accounts. The software – referred to by some users as a “glorified spreadsheet” – was a standalone system, which was used by more than 1,500 subpostmasters.

Computer Weekly reported in January that former users of the software had come forward claiming they had been prosecuted for unexplained shortfalls. Former MP Kevan Jones, who now sits in the House of Lords, was involved in the campaign for justice for Horizon victims and has spearheaded a campaign for subpostmasters who believe they suffered losses and criminal prosecution as a result of Capture errors.

After pressure, the government commissioned an investigation of Capture to be carried out by forensic specialists Kroll. This report is now in the hands of the government and its publication is expected soon.

Neil Hudgell, a solicitor at Hudgell Solicitors, which has about 40 former Capture users as clients, said he is confident that the content of the report will be supportive of his clients’ claims.

Steve Marston was prosecuted in 1996 for theft and false accounting following an unexplained shortfall of nearly £80,000 in his branch in Bury, Lancashire. He said he had never had any problems using the paper-based accounting system. This changed when his branch, which he ran from 1973, began using Capture.

He covered the losses with his own money, but it kept getting worse. After an audit revealed a loss he couldn’t fully cover out of his own pocket, he was advised to plead guilty to theft and fraud to avoid jail. The judge took into account two bravery awards Marston had received for standing up to armed robbers, saving him a jail sentence. He was given a 12-month suspended sentence, lost his home and business, and went bankrupt.

Marston said the stats in the latest FOI response provide a damning indictment of the effects that the introduction of Capture had. “Are we really expected to believe that, all of a sudden, honest and hard-working postmasters who have substantial amounts of money invested in their businesses have all gone rogue at the same time?

“Surely someone at the Post Office should have seen that the numbers [of investigations] literally exploded after the introduction of Capture, which we know to be unfit for purpose and, in my opinion, should never have been made public.”

Marston, who will meet the government next week to discuss the Capture controversy, said he hopes to get justice. The government is expected to publish the Kroll report on Capture soon.

In June, Computer Weekly revealed another similarity between Capture and Horizon in terms of inadequate training. Subpostmasters used pre-Horizon Capture software without any training from the Post Office, a failing that mirrors one of the causes of the Post Office Horizon scandal. Despite a Post Office document from 1995 outlining the training users received, former subpostmasters, who encountered serious problems with Capture, have come forward revealing they had no training. One of the major problems with the controversial Horizon system was the lack of adequate training on using the system.

Computer Weekly has contacted the Post Office for comment.

The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered due to Horizon accounting software, which led to the most widespread miscarriage of justice in British history.

 

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Report 2

The Post Office Horizon IT Inquiry resumed while we were away: I'm not going to have time to comment on what I haven't even started to watch/listen to, but this report from Mark Sweney of The Guardian shows that, whilst PO CEO Nick Read thinks he has changed the business structure, he really doesn't understand at all.

Post Office asked to use Horizon IT data to support criminal case this year, inquiry hears

The Post Office attempted to use Horizon IT data to support a criminal case against a post office owner earlier this year, despite hundreds of post office operators being wrongfully prosecuted for theft, fraud and false accounting because of bugs in the system.

A chain of email correspondence between the Post Office and the Horizon developer, Fujitsu, relating to a police investigation into a potential criminal case involving a “large sum of money” against a sub-post office operator was shown at the public inquiry into the scandal on Tuesday.

An email was sent by John Bartlett, the head of investigations at the Post Office, to Fujitsu describing the Post Office as the “potential victim” and asking for the software company to provide a witness statement to the police or the case would not be able to progress.

The issue was rapidly escalated to Paul Patterson, the chief executive of Fujitsu Europe, who wrote directly to the Post Office chief executive, Nick Read.

“I am writing to you directly in order to raise serious concerns that have come to my attention which indicate the Post Office continues to pursue enforcement against postmasters and expects Fujitsu to support such actions,” he said in an email in May.

“We are concerned by the behaviour of the Post Office investigation team on this matter. That team maintains the approach of the Post Office as a ‘victim’ and requires Fujitsu to provide a witness statement as to the reliability of Horizon data stating that without such statement the case will not progress. For the investigations team to act in this manner seems to disregard the serious criticism raised in multiple judicial findings and indeed exhibits a lack of respect to the ongoing inquiry.”

Read responded by saying that there had been a “fundamental misunderstanding” at Fujitsu about the “Post Office’s current day culture and activities”.

He said that the Post Office was not continuing its pursuit of post office operators in private prosecutions – “including providing supporting data from the Horizon system” for cases – and that it was to help a potential police investigation.

Patterson responded saying that he considered the request to be “entirely inappropriate”, adding that the Post Office is “well aware there have been and there continue to be bugs, errors and defects in the Horizon system”.

“It seems clear that the Post Office continues to have significant cultural issues,” he said. “[It] sees itself as a ‘victim’ with the enforcement and prosecution of postmasters considered as a business as usual activity. Fujitsu finds the language and the suggested behaviour unacceptable from Post Office investigators.”

Between 1999 and 2015, the Post Office relentlessly pursued and wrongfully prosecuted more than 700 operators using faulty Horizon IT data.

The email request to Fujitsu came after ITV aired Mr Bates vs the Post Office, which brought the plight of the post office operators and use of the flawed data in legal actions to national attention.

UPDATE 2 October - REPORT 3 

Post Office spending £80,000+ a week on engineers who can’t work, as IT project burns cash

In another Karl Flinders Computer Weekly report, it turns out that Horizon replacement NBIT isn't doing so well either.

The Post Office has been paying more than £80,000 per week for contracted IT engineers to sit idle due to major delays in rolling out hardware for its New Business IT (NBIT) project.

In yet another example of taxpayers’ money being wasted, as the Post Office tries to rid itself of the system at the centre of a scandal, Computer Weekly can reveal that £1.6m could be spent on IT staff who are unable to do work they were contracted to do. This is as a result of issues with power supply units that can’t be used in the project to replace the controversial Horizon system. The NBIT project has already gone from a costing of £180m to £1bn.*

The latest waste was revealed as the Post Office scandal public inquiry was told by two former Post Office executives – chairman Henry Staunton and chief financial officer (CFO) Alisdair Cameron – this week that the NBIT project lacks governance.

According to an internal Post Office NBIT progress update, under the heading “high level issues”, tech engineers from IT supplier DXC, who were contracted in mid-June, have no work to do due to the issues with power supply units. The engineers will have to wait 16 to 20 weeks before replacement units are available, allowing them to complete the work they were contracted to do.

(* My emphasis)

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Post Office Horizon IT Inquiry resumes - catch up on YouTube.

There was considerable media coverage yesterday about the Post Office Horizon IT Scandal in the week that the Public Inquiry resumes hearing evidence.

In case you missed the publicity, and hence missed seeing the whole of today's sessions with Alan Bates, you can catch up on the Inquiry's YouTube channel here.

You can watch each session live, but if you watch the following day in catch-up mode you can advance the speed of playback through the YouTube settings cog.

The list of witnesses - all of whom will have provided written statements answering questions put to them by the Inquiry's legal team is lengthy.

The timetable for Phase 5:

 

Day	Witness
Evidence Week 1
Tuesday 9 April	Alan Bates - former sub-postmaster and Founder of the Justice for Subpostmasters Alliance
Wednesday 10 April	The Rt. Hon. Lord Arbuthnot of Edrom - Member of the Horizon Compensation Advisory Board; and former MP for North East Hampshire The Rt. Hon. Sir Anthony Hooper - former Lord Justice of Appeal and former Chair of the Working Group for the Initial Complaint Review and Mediation Scheme
Thursday 11 April	David Smith - former Managing Director of Post Office Ltd Sir Michael Hodgkinson - former Chair of Post Office Ltd and former Senior Non-Executive Director of Royal Mail Holdings plc
Friday 12 April	Alan Cook - former Independent Non-Executive Director and Managing Director of Post Office Ltd Adam Crozier - former CEO of Royal Mail Group Ltd and former director of Royal Mail Holdings plc
Evidence Week 2
Tuesday 16 April	David Miller - former Managing Director of Post Office Network, former Chief Operating Officer of Post Office Ltd and temporary Managing Director of Post Office Ltd David Mills - former Chief Executive of Post Office Ltd
Wednesday 17 April	Jon Longman - former Post Office Investigator  Allan Leighton - former Chair of Royal Mail Holdings plc; former Chair and former Non Executive Director of Post Office Ltd; and former Non Executive Director of Royal Mail Group
Thursday 18 April	Rodric Williams - former Litigation Lawyer at Post Office Ltd and current Head of Legal (Dispute Resolution & Brand)
Friday 19 April	Rodric Williams - former Litigation Lawyer at Post Office Ltd and current Head of Legal (Dispute Resolution & Brand)
Evidence Week 3
Tuesday 23 April	Susan Crichton - former Company Secretary and General Counsel of Post Office Ltd
Wednesday 24 April	Chris Aujard - former General Counsel of Post Office Ltd
Thursday 25 April	Angela van den Bogerd - former People Services Director at Post Office Ltd and Programme Director for the Branch Support Programme
Friday 26 April	Angela van den Bogerd - former People Services Director at Post Office Ltd and Programme Director for the Branch Support Programme
Evidence Week 4
Tuesday 30 April	Hugh Flemington - former Head of Legal at Post Office Ltd Harry Bowyer - Barrister and former employee of Cartwright King Solicitors
Wednesday 1 May	Martin Smith - Solicitor and former employee of Cartwright King Solicitors
Thursday 2 May	Martin Smith - Solicitor and former employee of Cartwright King Solicitors Simon Clarke - Barrister and former Senior Counsel at Cartwright King Solicitors
Friday 3 May	Jarnail Singh - Solicitor and former lawyer at Royal Mail Group and Post Office Ltd
Evidence Week 5
Tuesday 7 May	Patrick Bourke - former Government Affairs and Policy Director at Post Office Ltd Belinda Cortes-Martin (Crowe) - former Programme Director for Project Sparrow at Post Office Ltd
Wednesday 8 May	Brian Altman KC - Barrister
Thursday 9 May	Andrew Parsons - Partner at Womble Bond Dickinson (UK) LLP
Friday 10 May	Andrew Parsons - Partner at Womble Bond Dickinson (UK) LLP  Rod Ismay - former Head of Product & Branch Accounting at Post Office Ltd
Evidence Week 6
Tuesday 14 May	Mark Davies - former Group Communications & Corporate Affairs Director at Post Office Ltd
Wednesday 15 May	Chris Day - former Chief Financial Officer of Post Office Ltd
Thursday 16 May	Lesley Sewell - former Chief Information Officer at Post Office Ltd Martin Edwards - former Chief of Staff to the Chief Executive and Group Strategy Director at Post Office Ltd
Friday 17 May	Alisdair Cameron - Chief Financial Officer and former Interim Chief Executive of Post Office Ltd
Evidence Week 7
Tuesday 21 May	Alwen Lyons - former Company Secretary of Post Office Ltd
Wednesday 22 May	Paula Vennells - former Group Chief Executive Officer of Post Office Ltd
Thursday 23 May	Paula Vennells - former Group Chief Executive Officer of Post Office Ltd
Friday 24 May	Paula Vennells - former Group Chief Executive Officer of Post Office Ltd

 

Half Term 25 May - 2 June

Registration for public gallery attendance for the following weeks will open in due course.

 

Day	Witness
Evidence Week 8
Monday 3 June	Ben Foat - Group General Counsel of Post Office Ltd Jane MacLeod - former General Counsel and Company Secretary of Post Office Ltd
Tuesday 4 June	Jane MacLeod - former General Counsel and Company Secretary of Post Office Ltd
Wednesday 5 June	Alice Perkins - former Chair of Post Office Ltd
Thursday 6 June	Alice Perkins - former Chair of Post Office Ltd
Friday 7 June	Not sitting
Evidence Week 9
Tuesday 11 June	Anthony de Garr Robinson KC - Barrister Lord Grabiner KC - Barrister
Wednesday 12  June	Tom Beezer - Partner at Womble Bond Dickinson (UK) LLP Ken McCall - former Senior Non-Executive Director of Post Office Ltd
Thursday 13 June	Andy Dunks - former IT Security Analyst at Fujitsu Services Ltd
Friday 14 June	Matthew Lenton - Document Manager, Post Office Account, at Fujitsu Services Ltd Dame Moya Greene - former CEO of Royal Mail Group
Evidence Week 10
Tuesday 18 June	Ron Warmington - Director of Second Sight Support Services Limited Ian Henderson - Director of Second Sight Support Services Limited
Wednesday 19 June	Richard Christou - former Chief Executive and Executive Chairman of Fujitsu Services Holdings plc  Duncan Tait - former Chief Executive of Fujitsu Services Ltd
Thursday 20 June	Tony Kearns - Senior Deputy General Secretary of the Communications Workers Union Kay Linnell - Forensic Accountant and Advisor to the Justice for Subpostmasters Alliance
Friday 21 June	George Thomson - former General Secretary of the National Federation of Subpostmasters
Evidence Week 11
Tuesday 25 June	Gareth Jenkins - former Distinguished Engineer at Fujitsu Services Ltd
Wednesday 26 June	Gareth Jenkins - former Distinguished Engineer at Fujitsu Services Ltd
Thursday 27 June	Gareth Jenkins - former Distinguished Engineer at Fujitsu Services Ltd
Friday 28 June	Gareth Jenkins - former Distinguished Engineer at Fujitsu Services Ltd
Evidence Week 12
Tuesday 2 July	Tim Parker - former Chair of Post Office Ltd
Wednesday 3 July	Tim Parker - former Chair of Post Office Ltd
Thursday 4 July	Sir Stephen Lovegrove - former Shareholder Executive Official  Patrick O’Sullivan - former Shareholder Executive Official
Friday 5 July	Susannah Storey - former Shareholder Executive / UK Government Investments Official Mark Russell - Shareholder Executive / UK Government Investments Official
Evidence Week 13
Monday 8 July	Neil McCausland - former Senior Non-Executive Director and Interim Chair of Post Office Ltd
Tuesday 9 July	Robert Swannell - former Shareholder Executive / UK Government Investments Official
Wednesday 10 July	Tom Cooper - UK Government Investments Official
Thursday 11 July	Richard Callard - Shareholder Executive / UK Government Investments Official
Friday 12 July	Not sitting
Evidence Week 14
Tuesday 16 July	TBC
Wednesday 17 July	TBC  The Rt. Hon. Kelly Tolhurst MP - former Parliamentary Under-Secretary for the Department for Business, Energy and Industrial Strategy
Thursday 18 July	The Rt. Hon. Pat McFadden MP - former Minister of State for the Department for Business, Enterprise and Regulatory Reform (Employment Relations and Postal Affairs); Former Minister of State for the Department for Business, Innovation and Skills The Rt. Hon. Sir Edward Davey MP - former Parliamentary Under-Secretary for the Department for Business, Innovation and Skills (Employment Relations, Consumer and Postal Affairs)
Friday 19 July	Jo Swinson - former Parliamentary Under-Secretary for the Department for Business, Innovation and Skills (Employment Relations, Consumer and Postal Affairs)
Evidence Week 15
Tuesday 23 July	Baroness Neville-Rolfe - former Parliamentary Under-Secretary of State for Business, Innovation and Skills; Minister of State at the Cabinet Office
Wednesday 24 July	Margot James - former Parliamentary Under-Secretary for the Department for Business, Energy and Industrial Strategy
Thursday 25 July	The Rt. Hon. Sir Vince Cable - former Secretary of State for Business, Innovation and Skills  The Rt. Hon. Greg Clark MP - former Secretary of State for Business, Energy and Industrial Strategy
Friday 26 July	Closing statements

 

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