The end of the Alan Bates & Ors v Post Office Ltd litigation leaves many stones unturned. What lies beneath them, how can they be investigated and what likely effect could they possibly have?
The two trials explored only two facets of Post Office internal mechanisms, the contract between the subpostmasters and the Horizon Computer system. It has been a source of frustration since the days of the Second Sight investigation that Post Office have sought to limit investigations to the actual working of the computer system and not the processes, procedures and effects that surround that system.
We have now had confirmed that the Horizon computer system is suspect and that errors in that system have a material effect on the accounts of subpostmasters but the Horizon system is only part of the story and some of the effects of these errors have wider implications.
There are clearly a massive amount of unreconciled transactions floating around, the value of which are assigned to suspense accounts until such time as one of two things happen: a) The value is either allocated to the correct account or, b) as Second Sight discovered, ultimately transferred to the Profit and Loss account because the correct account could not be found. Reconciling rogue transaction values would primarily be a manual process and a slip of the finger, accidentally or deliberately, could lead the value to be assigned incorrectly. I use the word ‘deliberately’ because it seems to me to be totally statistically unlikely that the only fraudsters POL have employed over the years have been subpostmasters.
Which side of the accounts these rogue transactions lie is of interest as well. One would have thought that statistically they are just as likely to be a debit or a credit. Those that debit a POL account would surely attract more attention to be resolved than those that result in a credit to them.
Then there are the parties involved. Post Office Ltd are one, the subpostmasters are another and then there are the third parties who are either customers or providers such as banks. Post Office Ltd have shown scant concern in the past where a dispute arises between subpostmasters and the third parties. For instance if a subpostmaster accidentally credits £1,000 to a customer who has deposited £100 then that creates a debt to Post Office Ltd for the subpostmaster of £900 while the customer is sitting pretty with an extra £900 in his account. Post Office Ltd is not at all interested in your mistake. History shows us that failure by the subpostmaster to top up the Post Office Balance by the missing £900 will be treated as theft.
The value of individual transactions is of course the greatest concern. In the example above, and for the sake of simplicity (because I don’t know the current commission rate) let’s say the subpostmaster receives £3 for every £1000 he takes as a banking deposit, POL take £2 and the customer pays his bank £7.
Let’s have a look at the flow of money from £1000
Customer receives Nett from Bank £993 Profit £893.70(£993 – £99.30)
Bank Receives Nett from POL £995 Profit £1.80
POL Receive Nett from SPMR £998 Profit £2.70
SPMR Receives Nett from Customer and POL £102 Loss £897.80
So in this example as a result of the SPMR mistake if it is not discovered you can see that the Customer, the Bank and POL ALL make an additional profit paid for by the unfortunate subpostmaster.
The trial judge has found it to be more than likely that Horizon errors were to blame for the losses attributed to the claimants but we will never know the effect of these errors and whether or not they were compounded by additional profit via commission received by POL from their clients or customers. The judge also confirmed that the keyboard layout and issues with the touch sensitive screen led to errors being generated by the user (and/or the hardware itself). These errors would in most cases create either phantom transactions or transactions with incorrect amounts all of which would generate additional profit to third parties and losses to the SPMR.
It is worth pointing out perhaps that there seems to be a very distinctive difference between the number of transactions processing in error that resulted in a loss to the SPMR and those that resulted in a credit. There could be two possible logical reasons for this: a) Customers failing to report the additional credit they received whether deliberately or not and SPMRs taking advantage of a method available to them to recover previous losses and b) SPMRs not noticing these spurious credit transactions.
However none of these would necessarily end up in a suspense account.
The more likely transactions to end up in a suspense account are those that involve a payment and receipt mismatch and there are plenty of examples of those revealed in the trial. Of the greatest concern are those transactions involving totally different computer systems such as between the Cash Centre computer system and Horizon. This year (after the Horizon trial was closed to new evidence) there have been numerous errors spotted where the value amount received by a branch is different from what was printed on the dispatch note. It was very clear, to me at least, that there was a major problem in the cash centre and the end of day reconciliation process (if there was one) was not working as it should. The difference in the amounts dispatched would have had to end up in a suspense account somewhere for investigation and subsequent allocation.
As the trial was limited to the operation of the Horizon computer system there were some additional known errors that were not investigated. One of these is of particular interest, perhaps even to the police at some stage. Since 2011, Network Transformation has meant the relocation of thousands of post offices over and above the usual churn in ownership. It is known that some transaction corrections (error notices from POL to the SPMR) whether credit or debit can take up to a year and sometimes even longer to process internally by POL The amount of these credits to SPMRs must be held in a suspense account somewhere and will be payable to the SPMRs once the investigation is complete. In a Freedom of Information request it was discovered the POL make no attempt to maintain contact details for SPMRs once they leave the network so how they pay back this money from the suspense account to the rightful owner is questionable. One example I have of what has happened in the past is that a new SPMR received a credit transaction correction only a few weeks into opening his office and queried it with the Help Desk as he knew it could not be for him. The Help Desk told him it was for the previous SPMR and just to keep it.
The job of Second Sight was to investigate these matters. When it came to looking at the suspense accounts they were told that it was out of scope of their investigation and they were quickly stood down. It is a matter of fact that their job is incomplete and POL will always remain under suspicion and the brand untrustworthy until such time as they are allowed to complete their task or the police decide to get involved.
It is also a matter of fact that the new CEO of POL, while seemingly willing to change the company for the better, has yet to make any significant changes as a result of the judge’s decisions. He is still relying on the same people who couldn’t supply his predecessor with the truth to tell him what he needs to know. It is only a matter of time, without positive action on his part, until he becomes embroiled in the past and what looks like current indiscretions of some of his employees.
He needs to get rid of them now.