Fraud and the Post Office Horizon Computer

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I was searching the Internet last night to see if my Fraud Resource web site had moved up Google’s ranking at all and came across a link to my name concerning a job I did around 4 years ago.  It is interesting to see the contents of a forensic accounting report being quoted in the press as usually the forensic accountant remains in the background in criminal prosecutions even when his or her work is critical to the proper outcome of the matter.

The article was by and highlighted the plight of a number of postmasters who ran 7 of the Post Office’s 14,000 or so branches throughout the UK.  All of them had been convicted or accused of stealing typically £40,000 from their branch.  One of the cases was mine.  I am quoted as saying that the Post Office system was unlikely to be flawed otherwise you would see systematic problems through many of the 14,000 branches [inferring not just those run by postmasters who just happened to also have financial difficulties?].  I have to say that the contents of my report should not have been disclosed but hopefully no harm has been done in this case.

What the article did not say was that I had a couple of similar cases a year or two previously where I did examine the Post Office Horizon computer system in more detail.  I concluded then that the system was essentially straight forward and could be considered to be an “Excel spreadsheet” with a fancy front end.  There were unlikely to be such substantial and regular errors on the Post Offices part limited to only a few individual cases – however the apparently disadvantaged postmasters failed to consider the most obvious facts:

1. The deficit typically grew by a few £1000 per week over a few months.

2. The deficit was discovered by a Post Office audit that would probably be triggered by the increasing funds drawdown compared to usual.

3. The postmaster was responsible for reconciling his accounting system with the Post Office daily and weekly.  Any deficiencies should be reported immediately so that they could be sorted (the Post Office would often bear a loss in this way).

4. The postmasters knowingly carried forward an increasing error by falsifying returns – failing to report the differences.

5. Whether or not the postmaster stole the money, a member of staff stole it or it was negligently overpaid regularly to customers of the branch in error – the fact remains that the postmasters were responsible for reporting problems to the Post Office and because they allowed the error/loss to mount up – they were responsible for it – either as criminals or incompetents.

In the most recent case that was being reported I had been asked by the barrister to advise the defendant in conference of my findings and as a result he pleaded guilty to false accounting – in return the prosecution dropped the theft charges for which he would I am sure have been convicted.  His sentence was accordingly much lighter.  12 weeks in prison against probably a couple of years at least.

Hopefully this was a just outcome.  If he had been convicted of theft he would have face confiscation proceedings for the £40,000 and given the nature of the alleged offences may even have endured the lifestyle assumptions.  Clearly the postmaster had little in the way of assets and if he had defaulted on the confiscation his whole term in prison could easily have reached five or even more years!

About Mark Jenner

Mark Jenner is an experienced forensic accountant specialising in fraud and white collar criminal matters. He provides independent financial investigation and expert accounting witness services to police forces, fraud regulators and criminal defence lawyers, also providing assistance and solutions to organisations embroiled in financial disputes.

11 Responses to Fraud and the Post Office Horizon Computer

  1.'scott says:

    I am a subpostmaster and currently in the same position as the ‘criminals’ you mention in your article. You are incorrect in your assumption that the post office often bear losses. I reported to them a strange occurrence with the system at my branch showing £1700 worth of stamps in my system which i had not got in the branch. They immediately took that amount out of my remuneration without any checks of how Horizon could have shown this inflated amount. You seem to think that these people should be sent to prison. The class action now being brought by Shoosmiths will show that the system is flawed. You clearly have absolutely no idea that subpostmasters are backed into a corner and are expected to pay discrepancies immediately when the postoffice system can take up to 6 months to correct errors that are in the postmasters favour. Obviously you think these criminals are a danger to society which is why you think it was a just outcome

  2. admin says:

    Thanks for your reply – I think the cases that I have encountered may differ from the ones you mention. These were criminals who blamed the Horizon system for their greed. If you have a loss of £2000 every week what do you do – report it to the Post Office. If it happens the next week you do the same – something is wrong and needs investigating even if you have to do it yourself. You do not leave it for six months until you are audited and found out. No excuse for being a criminal I am afraid – but I expect there are cases where the PO is ignorant and does not deal with problems properly – these are not the cases I dealt with. Many thanks for the comment please send me evidence of systematic failure in Horizon and I would be happy to help. Both my cases were guilty and they pleaded as such.

  3.'scott says:

    Thankyou for your reply
    It is very difficult to investigate the system now that a lot of payments and deposits are automated.. genuine errors cannot be corrected like they use to be able to be. Giro deposit slips are now automated.. so if a customer pays in £1000 and staff accidentally keys in £10000, if its not spotted immediately then the subpostmaster is liable for 9000. There is no paperwork to check the deposits on the system with what was actually deposited. Previously a printout of the deposits were checked with the paperwork to support them on a daily basis and this paperwork was despatched to Alliance and Leicester. Mistakes were picked up by them and a correction flagged to your system. Now, there is no paperwork.. the customers deposit books are simply scanned and returned to the customer. My branch regularly had 3 staff working flat out with this type of deposit and all the other automated deposits such as savings accounts. At the end of the day there is only a list of transactions but nothing to support them. In other words the audit trail is flawed. It puts everyone at 100% accuracy otherwise you become liable. When i telephoned the internal helpline and asked how transaction corrections would be generated by the automated system, the response was ” I dont know “. I had a discrepency of £9000 which could not be found amongst 100’s of automated transactions. I decided not to report it immediately as i had learned by experience that the postoffice would take it from my remuneration without question. I was praying for a transaction correction to arrive. This would have happened under the previous system. However i was audited and am now being prosecuted. I am not sure what else i could have done at the time apart from going bust!! I am aware of this being a criminal offence in law but i believe that my contract has been compromised with the new system. My system was definitely glitchy at times, some times 2 printouts of the same section on horizon would show differing amounts depending on which computer was used. During an office balance, the stamps on hand were more than the previous weeks totals which had tallied closely with the system that week even though i had not received any stock.. this was the £1700 i have mentioned… i paid it but i never got to the bottom of that one.. really was a mystery. Other things occurred now and again. I am not lying about this.. when you work 6 days a week with it you see very occasional oddities that usually iron themselves out.. but not this time for me. Wish me luck if i go to prison

  4.'steve says:

    Obviously if people are engaged in criminal behaviour they deserve the full weight of the law to be applied to them.

    However, the fact is that, as the postmasters are contractually obliged to immediately make good any shortfalls or discrepancies in the reconciliations, the post office rarely, if ever, makes any attempt to assist the postmaster when reconciliation differences are flagged up thet the postmaster is unable to resolve. They simply recover the monies directly from the postmaster’s income.

    There are also some other facts about the Horizon system which undermine the absolute belief placed in the numbers and reports it produces by the post office. There are several transaction streams with NO AUDIT TRAILS whatsoever making it literally impossible for a postmaster to correct errors after they have happened because it is impossible to prove what the correct entries should have been!!!

    There are also other hardware and software issues impacting on the system’s integrity which I will not go into here as these are matters which are sub-judice. I have seen the evidence myself and have also heard from ex post office trainers (people who trained subpostmasters on the Horizon system) who are scathing about its merits as a ‘system’

    In theory any errors will be automatically picked up and corrected when the supporting documentation is sent to the post office’s own transactions processing centre. However it is literally IMPOSSIBLE for that to happen for transactions streams where there is no audit trail. If such a situation were allowed to arise in a private company the auditors would quite rightly give the firm an absolute rollocking

    It is very easy to see why some postmasters are tempted to sign off reconciliations where they have not been able to identify reasons for a shortfall in the hope and belief that somehow the error will be identifed by the post office and automatically corrected. They do not believe they will receive any help from the post office and they will get an immediate reduction in their income and, if the ‘system’ is working error corrections will automatically regularise the numbers in the near future.

    Obviously they should resist that temptation because it makes them guily of false accounting even if they have had no benefit whatsoever.

    If the Horizon system really is Excel with a sophisticated front end that would worry me even further !!! Excel is a fantastic programme. However, it is very easy to misjudge formulas or enter macros which have flaws or which fall over if processing volumes exceed the capacity of the formulas and spreadsheets to process them. Prima facie I would not have thought that Excel should form the basis of the accounts processing of a business processing such massive volumes of work as the post office.

    You make the point that if there was a systems flaw one would expect to see similar problems arising everywhere and not just in a small number of cases. This sounds perfectly reasonable. However, the transaction streams of different post offices can vary massively. Some transaction streams in some post offices may put massive stress on the system’s ability to process them but these streams may be absent in other post offices. One has to look at the specifics of each case.

    Also, there may only be tiny flaws in the system which only arise in exceptional circumstances. However, these may well be enough to create discrepancies of a few tens of thousands of pounds in a small number of offices given that the post office as a whole is dealing with transaction streams measured in hundreds of milions, if not billions, of pounds. These flaws are immaterial to the post office as a whole but may be highly material in terms of individual post offices. Many subpostmasters careers and reputations have been ruined by the automatic assumption that they have somehow sprited monies away because there is an absolute belief in the integrity of the numbers produced by Horizon which is, in fact, missplaced.

    If there is an audit trail then it should be possible to PROVE whether or not the entries being reported by the system are correct or not. The fact is that the post office is not interested in doing that analysis when unexplained differences occur because it can recover any discrepancies from the postmaster. It is also not interested in auditing the system as a system because it would be a PR disaster if flaws were found.

    I understand that your forensic accounting report was from several years ago. Since then there have been unilaterally-imposed changes to the system and several transaction streams have no audit trail. I also understand that your comments only relate to the specific cases you were asked to investigate.

    However, the correct way forward would be for the post office to commission an independent report into the integrity of its systems and to actually help sub postmasters with reconciliation problems rather than immediately deducting from there income often followed by criminal proceedings, ruined businesses and reputations and jail terms.

    I am not condoning criminal behaviour by subpostmasters. I am saying that many have had deductions to their income, been bankrupted and even served prison sentences when in fact they have not had a penny but were simply unable to reconcile differences reported by Horizon.

    A major law firm are shortly to bring a class action and I sincerely hope that the scandal of the way the post office rides roughshod over it subpostmasters is brought into the full glare of publicity.

  5. admin says:

    Thanks for your detailed comment – I have tried to think how I can help. I recall when doing my first case I spent a long time ’round the back’ walking through the Horizon system at Leeds central post office (now turned into restaurants). I also obtained a lot of downloads from the po’s archives to examine in detail. Remember I was working on behalf of the defendant here and looking for mitigation. I do remember that the problem of sorting out an entry error was investigated. My wife also works in a different bank and tells me the same story. You cash up at the end of the day and any discrepancies have to be sorted then. The number of times she has been late because one of the cashiers has found a difference. In the few cases where the error could not be identified – there was hell to pay! This was the same for you – where you had to be responsible for your errors. In my cases the ‘errors’ were all round sums of similar amounts, occurred regularly and for many months. In both cases when faced with evidence such as gambling debts etc the defendant came clean.

    Playing devils advocate I suspect that the po takes the hard line to make sure that postmasters are diligent in their work and are unable to pass off errors as being shoddy work by the staff etc.

    I do not know all the circumstances but in my most recent case the postmaster pleaded to false accounting and was able to escape prison for theft owing to our work for the defence team. I do not think I can recall the outcome of the first case which was some time ago (I may not have been told).

    Good luck

  6.'Robert Pyke says:

    Our local postmistress has had her contract revoked. At close of the old computer system she was 35p in credit. As soon as the new system was applied to her account it showed she was in debt to £2000. Shortly, this debt was shown as £4000. She has been subjected to a five hour PO Fraud squad interview, has had her house searched from top to bottom and has had her livelihood taken away from her. As yet no charges have been brought against her and we have lost our post office. Is this a Stalinist or what?

  7.'Basil Bimson says:

    I along with my wife had a sub post office from 2000 to 2005 when P O Ltd closed us under network reinvention. After horizon was installed there were a number of glitches on one accasion we lost £1000 on the day we accepted our rems delivery, and could find no other reason other than a fault on horizon Which P O said there was no possibility of and I had to put the money in out of my own pocket!

  8.'scott says:

    I presume you have read the report by 2nd sight
    the final report will be totally scathing and will ensure previous convictions are unsafe.
    Thank the Lord for the tenacity of the postmasters

    fighting against opinions such as yours has been a long long struggle

  9. The trouble is that although there may well be problems with the Horizon system, for the most part it works as it should. However, when a substantial deficit is revealed for the first time at a Post Office audit, some Postmasters may find it easier to blame the system than admit theft.

    As a matter of interest, in the most recent case I was involved with (2013) I was able to support the Postmaster’s claims and show that a large deficit was unlikely to be down to him – he was acquitted. My opinions are always unbiased and based on the logic and circumstances of a particular case.

  10.'Nic says:

    I run a post office and have just been suspended due to shortages which were quite apparent and I never hid. Also some buttons had been pressed on the system apparently which resulted in £4000 odd sitting in suspense. Previous audit said we owed £17000 and the auditors didn’t even count the stamps right, £249 out. We have been paying through our remuneration. We argued it, asked for a breakdown etc and got nothing. I watched the auditors at work and anything they couldn’t figure out they bumped it in our loss. It was ridiculous. We have only been open 14 months, money was showing short in balance even whilst the trainer was on site, for gods sake! Trainer couldn’t answer my questions, Andy carpenter couldn’t answer my questions, what’s dummy ps? We had loads of those for monetary amounts. We know it relates to pay station but it doesn’t add up. I still have not had a reply for that. There are hundreds maybe thousands of transactions relating to dummy ps! In the 14 months of running it my cash decs have never balance, I have spent more time in front of horizon looking for money than I even want to think about. I have suffered anxiety, stress and dreaded doing cash decs. Initially we pooled thousands in to correct shortages but after some time we started realising we had no money as we were putting it all in the post office. Pay station errors, scratch card errors, training is pathetic and done by people who don’t have a clue about anything. We have joined the class action law suit by freeths, apparently they now have 600 postmasters on the class action. You tell me that’s not significant? I have first hand knowledge of the horizon system now and it’s a fucked up piece of convoluted crap that couldn’t lie straight in bed its that bent. It can never remain balanced under a post masters steam due to outside interference, transactions corrections you can’t refuse and never in your favour. Pay station figures going through that don’t add up. Stock auditors neve included so when I declared it or didn’t I always ended up paying for it during trading period. I must have paid for the same stamps 5 times, £249 .
    The worst part of it all is the kafkaesque approach taken by the post office, hardcore, guilt proven, shoot from the hip, ask questions later. I have left a massive trail of the amount of times I have contacted them requesting audits, they never come when you want but turn up when you least expect and then come out with some ridiculous figure that you owe them. Problems from day one, worse thing we ever did getting a post office. Now the post office say they are sending someone in to run it and I am jumping for joy. Let’s see him/ her balance the till and my life just got infinitely easier. Post office have ruined countless lives over money, human cost means nothing to them. I find them deplorable and without morals. Bad thing for them is they have now come across me, if they decide to pursue criminal action, I will fight all the way. Quite frankly prison would be a holiday from this crap. But I will get justice and show them up for what they are, greedy, deplorable, immoral pigs paying lip service and defending their precious organisation like butter wouldn’t melt.

  11. There is clearly a problem with the Horizon system. It doesn’t help when a handful of Postmasters use it to explain money they have stolen, as this weakens the class action case. Although I have dealt with a few cases involving alleged Postmaster theft, each of these cases has been theft and not the Horizon fault. In one exception, there was so much discrepancy with Horizon, that the court likely let a guilty postmaster walk. However, at the end of the day, I can only deal with facts and unfortunately am not paid to “audit” the Horizon system – such a review would cost many £100,000s to do properly – if it ever could be done!

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