Paula Vennells blamed problems with Horizon on ‘temptation’ of postmasters to take money from tills

Paula Vennells blamed Post Office shortfalls on the “temptation” of sub-postmasters and not the Horizon software, the inquiry heard from witnesses.

In a damning day of evidence, the former Post Office chief executive was also accused of failing to disclose at least 16 cases that appeared to undermine the reliability of Horizon software at least two years before the company stopped prosecuting sub-postmasters in 2015.

Lord Arbuthnot, the Tory peer, and Sir Anthony Hooper, the retired High Court judge, were the latest witnesses to address the public inquiry into the scandal of more than 900 sub-postmasters being wrongfully prosecuted for shortfalls that did not exist.

Lord Arbuthnot, who began campaigning for Horizon victims in 2009, on Wednesday told the hearing he attended a meeting with Post Office executives and several other MPs to discuss concerns about the Fujitsu software.

Notes on the 2012 June meeting, drafted by Janet Walker, his then chief of staff, described how Alice Perkins, the Post Office chair had said the organisation and its staff were stewards of “large quantities of cash”.

The notes on her input added: “There is the issue of trying not to put temptation in people’s way, but in any retail business this is not possible.”

The document then went on to state that Ms Vennells “said that temptation is an issue, but that trust in the Post Office as a brand is absolutely paramount”.

The minutes of the meeting showed Ms Vennells claimed some sub-postmasters had been “borrowing” money from the tills.

They read: “It appears that some sub-postmasters have been borrowing money from the Post Office account/till in the same way they might do in a retail business, but this is not how the Post Office works.

“Post Office cash is public money and the Post Office must recover it if any goes missing.”

Lots and lots of cash

Speaking from the witness stand at the inquiry, Lord Arbuthnot said: “At the meeting of May 17 with Oliver Letwin and me, Alice Perkins and Paula Vennells both raised the problem of there being lots and lots of cash lying around in unexpected places.

“Whether this meant that they thought that that led sub-postmasters into temptation and being inherently dishonest wasn’t entirely clear, but that was the issue they were raising I think.

“We never got to the bottom of that, but that’s what she was talking about.”

Jason Beer KC, lead counsel to the inquiry, then asked: “Did you or would you take from what is recorded as being said there that the issue, according to Ms Vennells, was with postmasters putting their hands in the till, rather than with Horizon?”

The former Tory MP replied: “Well it’s clearly possible that that might have happened in some cases, but if you don’t have a robust, to use the word, Horizon accounting system, you can’t be sure whether it has happened.

“So, I thought it might have happened in some cases, but to say that it happened in a lot of cases struck me as needing to be examined and tested.”

Mr Beer continued: “Would you agree overall that this is a fair summary: the problem is that a small number of postmasters borrow money from the till, the problem is not Horizon, every prosecution involving Horizon has found in favour of the Post Office, and not a single case existed whereon investigation the Horizon system was found to be at fault?”

Lord Arbuthnot replied: “Yes.”

‘Very secure’

In the same June 12 meeting, the Ms Vennells also reportedly described Horizon as “very secure” and that “every case taken to prosecution that involves the Horizon system” had been found in favour of the Post Office.

Later, Mr Beer listed 16 examples of cases that undermined this argument, including identified bugs and sub-postmasters who had been acquitted by juries, and asked Lord Arbuthnot about each example.

He responded to each cited case with variations of “No, they didn’t [mention it]”.

Separately, Sir Anthony, who in 2013 was appointed chairman of a Post Office group that reviewed cases of sub-postmasters who believed they had been wrongfully convicted, told the inquiry that he had told Ms Vennells “again and again” that the Post Office’s case “didn’t make sense”.

The 16 cases Paula Vennells failed to disclose

Jason Beer KC, lead counsel to the inquiry, listed 16 examples of cases that undermined Paula Vennells’ argument, including identified bugs and sub-postmasters who had been acquitted by juries, and asked Lord Arbuthnot about each example

1. Julie Wolstenholme

“Firstly, anything about the Julie Wolstenholme case in which expert evidence had been served by a man named Jason Coyne concerning bugs in the Horizon system and which case was subsequently settled by the Post Office?”

Julie Wolstenholme ran a post office in Cleveleys, Lancs, until she was dismissed in 2001 after an £11,000 discrepancy was discovered in her accounts.

IT expert Jason Coyne was instructed to assess whether the subpostmistress was responsible for the losses at her branch, and found that the Horizon system was “clearly defective”.

The Post Office rejected his report as “far from impartial” and Dave Smith, its IT director, described Mr Coyne as “a sham”.

2. Lee Castleton

“They didn’t mention the case of Lee Castleton and the obtaining of the report from BDO Stoy Hayward which had found errors in the operation of the Horizon system?”

Lee Castleton was prosecuted after his branch in Bridlington, East Yorks, was found to have a £25,000 shortfall.

The resultant two-year legal battle bankrupted Mr Castleton and forced him to sell his house after he was ordered to repay the sum and £321,000 in legal fees.

That was despite a 2006 report by accountants BDO Stoy Hayward finding errors in the Horizon software.

3. Maureen McKelvey

“They didn’t mention the acquittal of Maureen McKelvey by a jury in 2004, Mrs McKelvey having blamed Horizon for the causing of losses of money, which she was accused of stealing?”

Maureen McKelvey was found not guilty by a jury in 2006 after the Post Office prosecuted her for theft over a £30,000 discrepancy she had reported herself at her branch in Clanabogan, Omagh.

She had maintained throughout her trial that the Horizon IT shortfall had made the errors.

4. Suzanne Palmer

“They did not mention the speedy acquittal of Suzanne Palmer by a jury in 2007, Mrs Palmer also having blamed Horizon at trial for the losses attributable or said to be attributable to her? A jury question directed at the Post Office to the effect of what is Mrs Palmer supposed to do if she didn’t agree with the figures that Horizon had produced, which the Post Office had been unable or unwilling to answer, and an order that the Post Office pay £78,000 in costs?”

Suzanne Palmer went bankrupt and was cut off from two of her grandchildren after she was wrongly prosecuted by the Post Office for stealing money from her branch in Rayleigh, Essex.

A jury acquitted the mother-of-two of false accounting in January 2007 and the Post Office paid £78,000 in costs – but still sacked her.

5. Callendar Square bug

“They didn’t mention any of the following bugs, all of which have been discovered and notified to the Post Office by this time: The Callendar Square bug, sometimes known as the Falkirk bug. Operative by the Post Office’s admission between 2000 and 2006, and of the findings later by Mr Justice Fraser until 2010?”

The Callendar Square bug, otherwise known as the Falkirk bug, has been acknowledged by the Post Office to have been operative between 2000 and 2006.

It could cause errors in accounts by appearing to prevent cashiers entering a transaction. The transactions did go through – meaning if the cashier made a second attempt, the transaction would be duplicated.

6. Receipts and payments mismatch bug

“They didn’t receive the payments and receipts mismatch bug of 2010?”

This bug, active in 2010, made it appear to the post office branch manager that the incomings and outgoings on their Horizon accounts were balanced, according to a submission to the inquiry by Lee Castleton and three other wrongly-prosecuted sub-postmasters.

But on the main Horizon servers, the accounts would not be balanced – meaning managers would see the branch as having a shortfall.

7. Suspense account bug

“The suspense account bug that was operative between 2010 and 2013?”

The suspense account bug was active between 2010 and 2013 and erroneously counted previous years’ financial records in later years, which caused shortfalls and discrepancies.

Suspense account is an accountancy term which refers to a place where data is temporarily inputted before being confirmed as correct.

8. Dalmellington bug

“They didn’t mention the Dalmellington bug operative from 2010 and the fact it was still operative at the time of this meeting?”

The Dalmellington bug, active between 2010 and 2015, was named after the Scottish village where a sub-postmaster first fell victim to it.

When the cashier would attempt to confirm a receipt of cash, the screen would freeze and everytime the user pressed “enter” on the frozen screen, the record would be updated without the cashier knowing – thus allowing discrepancies to rack up.

9. Remming in bug

“They didn’t mention the remming in bug in 2010?”

The remming in bug was present between March and August 2010, and takes it name from the term for dealing with a large delivery of cash – a “remittance”.

The bug doubled the amount of cash inputted as being delivered, which led to shortfalls, according to Justice Fraser’s judgement in the 2019 Alan Bates vs the Post Office case.

10. Remming out bug

“Or the remming out bugs operative in 2005, and again in 2007?”

Identified in 2005 and 2007, the remming out bug refers to an issue in accounts caused when large amounts of cash left a branch, or were “remmed out”.

11. Local suspense account bug 2010

“They didn’t mention the local expense account bug operative in 2010?”

Reported in 2010 and fixed that year, the local suspense account bug caused issues in a branch’s local suspense account, which is a short-term holding bay for transactions.

12. Reversals bug

“The reversals bug operative in 2003?”

This bug, active in 2003, failed to change accounts when a cashier “reversed out” a data entry. On some occasions it caused the amount to double, the inquiry was told in January.

13. Girobank discrepancy bug

“The Girobank discrepancy bugs operative in 2000, 2001 and 2002?”

The Girobank discrepancy of 2000, 2001 and 2002 referred to payments made via Girobank, a then Post Office-owned financial services provider. The 2019 High Court Horizon trial heard that the bug’s effect was to create discrepancies between the payments made and the payments recorded, thereby producing a shortfall in the accounts.

14. December 2005 - independent review considered

“They didn’t mention that consideration had been given to the commissioning of an independent expert review and report on Horizon in December 2005?”

In December 2005, the Post Office considered commissioning an independent review and report on the Horizon IT software. The draft note of the meeting, according to a submission to the inquiry by Lee Castleton and three other wrongly-prosecuted sub-postmasters, recommended discussing the need for an external review of Horizon with Fujitsu, but it was never acted upon.

15. March 2010 - independent review considered

“And again in March 2010, but that on each occasion the Post Office had decided against it? On the latter occasion, seemingly on the grounds that it might be disclosable in criminal proceedings?”

Another review was considered in March 2010, but again the Post Office decided against it. The same inquiry submission says that Rob Wilson, the Post Office’s former head of criminal prosecutions, discouraged the review.

16. Audit record queries data

“They didn’t mention problems with the so called ARQ data and whether those issues should be revealed to criminal courts who are hearing criminal charges against sub-postmasters based on ARQ data, and of which the Post Office had been notified?”

ARQs, or audit record queries, are records of keystrokes and transactions made on Horizon terminals, letting engineers trace what sub-postmasters did on computers at their branch offices. Bugs in Horizon, however, meant these ARQs sometimes contained duplicated data, making it harder to trace exactly what went wrong in a particular case. Sub-postmasters at branch offices could not raise ARQs themselves. Only Post Office managers had permission to do so.