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UKGI's written submission to the PO Inquiry admit, whilst downplaying, serious corporate governance failings whilst pointing the finger at PO executives and their GCs
This post has bene updated to include an important point about the Detica report being missing from UKGI’s analysis (see the end of the post). It is a slightly neatened up version of a twitter thread I posted over the weekend. I hope readers will forgive the somewhat stream of consciousness approach here. I have added one or two more thoughts and a short conclusion at the end. I have written on mutually assured irresponsibility here.
UKGIs opening written submissions to the PO Inquiry indicate, from where they are sitting, the main failings of the Scandal were largely the fault of PO execs, with interim GC Aujard, CEO Vennells and, uh, PowerPoint presentations featuring heavily. The submission has a strong ‘let the finger pointing’ begin vibe. The criminal silks at the Inquiry must be rubbing their hands.
Their claim essentially is that the Board was kept in the dark. This meant the Government as shareholder, represented through the shareholder non-executive director on the Board, was also kept in the dark about the true extent of Horizon woes. The truth of that claim will be tested, I am sure, by the Inquiry. Readers should bear in mind this UKGI have an interest in displacing blame. Also, this is my very quick, initial review of the document. I encourage interested readers to look at the original.
It is also something of an admission that the non-execs and UKGI (or its predecessor ShEx) did not do their job until 2018 at any rate. The mea culpa is limited and while they do appear to have learned several lessons, I predict they’ll learn more.
What do we learn? We begin with the work done by Cartwright King and Brian Altman KC.
Key point one is they claim there is no evidence the Board were ever shown the Clarke Advices. Instead the Board were focused on how Second Sight’s investigations might open them up to attack disgruntled former SPMs.
"Instead, what was communicated to the POL Board at its meeting on 25 September 2013, was that Brian Altman QC had been instructed to oversee the process by which Cartwright King were reviewing POL's historical criminal cases to advise on POL's continued disclosure obligations; and to recommend whether POL should continue to bring private prosecutions, and if so, to assist with re-drafting POL's prosecutions policy…. From ShEx's perspective, the instruction of a highly regarded senior criminal QC (and former First Senior Treasury Counsel) to carry out these tasks appeared to be a reasonable response to the concerns that had been raised following receipt of Second Sight's interim report.”
In October 2013, CEO Vennells reports to Board reassuringly. Telling them 10 out of the 301 reviewed cases warranted disclosure of Second Sight’s report. Brian Altman QC's review of the overall process concluded the process was “fundamentally sound". And no appeal has been made to the Court of Appeal following the 10 disclosures.
Various discussions about the mediation scheme and prosecution policy ensue. ‘On 9 September 2014, Cartwright King completed Phase Two of its review’. In a report on this for the Board meeting General Counsel (Chris Aujard) indicated, “that POL had found nothing in any of the 73 cases which had been investigated within the Scheme that raised concerns about faults with the Horizon system, the safety of convictions…”
“During the autumn of 2014, a draft of POL's new prosecutions policy prepared by Brian Altman QC was presented to POL and… considered internally.” A copy of the draft was not provided to the POL Board Until January 2016.
“When the POL Board met on 28 January 2015, the CEO provided a paper updating the Board on a number of matters, including Project Sparrow. She informed the Board that the investigation of all cases within the Scheme was now complete and, significantly, stated… To date, we have found no evidence, nor has any been provided by either an Applicant or Second Sight, of either faults with the Horizon system or unsafe convictions, and we are not aware that any convictions have been appealed."
[UKGI opine] It is not clear whether the CEO was aware of Simon Clarke's advice in July and August of 2013… once again, her report provided significant reassurance to the Board and Shareholder NED (Richard Callard), that there were no concerns with previous prosecutions.”
In c. February 2015, the CCRC contacted POL asking for information about Brian Altman QC's review of POL's prosecutions policy. But UKGI report Brian Altman QC's conclusion that prosecutions had been handled appropriately was once again reassuring.
On the 9 April 2015, Second Sight presented its final report to POL. That report raises several serious concerns about prosecutions. A few days later a rebuttal document is produced by POL. E.g. POL disputed Second Sight's findings in section 25 of its report, as being, “...based on generalised and anecdotal assertion which is unsubstantiated”.
Really importantly I think, “A copy of Second Sight's final report and POL's response was provided to the Department upon ShEx s request, but does not appear to have been circulated to the full Board.” So the Execs had it, the Government (or at least ShEx) had it but the Bd did not. So through omission or commission ShEx helped keep the Board in the dark on this pivotal document
By this stage PO and the gov non-exec are seen to blame Second Sight for delay in progress within mediation scheme and poor quality work (praying in aid apparent criticism from Sir Anthony Hooper, mediation chairman).
This brings us to the Mediation Scheme and we go back a little in time (the Mediation Scheme was created, I think in 2013). The allegation of SPMs is that the Mediation Scheme was created, or came to be used, to frustrate the investigation and resolution of claims. In relation to the Scheme in September 2014, we hear from UKGI that POL's General Counsel prepared an update for the Bd which was, “a relatively optimistic assessment of future progress.” He said, “POL [were] in 'a strong position to be more directive and assertive in our approach with Second Sight, JFSA and at Working Group more generally.” UKGI says also:
“Of particular significance was this assertion by the General Counsel, "This has been helped by the fact that we have found nothing in the 73 cases investigated which has raised concerns about faults with the Horizon system, the safety of convictions or Post Office's liability"
Sir Antony Hooper (chair of the Mediation Scheme gives a report to Minister limited due to confidentiality. UKGI do not report him criticising Second Sight here.
Several months after the GC’s update the Vennels vs Henderson Select Committee hearing takes place (Feb 2015). Henderson says their investigations are being frustrated, Vennels fails to answer select committee members adequately about access to documents. Even then, the NonExec doesn’t seem to grasp the problem, the UKGI response is here as in several places less than impressive in its self-reflections on what happened.
The Project Sparrow sub-committee, overseeing the problems are treated, a few days later, 11 February 2015, to a paper by POL's legal team and communications director indicating: “A 'fundamental change' …mediation in all non-criminal cases … removing the requirement for a Second Sight's report, but applicants can still request one.”
The claim here is that Second Sight’s work was terminated at this point beyond finishing up some work and at the least Second Sight’s involvement was curtailed and foreshortened. James Arbuthnot went ballistic. JFSA pulled out of the Scheme. PO and their non-exec are seen to be explaining Second Sight have not been sacked and in July 2015, Vennells writes to the Minister to say the mediation scheme is still viable.
“That position was reflected in a detailed PowerPoint presentation prepared by POL's CEO and General Counsel at a face-to-face meeting in early August 2015 and presented to the Minister.”
With the scheme plainly in disarray, UKGI spend a few moments in their submissions rationalising the Government sitting on hands. In essence, it was seen as a commercial dispute between business parties not a catastrophic miscarriage of justice and corporate governance shambles in the making. But by August though they/the Minister do decide to do something. Or rather, they tell new chair (Tim Parker) to do something. THis leads to the Swift Review.
UKGI’s self-reflection on the points here are interesting…
“There is no doubt that the message that the POL executive management consistently delivered to ShEx and the POL Board throughout this period was that it had acted responsibly and ethically in conducting a thorough investigation into Horizon and there was no evidence of any problems with this system. …it was often supported by very detailed analysis (such as the August 2015 PowerPoint presentation"
The POL Board was briefed on Second Sight interim report, prior to its publication, during the course of a conference call by the Chief Executive “The investigation to date had found no systemic issues with the Horizon computer system but had highlighted areas for improvement [e.g. training.]," she told them. Rather surprisingly, to put it mildly, “The correspondence indicates that a copy of Second Sight's interim report was not shared with the POL Board in advance of this meeting.” The Shareholder NED, depended on the CEOs reassuring summary.
The desire to reassure remains mysteriously strong when a briefing for the Minister, we’re back to Swinson, is prepared, “Second Sight's conclusion that they had not identified problems of a systemic nature, although two 'anomalies' had been investigated in which defects or bugs in Horizon (which were presented as having been remedied) had affected the balances or transactions within 77 branches.” Even with the euphemistic anomalies, one might sense a flag beginning to flutter in the breeze, but apparently not,
In Aug 2014 we told also the acting GC wrote a detailed critique of Second Sight’s thematic report for government consumption.
“There was a POL Board meeting on 25 September 2014. The Board received an update on the progress of the Scheme but it would appear that neither the Second Sight thematic report nor the POL response were provided to the Board.”
Why? What reason could there be for not showing the Board the crucial and highly critical document.
“It seems likely that this reflects the fact that the documents had been prepared for the purposes of an independently administered mediation scheme that was currently in operation.”
In other words, the mediation scheme boxed off the evidence as independent and confidential, whilst their GC, it appears, undermined that evidence alongside his CEO. In March 2015 Vennells reports to the Board that Second Sight’s report is, “inaccurate and inflammatory; we will respond shortly". UKGI tells us, Second Sight's draft report was not provided to the POL Board at that stage. However, “On 14 April 2015, POL's Communications Director was chased by the Shareholder NED for a copy of the report, which was provided later the same day, accompanied by POL's draft response.” Seeking to minimise the impact of the knowledge that would or should have been gleaned from the report UKGI then make some, to my eyes rather mealy mouthed, criticisms of the Second `sight report. This quote will give you a flavour, although look at para 122 onwards if you are more interested:
“From ShEx's perspective it was not immediately apparent from the report whether the conclusion expressed in Second Sight's interim report concerning the lack of any evidence of systemic problems with the Horizon software required amendment and, if so, to what extent.”
“With the benefit of hindsight, the reference to Horizon being 'systematically flawed' …appears both highly relevant and concerning. However, it was not readily apparent from this single subparagraph in a very lengthy and detailed report.”
Suffice to say, I see what they mean, and I also that this is a very kind interpretation of their own failure here. A neutral reader of the report would have significant anxieties about the operation of Horizon within the Post Office. Perhaps ShEx were influenced to disgregard it by POLs 83 page response. It included this assertion…
"Having investigated each Reported Issue, and responded to the challenges put to Post Office by Second Sight, this has reinforced Post Office's confidence that there are no systemic failures in Horizon."
Now UKGI recognise, with darkly comic humility of their hindsight, “POL might not have been regarded as an entirely objective commentator” on Second Sight but excuse ShEx somewhat because Linklaters also criticised Second Sight’s work in 2014. They recognise, however, that the board failed to look into the issues properly.
They also admit their summaries for Ministers (George Freeman MP is mentioned) did not do justice to the detail of the conclusions contained in the Second Sight final report. (Para 135) A bit of civil service speak for they had royally dropped the ball here. Ron Warmington of Second Sight tried to put the Minister straight and Baroness Neville-Rolfe acted shortly afterwards (by calling on Parker to do something).
Importantly also, in 2014 Deloittes were also commissioned by the PO to do some work to, “complement the work undertaken by Linklaters, "to give them and those concerned outside the business, comfort about the Horizon system" Comfort giving is the Board’s illuminating phrasing, it appears.
A Deloitte partner attended a Board meeting and is reported to have given reassurance about what their work was finding. They report in May. The relevant committee, Sparrow, is sent their report but does not refer to it in its subsequent meeting. Instead a summary of it was provided by their kindly General Counsel. Some excerpts on the ‘comfort’ on offer:
"5.1 The Deloitte report raises two types of issues: the first relates to Sparrow, the second to wider business learnings.
‘As regards the Sparrow-related issues it is believed that given the limited scope of the work Deloitte were able to undertake it is highly unlikely that we will be able to extract any further comfort or assurance without their doing substantially more work.
…Furthermore, it is also clear that Deloitte will not consent to the publication of their report or the use of their name to publicly assert that the system is working with integrity unless they undertake specific testing.
That said, the report does give some comfort for the Board on the design for processing and storing transaction data
Oh, and there was also this in a footnote, “Subject to the limitations and assumptions expressed in their report, Deloitte 'have not become aware of anything to suggest that the system as designed would not deliver the objectives of processing of baskets of transactions and keeping copies of them in the Audit Store with integrity. "
A piece of careful drafting adding to the impression that the Deloite report had more red flags than Moscow in November.
UKGI put it rather more kindly, but damningly nonetheless…
it did not and could not convey the detail of Deloitte's full report, or its findings on important issues such as remote access… Instead, it gave a broadly reassuring impression that the findings of Deloitte's review were that there were no systemic issues with Horizon.
And the Board? They picked up these red flags, right? They asked for the full report? Well, I think you can guess:
“From the documents we have seen, there is no evidence that the full report was ever shared with the Sparrow sub-committee, the POL Board or ShEx, whether by email, or as part of a document pack for a meeting.”
A further board briefing prepared by the GC appears to have not disclosed the remote access findings by Deloitte which feature subsequently in the Swift Report: it was possible to remotely access Horizon SPMs without their knowledge and with fake signatures.
The submissions also consider how PO dealt with the Panorama story which revealed the secret remote access allegations to the World. Corporate Affairs Director, Mark Davies, led a response that claimed “allegations of remote access to alter branch accounts, and thereby creating discrepancies, were untrue.”
Suffice to say UKGI reached this conclusion about POs public statement. Here they do not mince their word.
“It is now apparent, of course, that a number of the assertions made by POL in the statement were inaccurate and misleading. The Horizon system was not effective and robust. The 'independent enquiry' (Second Sight) had not failed to find anything wrong with the system. There was no overwhelming evidence that it was not the computer system that was responsible for missing money in all of the branches investigated.
UKGI tell us the Board was not involved in the work on Panorama. And that the CEO briefed them on the [misleading] approach aided by, amongst others new GC, Jane Macleod. Vennells tells them, “The programme contained no new information and received almost no pick up from other media.”
The programme contained allegations from a Fujitsu whistleblower of significant civert remote access use to stop the software falling over.
And PO’s GC briefs the Minister on POs rebuttals.
“the BBC had declined POL's offer to provide documents which 'would have conclusively disproved the claims being made'”
I am not aware of any such documents but perhaps this is why disclosure in the Inquiry is taking so long; they’re still looking for these documents.
UKGI again admit with hindsight the Board should have done better.
The Parker review is up next. We know quite a lot about that and this post is already too long so less on this. Their submission is they didn’t see it until years later and Parker’s letter on it was reassuring. I raise my eyebrow slightly given the detailed content of the letter, and move on, but agree it was more reassuring than the review itself. They claim the Review might not have had the attention it deserved because it was effectively overtaken by events. By which they mean Bates, the litigation.
There’s quite a lot on privilege given that too was a stated reason for inhibiting sight and discussion of Swift and how IKGI have started manage this better post-Magnox. And they are clear the Board should have been shown Swift.
The Section on Bates is interestingly short given its importance, and the fact that much of the real action occurred when UKGI seeks to claim the non-execs had started to get their game together, 2018 plus. We hear that as Bates began, in 2016, the PO GC told the minister the case raised no new issues. In 2018 a postmaster Litigation sub-committee was created comprising Tim Parker, Ken McCall (the Senior Independent Director) and Tom Cooper, the Shareholder NED designate (who formally took up his position in March 2018). Parker’s role is important given his knowledge from the Swift Review. In May 2018, leading counsel advised on the merits and said they had the better case. And in September their expert said Horizon was sound with some bugs. Interestingly, given the High Court was told, with some emphasis, the case was an existential threat, the Minister was told the operational impact of losing would be limited.
By Feb 2019 Leading Counsel’s nerves seem to be showing a little. He, “explained that the case advanced by Post Office and Fujitsu on the issue of remote access had 'changed over time' in that, 'Initially Fujitsu had said that remote access was not possible.” Parker had already been told this in 2016 of course. So it’s interesting to see it flagged in this way.
Very curiously they do not discuss the hot mess that was PO and Fujitsu’s evidence in either trial. They do discuss the recusal application.
They say, on advice, “the Shareholder NED recused himself from the decision-making” on this. I thought, but may have misunderstood, he and Parker participated in the discussion but did not vote. If I’m right, this kind of finesse does UKGI no credit. And the Neuberger advice is dealt with in para 214. They lose of course and this prompts this interesting comment…
..following intervention by the Chair and the Shareholder NED, POL
had refreshed its legal team, including internally reorganising its legal team and replacing its General Counsel and employing a new firm of solicitors, HSF, to 'revisit the approach to the litigation' in respect of both substance and tone. As noted in the update, this was a welcome development from UKGI's perspective.
So it seems they may have blamed the lawyers, or PO’s then GC, Jane Macloed. This is not entirely surprising given the way the litigation strategy and execution played out in Fraser J’s court and Coulson LJs office.
My impression was HSF had been instructed before or by the time of the recusal application, or even that they were instructed on it whereas this document indicates it was later. Maybe I got that wrong, so we should prefer their view for now, and I will try and check.
HSF prepared a briefing in advance of a meeting of the Postmaster Litigation Sub-committee on 9 May 2019 in which they set out the extent to which they agreed and disagreed with the current litigation strategy being pursued by POL's original legal team. They also helped reformulate grounds of appeal which was submitted. [Leave was refused].
Interestingly, the change in legal teams was said to have led to an approach from the Post Office that was, “more receptive to these fuller [information] sharing arrangements, and in particular the insistence that appropriate consideration was given to settling the litigation.”
I’m not going to go through them but the report ends with Para 225 for the [rather obvious] corp governance lessons to be drawn on major litigation and para 230 on for more on lessons learned.
What to make of this? UKGI are, I think it is reosnably clear, pointing the finger at Aujard, Vennels and to a degree Davies and Macloed. We do not yet know what their reponse will be (although we do know Vennels has pointed the finger at the lawyers she has relied on). The failures of the Board, even if heavily managed by the Execs, are quite something. If UKGI are right the were asleep at the wheel for quite the corporate car crash for all that UKGI tries to reason their laissez fair approach was understandable.
Finally, who was told what about the Clarke advices remains very important indeed. Susan Crichton, the GC who left in November 2013 when Aujard was brought in, will have had a crucial role during that period. What she has to say will be very interesting indeed. Not least because she commissioned with PO’s Director of Security the Detica report in 2013. UKGI do not cover that at all. As Counsel to the Inquiry noted in his opening, “It included, amongst other things, findings:
"Post Office systems are not fit for purpose in a modern retail and financial environment", expressing a concern about the difficulty in recording information from multiple transaction systems. ….It also criticised the investigations process, stating there needed to be "a concept of quality, control and rigour in the investigation process".
Crichton left and the Director of Security, it is alleged, encouraged the shredding of documents. UKGI would be aware of it now. It’s odd that they do not say whether they were aware of it.