1 Friday, 12 April 2024 2 (9.30 am) 3 MR STEVENS: Good morning, sir, can you see and hear me? 4 SIR WYN WILLIAMS: Yes, thank you very much. 5 MR STEVENS: We're to hear from Mr Cook this morning, sir. 6 SIR WYN WILLIAMS: Yes, before Mr Cook is sworn, can I thank 7 him for agreeing to appear at 9.30 at very short notice. 8 It's of help to the Inquiry, Mr Cook, so thank you very 9 much. 10 THE WITNESS: You're more than welcome. Thank you, sir. 11 ALAN RONALD COOK (affirmed) 12 Questioned by MR STEVENS 13 Q. Mr Cook, my name is Sam Stevens and I ask questions on 14 behalf of the Inquiry. Could I ask you to state your 15 full name please? 16 A. Alan Ronald Cook. 17 Q. Thank you for giving evidence to the Inquiry today. In 18 front of you there should be a witness statement -- 19 A. Yes. 20 Q. -- that runs to 106 paragraphs. Do you have that in 21 front of you? 22 A. I do. 23 Q. For the record, the document reference number is 24 WITN00190100. Before I ask you to turn to your 25 signature, could we please turn to paragraph 89, which 1 1 is on page 30 of the statement. 2 A. Yes. 3 Q. I understand there's a point of clarification you wish 4 to make in respect of that paragraph? 5 A. There is, indeed, but I wonder, Mr Smith (sic), before 6 we get started, I'd like to put on record most strongly 7 my personal apology and sympathies with all 8 subpostmasters, their families, and those affected by 9 this. As we get into the conversation, obviously there 10 will be an opportunity for me to elaborate but it just 11 felt to me that was an important thing for me to say 12 upfront. 13 In terms of paragraph 89, it cites a couple of 14 letters that I had received from MPs, which was correct 15 at the time, or I believed to be correct at the time 16 I wrote this, but since the document was submitted, some 17 further documents have been released by the Inquiry 18 which show that there were three more cases. So that -- 19 it was correct at the time and I'm just seeking to 20 clarify that, you know, that there's nothing wrong with 21 the statement as it stood then but there have been three 22 cases identified since. 23 Q. So at the time you signed the statement you believed 24 paragraph 89 to be true? 25 A. Correct. 2 1 Q. But you've since received further documents that show 2 that there were further letters sent? 3 A. Correct, correct. 4 Q. Subject to well -- no, before we do that, can I ask you, 5 please, to turn to page 36. 6 A. Yes. 7 Q. Is that your signature? 8 A. It is. 9 Q. Are the facts stated in that witness statement true to 10 the best of your knowledge and belief. 11 A. They are. 12 Q. Thank you. That stands as your evidence in the Inquiry, 13 and I'm going to can you some questions about it. 14 Very briefly, in terms of your background, you were 15 appointed as a Non-Executive Director of Post Office 16 Limited on 23 February 2005? 17 A. Mm-hm. 18 Q. You nodded yes. 19 A. Yes, sorry. 20 Q. In your statement, you describe having a long and varied 21 career in public and private sectors -- another nod? 22 A. Yes, indeed. 23 Q. You were Chief Executive Officer of National Savings and 24 Investments from September 2002? 25 A. Correct. 3 1 Q. Now, you held that role whilst you were a Non-Executive 2 Director of Post Office Limited; is that right? 3 A. Correct. 4 Q. But in March 2006, you were appointed as Managing 5 Director of Post Office Limited? 6 A. Correct. 7 Q. At that point, you stepped down from National Savings 8 and Investment Bank? 9 A. Correct. 10 Q. We don't need to turn it up but in your witness 11 statement you refer to the role of Non-Executive 12 Director and you say that you had a duty to challenge 13 management on any aspect of the business and their 14 proposed approach to both the running of the business 15 and the direction in which Post Office Limited was being 16 taken; and you still agree with that? 17 A. I do. 18 Q. In order to carry out that duty effectively, you would 19 need to know, broadly, what the Post Office's operations 20 were, wouldn't you? 21 A. Correct. 22 Q. How were you introduced or inducted to the business when 23 you became a Non-Executive Director? 24 A. So, as I have explained in my statement, I had quite 25 a bit of dealings with Post Office to becoming 4 1 a Non-Executive Director because the Post Office was the 2 primary distribution channel for the National Savings 3 and Investments products, so that's how I got to know 4 some of the people at the Post Office. However, it's 5 a different order of magnitude if you become a board 6 member. So they've set up a programme for me, going 7 around visiting a number of branches, visiting heads of 8 different functions inside the building, and so that 9 it -- I mean, it lasted for several months, to be 10 honest, on and off. 11 Obviously, this was not a full-time role, because 12 I had a full-time role with National Savings, who were 13 happy to allow me to do this but -- so it was 14 a reasonably comprehensive induction. 15 Q. Do you remember getting any talks or induction sessions 16 from the Legal Department at Post Office Limited? 17 A. I can't remember, I can't remember a particular event or 18 a particular person that I saw. I would probably have 19 been updated by that area from the Finance Director, 20 Peter Corbett, would be my recollection. 21 Q. When you sat as a Non-Executive Director, did you apply 22 or take into account any codes relevant to corporate 23 governance and management? 24 A. This is the first time I had been a Non-Executive 25 Director; I had been on boards that had Non-Executive 5 1 Directors on them. The corporate governance code -- 2 I've gone on in later life to spend a lot of time 3 working on boards, so I would confess much more expert 4 now than I was then. But, certainly, I was well aware 5 of my overall responsibilities in terms of challenging 6 management. I was aware that I was not the decision 7 maker and that I had to contribute to the conversation 8 and, you know, express reservations, if I felt so 9 inclined, or supportive comments, if it felt to be the 10 right thing to do. 11 Q. Just to clarify your evidence, when you were 12 Non-Executive Director do you think you would have 13 applied the Financial Reporting Council Corporate Code 14 or not? 15 A. Oh, yes, yes. 16 Q. In your view, were your expectations for the standards 17 of corporate governance in a publicly owned company like 18 Post Office Limited different to your expectations for 19 a publicly listed company? 20 A. Well, they were -- it is different. It was different. 21 I had a board at National Savings and Investments, which 22 I sat on as the Chief Executive, rather than 23 a Non-Executive Director. But, on that National Savings 24 and Investments board, I was outnumbered by the 25 non-executives, deliberately, that would be a typical 6 1 feature. So there were more people in the room that 2 were independent than were employed. 3 This -- the Post Office Board was the other way 4 round. So the -- it was primarily the senior management 5 team, Sir Mike Hodgkinson, who you saw yesterday, who 6 was the Chairman, was a non-executive. There was Brian 7 Goggin, who was the Chief Exec of Bank of Ireland, and 8 then myself. So both of us, both of the two independent 9 directors, had also business relationships with the Post 10 Office, if you see what I mean. 11 Q. What you refer to it as being outnumbered and it being 12 the other way around on Post Office Limited Board -- 13 A. Yeah. 14 Q. -- to what extent did that affect the adequacy of the 15 corporate governance or oversight? 16 A. I think corporate governance is better performed if the 17 non-executives are greater in number than the 18 executives, if you see what I mean. That doesn't mean 19 to say it's no good but I think it would be of a higher 20 standard with more independents on the board. 21 Q. Why weren't there more independents on Post Office 22 Limited Board? 23 A. Not known to me. What I would say is that that Board 24 was a subsidiary to the Royal Mail Holdings Board where, 25 yes, indeed, the independents were in the majority. So, 7 1 you know, I think, technically, if you looked at it, it 2 was okay because the Royal Mail parent had that 3 independence. 4 Q. To what extent were you involved with the Royal Mail 5 business whilst you were a Non-Executive Director? 6 A. Very little, really. Well, I would go -- as part of my 7 induction, I might have gone to the some of the 8 functions that sat in Royal Mail working for the Post 9 Office, for example, but in terms of the business 10 activities of Royal Mail, then I didn't get very 11 involved in that at all. 12 Q. Looking at responsibilities, would you agree that the 13 Post Office Limited Board was responsible for oversight 14 of the operations of the Post Office business? 15 A. Correct, yes. 16 Q. Do you agree with this: that the identification, 17 analysis and management of risk is very important to 18 running a company? 19 A. Indeed. 20 Q. Do you accept that Post Office Limited or the Board of 21 Post Office Limited was responsible for overseeing how 22 the Executive Team identified, analysed and managed 23 risk? 24 A. Correct, yes. 25 Q. Let's go to your appointment as Managing Director, March 8 1 2006, and please could we bring up the witness statement 2 at page 16, paragraph 46. You set out the background to 3 you becoming or being appointed as Managing Director and 4 you say at the bottom half: 5 "I therefore accepted the role of Managing Director 6 with the understanding that I would have full 7 accountability and responsibility for the Post Office 8 Limited business but that I would be dependent on Royal 9 Mail Group for delivery or oversight of certain 10 functions. For example, HR, legal, finance and IT." 11 Are you effectively saying you have ultimate 12 executive accountability for the operations of the Post 13 Office Limited company but you're not responsible for 14 the services provided by Royal Mail Group? 15 A. I have accountability, yes, but the responsibility 16 wasn't direct. 17 Q. What do you mean by that? 18 A. The people that were doing that work did not work for me 19 or somebody that worked for me. 20 Q. Which people are you referring to? 21 A. In those shared service functions: HR, Legal, Finance 22 and IT. 23 Q. So where Royal Mail Group are providing it, you're not 24 responsible for those people; is that what you're 25 saying? 9 1 A. Yes, that's right, yes. I'm not saying I'm not 2 responsible for the issues but the people were -- 3 Q. Yes, the people, yes. 4 A. -- not paying rations(?), Post Office employees, if you 5 see what I mean. 6 Q. What was your view on Legal being a group function? 7 A. In large groups, it's not uncommon because, if you 8 centralise, you know, a specialist expertise, you can 9 probably get a higher standard group by having them 10 central and building a career for lawyers or HR or 11 Finance, or whatever it is. 12 I was a little reluctant when I was being offered 13 the job because I would prefer to have had my arms 14 around everything. On the other hand, as I say in my 15 witness statement, it was sort of an -- I understood the 16 aspiration from a Royal Mail Group perspective why it 17 would be sensible to achieve those synergies by having 18 specialist functions centralised and, in the 19 conversations I was having about being appointed, when 20 I was offered the role, I was sort of exercised -- this 21 may sound like ego and it's not meant to be at all -- 22 I was exercised by the fact that David Mills, my 23 predecessor, was the Chief Executive of the Post Office 24 and I was being offered the job of Managing Director. 25 And so my suspicion was: was I going to have the 10 1 same level of accountability that David had had? And 2 I was persuaded during these conversations, in the build 3 up, that it would work. I felt rather embarrassed that 4 I'd sort of confessed any ego over a job title. It 5 wasn't about the job title, it was about the 6 accountability. 7 Q. And accountability you accepted? 8 A. Yes, yes. 9 Q. You earlier referred to -- when asked about legal being 10 a group function -- legal being centralised in other 11 group companies? 12 A. Mm. 13 Q. Are you aware of another group of companies where legal 14 is centralised, at the group level or the parent level, 15 and the subsidiary carries out or is responsible for 16 prosecuting members of its own workforce? 17 A. No, I'm sure not. 18 Q. Do you think Post Office Limited would have benefited 19 from its own legal team? 20 A. Well, I would have liked its own legal team, I would 21 have felt happier, I would have felt more accountable. 22 I'm not saying to you that the problems would have been 23 unearthed massively quicker as a result but I would have 24 been closer to the issue. 25 Q. What was stopping you from having your own legal team? 11 1 A. Well, it was not the proposed organisational structure, 2 so it wasn't -- it was a non-negotiable when I was being 3 appointed. 4 Q. When you were on -- as Managing Director, you sat on the 5 Royal Mail Board. 6 A. Correct. 7 Q. Did that mean you had some oversight of Royal Mail's 8 Legal Department? 9 A. And that's how I got my head round this structure being 10 okay, was, at the end of the day, it's not like I wasn't 11 going to be on the board of Royal Mail Holdings, which 12 I was. Obviously, that's high up, but the Board, as I'd 13 said earlier, was in the majority of non-execs and then 14 there were four business unit heads effectively, the 15 Royal Mail Letters business, Parcelforce, GLS -- which 16 was a European parcels business -- and Post Office. So 17 I was one of four. 18 Q. Can we turn, please, in your statement, page 7, 19 paragraph 24. You say in the middle: 20 "However, over time, I came to realise that the 21 Board's [and you're referring to the Post Office Limited 22 Board] scope was not as broad as I would have expected." 23 How did the Board's scope not match with your 24 expectations? 25 A. Well, an example would be that the Audit Committee that 12 1 existed was the Royal Mail Holdings Audit Committee, and 2 hung off the Royal Mail Holdings Board. There was no 3 audit committee for the Post Office Limited Board. So 4 that's just an example of the scope that reliance was 5 placed on Royal Mail Holdings governance, as well as 6 Post Office Limited governance. Otherwise, for example, 7 producing the annual results and having the accounts 8 audited was a process that would have been run through 9 an Audit Committee and that Audit Committee was at the 10 Royal Mail Holdings level, which I freely accept I was 11 on the board of Royal Mail Holdings but I'm just saying 12 it's -- from a Post Office Limited Board's perspective, 13 they were -- they weren't the accountable party. 14 Q. You're talking about the Audit Committee there but, in 15 terms of how you could oversee the operations of the 16 business on a day-to-day level, were you satisfied that 17 the Post Office Board had sufficient scope to do that 18 that task adequately? 19 A. Yes, yes. 20 Q. You say in your witness statement -- we don't need to 21 turn it up -- that there was a Risk and Compliance 22 Committee? 23 A. Mm-hm. 24 Q. Now, as I understand it, the Risk and Compliance 25 Committee sat below the Post Office Limited Board? 13 1 A. Correct. 2 Q. Was it a formal subcommittee of the Board or 3 an Executive Committee? 4 A. Well, it was a formal subcommittee of the Board but it 5 was primarily comprising of executives, as I explained 6 earlier, yeah. 7 Q. So, in those circumstances, would you accept that it's 8 good governance for the minutes of those committee 9 meetings to be submitted and reviewed by the Board? 10 A. It would be, yes. 11 Q. I want to turn now to Post Office prosecutorial role. 12 A. Mm-hm. 13 Q. Now, obviously, one of the issues the Inquiry is 14 examining is how that role was overseen. Now, your 15 evidence, which we will come to shortly, is that you 16 were unaware that Post Office was involved in the 17 prosecution of subpostmasters until May 2009? 18 A. No, that's not quite right. I was unaware that the Post 19 Office were the prosecuting authority, if you see what 20 I mean. I knew there were court cases but I didn't 21 realise that Post Office, in about two-thirds of the 22 cases, had initiated the prosecution as opposed to, you 23 know, the DPP or the police or whatever, just to 24 clarify -- 25 Q. So to clarify that, you're saying that you were aware 14 1 that the business investigated theft, fraud and false 2 accounting -- 3 A. Yeah. 4 Q. -- but you thought that it went to another agency for 5 the prosecution of the -- 6 A. The expressions that you would typically see were things 7 like the case went to court, and it was -- you know, and 8 I now know, because I've pored all over this and checked 9 all the figures, that about a third went down that route 10 but two-thirds were the Post Office taking the decision 11 to prosecute themselves. 12 Q. We're going to come to that part of your evidence 13 shortly. 14 A. Yeah. 15 Q. You now know that, whilst you were a Non-Executive 16 Director and Managing Director, that the Post Office 17 alleged to be the victim of crimes, it investigated 18 those crimes itself and decided whether to prosecute? 19 A. I too, yes. 20 Q. Do you accept that a company's involvement in 21 prosecutions such as that inherently creates risk for 22 the company? 23 A. Yes, I think it must. 24 Q. What do you think those risks are? 25 A. Well, I think, if somewhere that is not the organisation 15 1 in question is making the call to -- it's all about 2 independence. It's making the call to prosecute, then 3 one would go into that with a greater degree of comfort. 4 It doesn't mean that the case would be won or lost. It 5 just means that there was probably a higher bar to be 6 cleared before a prosecution was initiated. 7 Now, a lot of the evidence in these cases was on the 8 face of it quite compelling. But that's not really the 9 point. The point is how much independence is there in 10 the thought process? 11 Q. You say you weren't aware of Post Office's position as 12 making decisions on whether to prosecute. Assuming you 13 had been, while you were Managing Director, the risks 14 you've described, would you have foreseen those at the 15 time? 16 A. I would have been uncomfortable because I would not have 17 encountered that before. So I would have probed the 18 principle and, you know, it would be hypothetical for me 19 to say what might have happened but it's an area that 20 I might have gone down to say "Well, how then -- how 21 then do we -- are we comfortable that we're doing this 22 and, if the power is the power, what level of 23 independence could we build into that decision-making 24 process inside the Post Office?" 25 So, you know, the Post Office had many strands to 16 1 it. I don't know whether this was the case but I would 2 have, at the very least, looked for line manager 3 sign-off, you know, in the Operations area rather than 4 the Legal area, so it wouldn't be something that just 5 legal would do. But that's all hypothetical, probably 6 not helpful, to be honest. 7 Q. Yes, well, let's turn to look at your actual knowledge 8 and what you say in your witness statement. Can we go 9 to page 21, please, of the statement, and paragraph 59. 10 It talks about the Risk and Compliance Committee and, 11 about five lines down, you say: 12 "To the best of my knowledge, the Risk and 13 Compliance Committee was not given any information or 14 reporting, nor did it have any oversight of the 15 prosecution of SPMs. As a result, I did not take any 16 steps, as a member of the Risk and Compliance Committee, 17 to ensure that POL was acting in compliance with its 18 legal obligations in relation to those prosecutions and 19 civil proceedings against SPMs. I was not aware that 20 they were taking place." 21 A. Correct. 22 Q. So where you say you were not aware they were taking 23 place, what precisely do you mean? 24 A. It's probably not sufficiently precise. I knew there 25 were prosecutions but prosecutions by the Post Office, 17 1 as opposed to from somewhere else, was what I was 2 talking about. 3 Q. So what did you think happened in terms of -- who did 4 you think did the investigation? 5 A. Oh, Post Office, there was an Investigation Team. They 6 did the investigation. As I said, expressions were used 7 like "This is going to court". I had assumed that the 8 police/DPP had been involved -- I mean, I shouldn't have 9 presumed but I did presume, sadly -- and that we were 10 then -- it had gone to court, was the expression used. 11 I had not encountered the notion of an organisation 12 that could make that decision on its own and I suppose 13 I had too much assumed knowledge and, you know, when you 14 see the words that were written, I can see why 15 I still -- that view still perpetuated in my mind 16 because it didn't overtly say, "We have taken the 17 decision to prosecute". 18 So one of my regrets, that I didn't pick up on that 19 earlier. 20 SIR WYN WILLIAMS: As I understand it, it follows from what 21 you're saying that, when you became the Managing 22 Director, no one within the company, Post Office 23 Limited, thought it necessary to tell you "And by the 24 way, we prosecute people in the sense that we don't just 25 investigate them but we initiate and conduct the 18 1 prosecution"; is that it? 2 A. That is correct, and it may be that they assumed I knew 3 that. 4 SIR WYN WILLIAMS: Well, there may have been many 5 assumptions, but that's the state of -- 6 A. That was -- 7 SIR WYN WILLIAMS: -- play, as far as your evidence is 8 concerned? 9 A. Yes, that's right. That was the point I was trying to 10 get across. It's quite subtle but it's very important. 11 MR STEVENS: Can we look, please, at the -- well, 12 POL00021418. This is a note of the Risk and Compliance 13 Committee meeting on 29 September 2005. You'll see at 14 the bottom your apologies, which means you weren't in 15 attendance. 16 A. Correct. 17 Q. Do you remember reading these minutes? 18 A. I don't. I mean, this was 18 years ago, whatever, 19 I don't remember. I'm sure I would have been sent them. 20 I did not typically -- while I was a non-exec, I did not 21 typically attend this Risk and Compliance meeting and 22 I didn't realise I was -- I mean, obviously, I must have 23 had the minutes but I didn't realise I was being 24 recorded as not in attendance but I would have received 25 the papers, I'm sure. 19 1 Q. Would you have read them? 2 A. Yes. I'm a voracious reader. 3 Q. Could you please turn to page 6, and the bottom of the 4 page, please. Under "Updates on major incidents", it 5 says: 6 "Post Office Limited has a principle of undertaking 7 criminal prosecutions for all cases where it is in the 8 public interest, but noting that likelihood of recovery 9 and circumstances of the defendants and the victims may 10 be relevant to that decision." 11 That's saying in terms that the Post Office made 12 decisions to prosecute, isn't it? 13 A. It does. It's not how I read it. This is my regret. 14 I mean, there was a sort of, I don't know, a sort of 15 high and mighty, tone sometimes there, and people, 16 I don't know, it fed a sense of self-importance. It 17 never occurred to me, reading that, that the Post Office 18 was the sole arbiter of whether or not that criminal 19 prosecution would proceed. I felt what they were saying 20 was "We agree it's proceeding" but somewhere else had to 21 agree to it going ahead. 22 Q. Where did you get that assumption from, that it was 23 somewhere else? 24 A. I had never come across a situation before where 25 a trading entity could initiate criminal prosecutions 20 1 themselves, so I am not blaming others for this. It's 2 my misunderstanding but I just had not encountered that 3 type of situation, and I would have just read those in 4 the vein of "We agree it should be done". 5 Q. Do you think you should have known that Post Office was 6 making those decisions? 7 A. I think I should, yes, and that's -- clearly there are 8 many regrets on many aspects of this but that is one of 9 mine, that I didn't understand -- I was going to call it 10 a subtlety, that would be an insult, it's not 11 a subtlety, it's really important -- but it was 12 a different nuance on it. 13 Q. Could we, please, turn to POL00021421. This is another 14 Risk and Compliance Committee meeting on 6 September 15 2006. At this point, we see that you're in attendance 16 as a member? 17 A. Because I was then the Managing Director, yeah. I think 18 Sir Mike Hodgkinson talked yesterday about the debate 19 about the appropriateness of me being there or not as 20 an executive but I felt quite strongly that this would 21 be a committee that I should attend as Managing 22 Director. 23 Q. Why was that? 24 A. It's something I've done in all the companies that I've 25 chaired or been involved in since I always go to the 21 1 Risk and Compliance Committee, because that's where 2 a lot of the detail is and, putting it crudely, that's 3 where the risks lie. And I've always worked in 4 regulated businesses, so the word "compliance" is quite 5 important because you're working to a set of statutory 6 rules for many of the different products that we were 7 selling, so compliance with those rules feels like 8 a really important thing for the boss to have his head 9 round. 10 Q. Could we turn, please, to page 4 and go to the bottom of 11 the document, and it says, "Investigation Activity 12 Period 5 Report", and it refers to Dave Pardoe 13 presenting the key points from the monthly Investigation 14 Team. Do you recall who Dave Pardoe was? 15 A. Well, I assume he was a member of the investigation -- 16 I recognise the name but I can't see him in my mind's 17 eye and I assume he was on the Investigation Team, 18 I don't know. 19 Q. What do you think the Investigation Team did? 20 A. Well, they investigated all aspects of fraud and, just 21 to make it plain, more cash went through the Post Office 22 organisation than any other organisation, you know, 23 80 billion a year. The potential for fraud was endless. 24 But the fraud I'm talking about is what the customers 25 were up to, not particularly about what staff were up 22 1 to. So there was a constant stream, these investigation 2 reports would have a whole range of issues, you know, 3 for example, I don't know, travel money cards or we were 4 issuing cash on plastic, which seemed a very innovative 5 thing at the time, believe it or not, considering how we 6 all behave today, but there was a lot of potential fraud 7 to investigate. 8 Q. But you knew that they investigated allegations of fraud 9 within sub post offices? 10 A. Yes, yes, or even in Crown Offices or franchise offices, 11 yeah. 12 Q. Did you know that was part of the Security Team? 13 A. Yes. 14 Q. In terms of reporting lines, what was your relationship 15 to the Security Team? 16 A. They reported through the Operations Director. I can't 17 remember how many layers but, ultimately, the Operations 18 Director was responsible for that and the Operations 19 Director reported to me. 20 Q. Did you ever have discussions with members of the 21 Security Team outside of the Risk and Compliance 22 meetings? 23 A. I would have thought so. If you're going to follow up 24 with a question of what was one of those meetings, 25 I would struggle to remember, to be honest. But I was 23 1 quite a visible boss, I think, and so I would make it my 2 business, if it was possible. If somebody had written 3 me something from inside the organisation, my tendency 4 would be to get up and go and find that person and talk 5 to them about it, and that visibility, I think, was good 6 that I was always walking round the building on the days 7 that I wasn't out in the network, and then you connect 8 better with people. So I'm sure I had contact but 9 couldn't give you an example, to be frank. 10 Q. But with that visibility and the likelihood of talking 11 to them, your evidence is still that, at no point in the 12 years that you were a Managing Director, anyone in the 13 Security or Investigation Team raised the fact that they 14 made decision to prosecute? 15 A. I -- well, that is my position, definitely. I think 16 it's sometimes what's said and what's heard, and the 17 problem that I was bringing to the piece was I just had 18 a presumption and I didn't hear something sufficiently 19 categoric to say "What, you mean we decide on our own 20 and no one can stop us?" I never asked that question. 21 Well, when I say I never asked, I did obviously when we 22 got to the Computer Weekly article, which we'll get to 23 but, prior to that point, I had gone through not picking 24 up that. And I'm not blaming them for not spelling it 25 out enough; to be frank, I'm blaming me for not picking 24 1 up on it. 2 So people can say things and they feel that's okay, 3 he was okay with that. Well, I wasn't okay with it; 4 I just didn't really appreciate what was meant. 5 Q. Can we bring the same document back up, please. Still 6 on page 4, please. It goes on to say what was in the 7 report. It says: 8 "In particular, the report focused on the Accrington 9 DMB ..." 10 That's directly managed branch, is it? 11 A. Yes. 12 Q. "... £600,000 fraud, successes using Proceeds of Crime 13 Act ..." 14 What does that mean to you? 15 A. I don't really know, to be honest. 16 Q. Was it the case that you were discussing the Post Office 17 Limited using the Proceeds of Crime Act to -- 18 A. Yes, so if that's coded speak for Post Office making 19 prosecutions, then so be it. That's not necessarily 20 what I read it as. 21 Q. That's not what I'm putting to you. 22 A. Okay. 23 Q. I'm putting to you had that refers to a discussion of 24 Post Office Limited using the Proceeds of Crime Act to 25 recover funds from persons it accuses of theft or fraud. 25 1 A. Okay, yeah. 2 Q. Would that have happened; would that conversation have 3 happened? 4 A. Well, it's in a report that I would have received. 5 Q. Well, you were at this meeting. 6 A. Yeah. 7 Q. Yeah. 8 A. I can't remember the conversation, obviously, all that 9 time ago, but -- 10 Q. It says: 11 "... and the better targeting of audit resource on 12 dishonest branches." 13 Dishonest branches, that's referring to 14 subpostmasters accused of theft, fraud and false 15 accounting, isn't it? 16 A. Yes, it is, yes. Well, I don't think it's just 17 subpostmasters. But, you know, if there's -- if there 18 were problems with a branch, there were many different 19 types of branches. I mean, a significant quantity of 20 the branches were franchised to supermarket chains and 21 high street retails, you know, so there were -- there 22 was a group of directly managed branches where the staff 23 in them worked for me. There was a large tranche of 24 branches that were partnerships with other retail 25 organisations, and then there were subpostmasters. 26 1 Q. Yes. Before we move on, the second paragraph on 3.2 2 refers to concerns about checks and appropriate method 3 of payment, and it says: 4 "Likewise, issues were raised with the ... Instant 5 Access Saver Account and travel cards offers, in 6 themselves solid offers that are spoilt by branch 7 non-conformance." 8 It says: 9 "Alan voiced an opinion that he was against 10 modifying an offer (to the detriment of the customer) in 11 order to force branch conformance and would rather 12 expect steps to be taken to drive conformance -- by 13 sanction if necessary." 14 A. Yes. 15 Q. What sanction is that referring to? 16 A. That doesn't really sound like me but, yeah, it would 17 be -- if we were just -- if we had to stop -- and don't 18 forget cheques were still a big thing back then -- if we 19 had to stop taking cheques because we had people who 20 couldn't handle the cheque correctly, that seemed 21 disadvantageous to customers. So what we needed to do 22 was to find a way of making sure that we followed the 23 right procedures. 24 Now, very often, I have to say, the challenge was 25 the procedure was cumbersome in the first place. So it 27 1 is harder to conform if the process is complicated. So 2 I spent many years in customer operations, it's the line 3 I grew up in, and you can engineer these problems out by 4 changing processes and procedures, and you can't make 5 them foolproof, but you can design, if you're not 6 careful, processes that make it more likely that people 7 will make mistakes. 8 And I did -- one of the things I did, as part of my 9 induction when I became Managing Director, rather than 10 Chief Exec was, I did the Horizon, the fast version of 11 the Horizon training course, and I went and worked at my 12 okay Crown Office for a day, which was probably one of 13 my most stressful days at the Post Office but it showed 14 to me that it was a complicated thing to do. 15 Q. Okay. I want to show you another document, please. 16 It's POL00048361. This was a document that was given to 17 you this morning. 18 A. Oh, right, yes. 19 Q. So this is "Investigation Team Report Period 9, December 20 2006". In the top left it says, "POL ET". That's the 21 Post Office Limited Executive Team, isn't it? 22 A. Yes, yes. 23 Q. These are the types of reports we were referring to in 24 the last set of minutes -- 25 A. Correct. 28 1 Q. -- which would be sent to you? 2 A. Yeah, yeah. 3 Q. You see in the top right, it says it's from Tony Utting 4 with the job title National Investigation Manager? 5 A. Mm-hm. 6 Q. Do you remember working with Mr Utting? 7 A. I don't, to be honest. I recognise the name. It 8 depends what you mean by remembering working with him, 9 I knew the name but I can't place him now after all 10 these years. 11 Q. When Mr Utting gave evidence to the Inquiry, he said 12 that he had acted as Designated Prosecution Authority to 13 make decisions on prosecutions? 14 A. Right. 15 Q. I assume you can't agree or disagree with that? 16 A. No, that's the first I've heard of it. Yeah. 17 Q. If we look down below what the investigation -- it says, 18 "Investigation Team Report", the title there, and it 19 says beneath that: 20 "The principle [sic] aims of the Investigation Team 21 are to stop criminal offences taking place, apprehend 22 and prosecute those who commit offences against us in 23 order to maximise our recovery and reduce loss to [Post 24 Office Limited] and its clients through the 25 identification of areas of weakness", and it goes on. 29 1 A. Yeah. 2 Q. Again, this is saying in terms that Post Office Limited 3 prosecuted people, isn't it? 4 A. Yes. No, no, it's the same point. I do understand and 5 accept the point. I still didn't take out of it that we 6 were the final decider in so many cases to prosecute. 7 This report, I saw it this morning, it just reminds me 8 of the scale of activity in an organisation that handles 9 so much cash. So there's so many things, if you look, 10 here about the different types of product, the risk of 11 fraud and, primarily to me, when I was hearing the word 12 "fraud", I was thinking it was we or the Bank of Ireland 13 was being defrauded by customers. And, you know, very 14 often it was but there was another dimension which was 15 staff as well. 16 Q. If we turn to page 3, please, and the second paragraph. 17 Sir, I'm sure I'm going to get this wrong, I think 18 it's Gaerwen Post Office branch. I can see a wry smile, 19 I probably have got that wrong, but anyway. 20 But this refers to the prosecution of Noel Thomas, 21 a Core Participant in these proceedings, and it said: 22 "The subpostmaster pleaded guilty to false 23 accounting by inflating his cash account by 24 approximately £48,000." 25 It goes on to describe the case. 30 1 You would have seen this at the time, wouldn't you? 2 A. Yes. Sorry, the screen has gone blank, actually. 3 Q. Yes, it's just -- 4 A. Okay, right. 5 Q. £48,000, that's a significant loss to the business, 6 isn't it? 7 A. Yes. 8 Q. The idea of these investigation reps is that you get 9 them on a monthly basis; is that right? 10 A. Mm-hm, yeah, yeah. 11 Q. It enables the Executive Team to trace through from the 12 point of a loss is, found right through to the outcome 13 of the case; correct? 14 A. Mm-hm, yes. Sorry. 15 Q. Is it not the case that whilst this case was going 16 through when you received updates on it, at some point, 17 you would have been told that a decision had been made 18 to prosecute? 19 A. Well, I think not, really. I don't think that's the 20 case. These cases were reported on, and if they went -- 21 as I said, the terminology, and it's even used in that 22 particular paper, "went to court" -- 23 Q. Well, they went to court -- 24 A. Yes. 25 Q. Even if the Post Office made the decision, the case went 31 1 to court? 2 A. Well, those two things don't quite go together. So it 3 went to court. I had not assumed that we had made -- we 4 might have wanted it to go to court but I didn't realise 5 that we had the power, back then, to take it to court, 6 regardless of what anybody else might think. 7 Q. If Post Office Limited had been dealing with the CPS or 8 the police to handle these types of cases, would that 9 have been described within the CPS that was 10 a stakeholder? 11 A. Well, about 30 per cent of them went down that route, 12 I understand. I never saw a differentiation, nobody 13 ever -- you know, it wasn't who decided as it went to 14 court. And, as I say, I now understand, I sat and 15 worked it out the other evening, just under 30 per cent 16 meant that route, so the majority were the Post Office 17 making that call. But I had not appreciated that at the 18 time, until late in 2009. 19 Q. Well, we'll come to late in 2009 shortly. 20 How do you think that prosecutions were overseen in 21 Post Office? 22 A. By the Investigation Team. 23 Q. So is it effectively that what -- is your evidence, 24 effectively that the Investigation Team and the Security 25 Team maybe ran the investigations but at board level. 32 1 There was no oversight -- 2 A. Well, it reported up through the Operations Director. 3 But we wouldn't have been progressing each case at board 4 level because the organisation was just too large, it 5 just wouldn't be looking at individual cases. If 6 something notable happened, and that Welsh one was 7 notable, I guess, and it got its whole paragraph. But 8 when I would have read that, I would have seen that the 9 postmaster pleaded guilty. 10 My concern now, I understand it, is that postmasters 11 were being advised to plead guilty even if they thought 12 they weren't, in order to reduce -- 13 Q. We're looking at the decision on prosecution. 14 A. Yeah, okay. Sorry, I digress. 15 Q. Let's look at things in another way. 16 A. Yes. 17 Q. Are you aware that the central legal department in Royal 18 Mail Group provided legal advice on the prosecutions? 19 A. I assumed they did, yes. I took comfort from the fact 20 they were there. 21 Q. So you knew that Royal Mail Legal had some involvement? 22 A. Yes. 23 Q. What did you think they were doing? 24 A. Well, it's not an unusual governance structure to have 25 a large central support function that's providing 33 1 a service to two or three different business units in 2 a group, and one of the -- and, for one of those 3 business units, there would be a more senior person, 4 lawyer or accountant or whatever, that would establish 5 a close relationship with the business unit. But their 6 main boss would be the central function. 7 Now, if you're in that business unit, you take some 8 comfort from the fact that there's a more high power 9 individual in Royal Mail Group that is exercising 10 technical oversight over what those people are doing. 11 Q. What did you think they were taking oversight of, for 12 you to gain any comfort? 13 A. The quality of the legal decisions being made. 14 Q. What were the legal decisions being made? 15 A. Well, there was a whole variety of things, we had, you 16 know, fraud on Post Office Card Account. There was 17 loads of activity going on that was nothing to do with 18 the Horizon issues and subpostmasters. 19 Q. Right. So let's focus purely on the decision to 20 prosecute. Did you realise that -- sorry, let's make it 21 broader than that -- the investigation of subpostmasters 22 for theft, fraud and false accounting and the subsequent 23 prosecution, did you think that the Royal Mail Group 24 Legal Department had any involvement in that? 25 A. I would have thought they'd had oversight, yes. 34 1 Q. Why did you think that? 2 A. Because they were responsible for the legal function. 3 Q. I'm going to go back to the hypothetical where we 4 started earlier. If you were aware, assume you were 5 aware, that Post Office Limited were making the 6 decisions to prosecute, yes -- 7 A. Yes. 8 Q. -- would you have sought to get a legal function within 9 Post Office Limited? 10 A. Well, the latter wasn't an option because that had been 11 debated when I first was offered the role. But I would 12 have -- if I had discovered that back then, as I think 13 I've already said, I would have then looked at how we 14 could put safety checks in, and whatever, but it would 15 be something that I would have reviewed with the Group 16 Legal Director. 17 Q. With hindsight, do you think relying on the Group Legal 18 Department was effectively putting that advice too high 19 up the chain? 20 A. Well, I think it was a mistake on my part. You know, 21 I'd -- I shouldn't have allowed the organisational 22 structure to give me any sense of less of 23 an accountability because I was accountable. But no, 24 I don't think -- this was quite a big deal. I think it 25 would be right and justifiable for me to be talking to 35 1 the Group Legal Director and seeking personal assurance 2 from him that he was comfortable with what they were 3 doing. 4 MR STEVENS: Sir, I'm going to move on to another topic, 5 I know it's slightly early, but I wonder thought if it 6 might be more sensible to have a break there and then 7 have a longer break until we swap. 8 SIR WYN WILLIAMS: Yes, however you wish to pursue it, 9 Mr Stevens. What time shall we start again? 10 MR STEVENS: 10.35? 11 SIR WYN WILLIAMS: Fine. 12 (10.22 am) 13 (A short break) 14 (10.38 am) 15 MR STEVENS: Sir, can you see and hear me? 16 SIR WYN WILLIAMS: Yes, thank you, yes. 17 MR STEVENS: I'm apologise, I'm going to have to go back to 18 the topic I was just covering. We've given a new 19 document to Mr Cook, which he hasn't, I don't think, 20 seen before, at least not -- I shouldn't say that: he 21 hadn't seen recently. Can I turn that up now, please, 22 it's WITN01820101. Can we go to page 6, please. 23 Mr Cook, this is a letter dated 3 September 2008, to 24 Mr Sabet. Have you seen this recently? 25 A. Five minutes ago, yeah. 36 1 Q. If we can go to the end of the letter, please, on the 2 other page. It says, "Yours sincerely" and then we've 3 redacted that but it says, "Alan Cook". Did you sign 4 this letter? 5 A. I would assume so, yeah. 6 Q. Could we go, please, back to page 1 -- I'm so sorry, 7 page 6; I meant page 1 of the letter. That's very 8 misleading of me. Can we go to the bottom, please. 9 Thank you. 10 So it's referring to previous correspondence about 11 disputed accounting errors. It refers to audits and 12 identified shortages totalling £50,000 -- sorry, 13 £50,619.17, and an outstanding recovery. 14 The last paragraph says: 15 "In terms of the decision to issue court 16 proceedings, the investigations undertaken by the Post 17 Office Security Team are to decide whether there is 18 a criminal case to answer. This is independent from any 19 action that may be taken by the Contracts team, whose 20 role is to focus on contractual related issues only. 21 I believe that Carol Ballan, Contracts Manager, has made 22 this differentiation quite clear during one of the 23 several conversations she has had with you over the past 24 few months. 25 "It gives me no pleasure to write a letter such as 37 1 this and I am truly sorry for any impact this situation 2 may have had on your family. At the same time, I am 3 mindful that the cash and stock we are accountable for 4 are public funds. The decision to issue legal 5 proceedings is never taken lightly. The alleged 6 offences of fraud against you are, however, of 7 a sufficiently serious nature to support that this is 8 the correct course of action to take. That decision, 9 therefore, remains unchanged." 10 Therefore, this shows, doesn't it, that you were 11 aware that it was the Post Office Security Team that 12 made decisions on whether or not there was a criminal 13 case to answer. 14 A. Well, this is another example of the same thing. That 15 is not how I read it and we -- clearly, we wouldn't have 16 wanted anyone prosecuted where we didn't believe we 17 wanted to prosecute but I didn't believe that we were 18 the only party that made that possible, if you see what 19 I mean. 20 Q. Mr Cook, before you sign letters you presumably satisfy 21 yourself that they're accurate? 22 A. Yeah, well, it's how I read it at the time, yes. 23 Q. You say you satisfy yourself that they're accurate -- 24 A. Yes. 25 Q. -- then how would you have done that in this case? 38 1 A. There would have been a file of papers with this, 2 typically, so there would have been -- I forget the 3 beginning. Was this responding to a letter from 4 Mr Sabet? I can't remember. 5 Q. Yes. 6 A. Yes, so there would have been his letter, a report from 7 the relevant part of the organisation and this letter to 8 sign, and they would have drafted the letter. 9 Q. Over the course of working there for number of years, in 10 responding to this letter, you would have known, 11 wouldn't you, that Post Office Limited made the decision 12 to prosecute in some cases? 13 A. I didn't appreciate it was their sole decision. 14 Clearly, we would have had to have decided it wanted to 15 happen but I still felt that it wasn't the Post Office's 16 power to do so. So it's the same point that I was 17 making before the break. 18 Q. I'll move on. I want to look at knowledge of Horizon, 19 please. Could we take your witness statement at page 8, 20 paragraph 27. Paragraph 27 talks about knowledge of 21 Horizon as a Non-Executive Director and I think it's 22 about roughly eight lines down, you say: 23 "I recall asking about reliability in terms of 24 system availability and accuracy." 25 What do you mean by system availability and 39 1 accuracy? 2 A. In terms of was it there when it was meant to be there, 3 if you see what I mean. So when the day started, if you 4 turned the thing on, was it available? And, in fact, 5 later on in my time there, that did become an issue, 6 where the system wasn't available, and a lot of the work 7 of the subsequent development of Horizon was to make it 8 run faster, more efficiently and definitely finish all 9 its overnight processing before it needed to come up in 10 the morning. So that's availability and then that it 11 all worked and the screens didn't lock and all that sort 12 of stuff. 13 Q. And it produced accurate accounts? 14 A. Sorry? 15 Q. And it produced accurate accounts? 16 A. Yes, yes. But accuracy was a much broader term than 17 just the accounts. It was obviously, you know, did it 18 perform correctly? If I'm doing a road tax disc, when 19 I press this button, does it produce the right road tax 20 disc, for example? 21 Q. You go on to say: 22 "Availability seemed to be good and I was assured at 23 the time that there were no critical bugs or defects." 24 Who assured you? 25 A. Well, I can't name individuals but, when I was doing my 40 1 rounds, I was in -- walked -- not walked but met with 2 people in the Operations area and got demonstrations, 3 certainly one of the two David Smiths would have been 4 one of the people that I sat down with, the IT guy, to 5 talk me through the system, its history, its current 6 level of performance. This was in an environment where 7 the accuracy of the system was not really in question 8 but there were issues about, as I say, its oversight 9 performance and its available. 10 Q. Can we just jog on to page 15, please, and paragraph 42. 11 There you say: 12 "I have been asked whether I was ever told that 13 there were no systemic issues with the Horizon or 14 problem with integrity prior to February 2009." 15 You say: 16 "I do not recall being told at any time, whilst 17 a [Non-Executive Director], that there were or were not 18 systemic issues with Horizon or problems with 19 integrity." 20 So are you talking about something different here to 21 when you said earlier you were assured on its accuracy? 22 A. Well, no, this is -- this was about while I was a NED, 23 so it was the first 12 months that I was involved in the 24 Post Office, and the level of briefing I got as 25 a non-exec was less than I received when I became 41 1 Managing Director and I think this paragraph is talking 2 about was I told whether or not there were systemic 3 issues. It was a problem that didn't come up in my 4 briefing. 5 Q. So you were told it was accurate; is that right? 6 A. Well, what I was saying there was that accuracy was not 7 flagged as an issue. 8 Q. Right. 9 A. Yeah. 10 Q. So, effectively, accuracy and integrity, when you were 11 a NED, were a non-issue? 12 A. Assumed to be okay, yes. 13 Q. That document can come down. Thank you. Could we 14 please bring up POL00021487. This is a minute of the 15 Board meeting of Post Office Limited on 23 February 16 2005. That was your first Board meeting you attended as 17 a Non-Executive Director, wasn't it? 18 A. Yes, it must have been, yeah. 19 Q. Looking at the attendance list, who there was 20 responsible or had expertise in IT? 21 A. Well, it would be Ric Francis as the Operations -- 22 Q. Ric Francis? 23 A. Yeah. So people like David Smith, that I referred to 24 a moment ago, worked for Ric Francis. 25 Q. On the meeting was David Miller, as well, Chief 42 1 Operating Officer. What it did you know of his 2 background? 3 A. Well, I'd never met him before I joined and he had been 4 at the Post Office for many, many years and seemed to be 5 the font of all knowledge, if you see what I mean. 6 Seemed a respected guy. When I arrived -- sorry, this 7 when I'm a non-exec, that's right. So he was the Chief 8 Operating Officer. By the time I was approached to 9 join, he had indicated his decision to retire, so 10 I didn't really work with him as an executive but I did 11 work with him. 12 Q. You said he was the font of all knowledge -- 13 A. Yeah. 14 Q. -- did that include on Horizon? 15 A. Well, I don't think he was an IT specialist but he would 16 have had all the history, yeah, he was a knowledgeable 17 guy. 18 Q. Were you aware he was heavily involved in the pilot of 19 Horizon? 20 A. I wasn't specifically, no. It wouldn't surprise me but 21 I didn't know that. 22 Q. Can we turn, please, to page 6, and if we could go down 23 so that -- that's perfect, thank you. 24 Now, this is a discussion on Horizon Next Generation 25 which we've been calling Horizon Online. I don't want 43 1 to cover Horizon Online now. I want to look at (f), 2 where it says: 3 "Assurance was provided to the Board that the new 4 system would have at least a similar standard of current 5 capability." 6 Do you recall there being any discussion on the 7 adequacy of what's called Legacy Horizon, the model of 8 Horizon that was running at the time. 9 A. No, my -- obviously, this was my first meeting but my 10 impression was there was a level of contentment with the 11 functionality of the system but not its running cost 12 and, occasionally, its availability. So I believe this 13 Next Generation proposal was about making it cheaper and 14 faster to run. You make it faster, you make it cheaper, 15 but -- and so the guarantee that was being given was 16 that it wouldn't reduce the level of capability. There 17 would be no point making it run faster and cheaper if, 18 in fact, there were things that we used to be able to do 19 that we couldn't do any more. 20 Q. Was there anyone on the board asking probing questions 21 as to the capability or the adequacy of the systems? 22 A. Well, my impression, attending this board meeting -- my 23 very first one -- was that we were treading ground that 24 everybody in the room had already discussed, apart from 25 me, because the vast majority of people on that meeting 44 1 were the management team. So I'm sure they would have 2 debated it before it came in. So if there was challenge 3 within the management team, I didn't see it. That 4 didn't mean it didn't happen at an earlier meeting. But 5 the only people I suspect that were looking at this at 6 that meeting for the first time would have been, 7 I assume -- I can't remember the attendees -- but Mike 8 Hodgkinson, I assume, would have been there, myself and 9 Brian Goggin, if he was there, would have been there 10 would have been the only people that were seeing it for 11 the first time, if you see what I mean. 12 Q. Was it not precisely your role as a Non-Executive 13 Director to challenge -- 14 A. It was, it was. 15 Q. The -- 16 A. It was my first meeting. I can't remember what I asked 17 but I remember and I've commented in my witness 18 statement that one of the things I would have imagined 19 I would have commented on is that, if you're trying to 20 make the system run faster and more slickly, it is quite 21 dangerous to try to start changing the functionality at 22 the same time, right, because the way you test it is to 23 produce "Does this run faster, cheaper and quicker, and 24 does it give you the same answer?" If you start 25 changing the functionality at the same time it makes 45 1 interpreting the test results more difficult. 2 Now, of course, the problem is that relies on the 3 fact that you are comfortable with the functionality 4 that is already in place. So any counsel I would have 5 offered would have been on the assumption that the 6 system functionality was sufficient, was that we should 7 try not to change the system functionality and focus on 8 the real objective which, was to get the thing to run 9 faster and cheaper. 10 Q. Please can we turn to POL00021420. It's another Risk 11 and Compliance meeting, 22 March 2006. So you would 12 have been Managing Director at that point? 13 A. By a few days, yes. The conversation about me being 14 a regular attender took place between this meeting and 15 the next one; and the next one is the one you've already 16 showed us as me being present. But, yes, I was not 17 present at this one. 18 Q. So you were not present but, again, you missing read the 19 minutes? 20 A. I'm sure, yeah. Well, definitely, because I was in post 21 by then. 22 Q. Could we turn to page 8, please, I believe. Yeah, 23 page 8. There's an appendix to this concerning the 24 IMPACT Programme, which the Inquiry has heard 25 significant amounts of evidence on. It says: 46 1 "IMPACT and the POLFS accounting system has moved on 2 significantly since the last report to the Risk and 3 Compliance Committee. 4 "The system is not yet processing all transactions 5 correctly and so the end state of POLFS ledgers which 6 automatically interface to the main business account has 7 not yet been achieved." 8 Do you recall reading that and can you tell us what 9 your views on it were? 10 A. I don't remember specifically. I can't interpret from 11 that, is that something that's in a testing phase or is 12 it something that's meant to be in production? 13 Q. Well, do you remember what your views -- 14 A. No, what I'm saying is I don't remember what I might 15 have said -- well, I didn't say anything because 16 obviously I wasn't at the meeting but, if I read that, 17 I would be -- my first question would be "I can't tell 18 from that paragraph whether this is something that's in 19 production and being used or it's results of testing 20 that they're working on". Because it talks about -- 21 it's "moved on significantly since the last report" sort 22 of implies that these are test results but I don't know. 23 Q. So you would have needed to follow up a bit further? 24 A. Yeah, I wouldn't have understood that. 25 Q. We'll move on to a different topic, please. 47 1 POL00081928. If we could turn to page 13, please. If 2 we could go to the email at the bottom, please. Thank 3 you. It's there. That's perfect, thanks, because we 4 see -- 5 It's one of these very unhelpful email print-offs 6 where we see that it's to Shaun Turner on the 11 January 7 2006, subject "Callendar Square". 8 Over the page -- 9 A. Oh, I see. Sorry, yeah. 10 Q. It says that: 11 "The [subpostmaster] has reported that he is again 12 experiencing problems with transfers, [5 January 2006] 13 which resulted in a loss of around £43,000 which has 14 subsequently rectified itself. I know that the 15 [subpostmaster] has reported this to Horizon Support, 16 who have come up back to them stating that they cannot 17 find any problem." 18 If we could then turn to page 6, please. If we can 19 go down to the second email in the chain, thank you. 20 This is an email the Inquiry has seen before. It's from 21 Anne Chambers to Mike Stewart, both within Fujitsu, and 22 it refers to the same issue, Callendar Square. Second 23 paragraph says: 24 "Haven't looked at the recent evidence, but I know 25 in the past this site had hit the Riposte lock problem 2 48 1 or 3 times within a few weeks. This problem has been 2 around for years and affects a number of sites most 3 weeks, and finally Escher say they have done something 4 about it. I am interested in whether they really have 5 fixed it which is why I left the call open -- to remind 6 me to check over the whole estate once S90 is live." 7 So this is a problem that appears to have caused 8 a discrepancy, a significant discrepancy? 9 A. Mm-hm, and these are both Fujitsu people, you say? 10 Q. These are Fujitsu people, yes. 11 A. Yes. 12 Q. Do you accept it's a problem that caused a significant 13 discrepancy? 14 A. Well, I don't know. I've only -- I'm just reading this. 15 I assume it must have done. I've never heard of the 16 Riposte lock problem before. 17 Q. Well, let me put it this way: if there was a problem, 18 which had the potential to cause discrepancy of over 19 £40,000 -- 20 A. Oh, I see, because it relates to the email -- yes, okay, 21 yeah. 22 Q. -- and it had been around for years, affects a number of 23 sites most weeks, that's a significant concern, isn't 24 it? 25 A. Yeah. I don't know if that problem is the same as the 49 1 discrepancy, but -- 2 Q. It's the same email, as I say -- you see at the top 3 Callendar Square? 4 A. All I'm saying is I don't know if that has produced -- 5 Q. I see. 6 A. -- the discrepancy. 7 Q. If we can go up in the chain, please. Sorry, just to 8 the top, if you can go down a little bit, please. 9 There's perfect, thank you. 10 That email is forwarded by Mike Stewart to Lynne 11 Fallowfield, who is at the Post Office. It says: 12 "Lynne, I was waiting for an update on ... Callendar 13 Square. See the email chain below." 14 It goes on to say: 15 "I think I am inclined as per this issue to wait and 16 see if all these branches are ok after the S90 counter 17 roll starts 4th after the pilot this week." 18 That document can come down for the moment. 19 You said you weren't aware of the Riposte lock 20 issue. 21 A. Yeah. 22 Q. Were you ever aware of an issue at Callendar Square when 23 you were Managing Director? 24 A. No, I don't -- well, I don't recall. I don't recall. 25 Q. Could we please bring up POL00032210. It's a Board 50 1 meeting on 20 April 2006. If you can just get the 2 entire attendance list in there, please. 3 Looking down that, in terms of IT people, you 4 earlier identified Ric Francis. 5 A. Mm-hm. 6 Q. Is there anyone else who had an IT background there? 7 A. Not -- there doesn't seem to be anybody that works for 8 Ric -- that worked for Ric, that is in the attendance 9 list so, no, I don't think so. 10 Q. Can we go to page 10, please, and down to the 11 "Operations Report" section. It says, "Horizon S90 12 release". 13 So do you remember we saw in the last email it says 14 that the problem would be fixed with S90. 15 A. Yeah, yeah. 16 Q. It says "This release would", and it lists a number to 17 things it would do: (i) transfer Bureau debit/credit 18 card transactions; more to do with debit and credit 19 cards; some generic payments; and then (iv): 20 "Provide for a plethora of change requests across 21 a variety of existing capabilities." 22 Did the board interrogate what those changes would 23 be? 24 A. Well, I can't remember but that would be something 25 I would normally challenge. You know, a plethora of 51 1 change requests is -- you get great detail on the first 2 three and I'm sure they're bigger, and I'm sure those 3 things will be individually smaller but, if it's 4 a plethora of them, to use the word then, that suggests 5 it would require probing. But I don't recall the 6 conversation I'm just reading it cold here. 7 Q. Based on how the minutes were created at Post Office 8 Limited, if there had been challenges, would they have 9 been recorded in the minutes? 10 A. I'd have hoped so. 11 Q. So do I take it from that -- well, what is your 12 evidence: do you think it was challenged or it wasn't? 13 A. Well, there's no evidence of it being challenged. 14 That's -- 15 Q. Why wouldn't it have been challenged? 16 A. I don't know. There could have been some reassuring 17 words when the thing was presented that saw off 18 challenge and this is how the person doing the minutes 19 chose to summarise the conversation. But, I mean, 20 I literally do not remember the conversation. But there 21 is clearly no documentary evidence that that fourth 22 bullet point was probed. 23 Q. Do you think if there was a non-exec on the board with 24 IT experience, that might have been challenged -- 25 A. Yes. 52 1 Q. -- or is more likely to have been challenged? 2 A. Yes, and, interestingly, in roles more recently, it's 3 become much more common for IT, senior or sort of -- or 4 recently retired senior IT people to join boards of all 5 sorts of businesses. So I chaired a small bank and we 6 had an IT professional on the board. It was always 7 a struggle for him because he wasn't a banker. But 8 actually he was there because he was an IT person and 9 provided useful, independent challenge. But there was 10 no such person on the board at this time, other than 11 employees. 12 Q. Executive members? 13 A. Yes, executives, that's right, yes. 14 Q. Did you feel sufficiently able to challenge the 15 executive? 16 A. I felt able to challenge the executive to a level that 17 was comparable with my experience but I wasn't 18 purporting to be an expert in every functional activity. 19 So I had a bias in my personal background which said 20 I was an operations-type guy in my early years, not IT, 21 but, you know, processing, operations. I spent all my 22 time in Financial Services and they were all the reasons 23 why people felt I would be worth having on the board. 24 But I wouldn't be able to -- and I did actually, for 25 a period, at the Prudential, run -- responsible for IT, 53 1 but I had an IT Director supplied by Accenture that 2 reported to me, so I wouldn't have been a detailed 3 specialist. 4 Q. At any point did you ask for more support with IT to be 5 able to challenge the executive in a more adequate way? 6 A. Well, the point was that the -- there wasn't an appetite 7 to have other non-execs on the Post Office Limited 8 Board, and we did have the Group IT Director sitting on 9 the Royal Mail Holdings Board and, as I said, what was 10 happening was these things were going up to Royal Mail 11 Holdings Board, and there was more challenge available 12 there, there was a Group legal director, there was 13 a Group IT Director and, whilst they were employees, 14 they weren't branded just Post Office. So there was 15 a level of independence in their interrogation. 16 And I don't think -- I have to say I didn't ask but 17 I didn't ask because I didn't expect the organisation 18 would want me to be looking for independent non-execs to 19 go on the Post Office Limited Board. 20 Q. Let's stand back a bit. Horizon obviously records 21 transactions for the Post Office business, yes? 22 A. Say that again. 23 Q. Horizon records transactions for the Post Office 24 business? 25 A. Yes. 54 1 Q. It provided the data from which the statutory and 2 management accounts would be compiled? 3 A. Yeah. 4 Q. As a director, you had to have confidence in that data 5 to be able to sign off on the management and statutory 6 accounts? 7 A. Yeah. 8 Q. So it follows, does it not, that you needed to be in 9 a position to satisfy yourself that the IT system that 10 generated the data was sufficiently robust and reliable? 11 A. Correct, and one of the ways any board would get that 12 level of comfort is from the external auditors, and the 13 external auditors would come in and they would run 14 software against the system that was, you know, the 15 primary driver of the business, and would run their own 16 reconciliations to make sure does it add up this way, 17 dare I say it, and does it add up that way, and does the 18 answer come the same and they'd have run -- and it's 19 sort of propriety software that's used by auditing firms 20 to validate the financial integrity of the system they 21 are auditing. 22 Q. That type of audit has the concept of materiality, 23 doesn't it? 24 A. Yes, it would. 25 Q. Can you just explain what that is? 55 1 A. So it wouldn't have to reconcile to the penny but it 2 would have to, you know -- but we're not told about the 3 penny in these instances here, are we? We're, you know, 4 it's -- so, so you would -- you should -- it's a pretty 5 reliable way of proving whether or not a system is 6 reconciling. 7 Q. That works, as you say, for statutory accounts -- 8 A. Yeah. 9 Q. -- in terms of the subpostmaster who may be facing a -- 10 A. No, I was just asking your question on accounts. 11 Q. And I am asking another one. 12 A. Okay, yes, I agree, yes. 13 Q. It doesn't help the subpostmaster who -- 14 A. If you're the rounding error, right, that's no joke. So 15 every single one needs to work, because there could be 16 compensating errors, for example. 17 Q. Was anyone on the board thinking of the reliability of 18 the Horizon IT System from that perspective, the 19 subpostmaster's perspective? 20 A. I think Ric Francis was focused on his user community. 21 He wouldn't have been thinking just about 22 subpostmasters; he'd have been thinking about all 23 people, all types of branch that used Horizon to process 24 transactions. There were two audiences, really. What 25 did Horizon feel like for the person on the counter that 56 1 was performing the transaction, who might actually work 2 for a subpostmaster? But also what did it feel like for 3 the customer, who is the other side of the counter, 4 receiving whatever, you know, it is they're purchasing? 5 Q. So that's Ric Francis. 6 A. Yeah. 7 Q. In terms of you as a Managing Director, did you think 8 about it from the subpostmaster's perspective of how -- 9 A. Yes, I did, yeah. I had -- it's only slight digression 10 but certainly when I arrived, I felt the -- that the 11 subpostmaster community felt unloved, to a degree, by 12 Post Office Limited, and one of the -- one of my early 13 objectives was to try to get close to the subpostmaster 14 community and try and resolve that. One of the first 15 things I did was establish a strong relationship with 16 the chap who was then the Federation's top guy, and the 17 top team, and I started -- 18 Q. Can you just say for clarity -- can you give a name, 19 please? 20 A. Colin Baker his name was, sorry. And then I started 21 a programme of visits -- which, in the end, I did for 22 the entire three years and ten months that I was 23 there -- of going out, and I would -- on a Friday, and 24 I would pick a part of the country and then I would say 25 to the Fed and I would say to the regional manager in 57 1 the area, "I've got time to visit five branches, give me 2 a list of branches that I can go and visit", and I went 3 randomly and visited them. 4 That was the biggest source of information. Oh, 5 and, just to be plain, it wasn't just subpostmasters; 6 I visited Crown Offices and franchise branches as well. 7 But that was my attempt to keep my feet on the ground as 8 to what the organisation was thinking and worrying 9 about, and, for those subpostmasters in the room, you'll 10 guess, I got plenty of feedback, right, and -- 11 Q. On that, if I may -- 12 A. Sorry. 13 Q. -- you say in your statement you think you visited about 14 250 branches over a period of years. 15 A. Yeah, yeah. 16 Q. Without criticising -- I'm not criticising the effort -- 17 but, in terms of getting feedback from how users found 18 the Horizon IT System, that was a very, very small 19 proportion of the number of users using it, wasn't it? 20 A. Well, all the numbers in the Post Office are very large, 21 right, so you do what you can do. All I can say is that 22 I found the visits illuminating. I can remember being 23 in one village that will be nameless and the 24 subpostmistress took me back into her kitchen behind the 25 shop and went through the process of how car insurance 58 1 was sold and why she couldn't be bothered to sell it 2 because of the torturous process that was followed, 3 following which we changed it. 4 Q. Well, let -- so those are individual -- was there 5 anything else you did, other than those visits, to try 6 to understand how subpostmasters found the Horizon IT 7 System? 8 A. Well, I wasn't just talking about the Horizon IT System; 9 I was talking about the business as a whole. 10 Q. No, but my question is about just the Horizon IT System. 11 A. Well, my primary focus was on the Federation, so I used 12 the Federation as, you know, the mouthpiece of 13 subpostmasters to provide input, and then there was a-- 14 there was -- on the staff, there was someone that ran 15 the Crown Offices. So I looked at the Federation, the 16 Crown Offices and the franchise branches. 17 Q. Just so I've got this clear, during your period as 18 Managing Director, you had your 250 or so visits to 19 branches themselves and then, in terms of further 20 subpostmaster feedback, that was effectively filtered 21 through the NFSP? 22 A. Yes, yes, filtered sounds a bit harsh, but yes. 23 Q. Well, sorry, it came through the NFSP? 24 A. It came through the NFSP. They were -- you know, they 25 were always forthright, vociferous, friendly, it wasn't 59 1 antagonistic. Colin Baker, in particular, went out of 2 his way to welcome me into the family, if you see what 3 I mean. My wife and I used to go to Federation dinners 4 and all this sort of stuff. It was important to me to 5 get close to the community that was servicing our 6 customers. 7 Q. While we are on this, I want to come to what the 8 Inquiry's termed as "responding to the emerging 9 scandal". Can we please look at POL00027890. 10 This a letter, in your statement you've described it 11 as the Porteous Letter. It's sent, we see at the top 12 right -- it's Pat McFadden MP, then Minister for 13 Employment Relations and Postal Affairs. 14 A. Yeah. 15 Q. It includes correspondence from Brian Binley MP, who, in 16 turn, includes an email from Rebecca Thomson. 17 A. Yeah. 18 Q. Can we look at the email, please. It's page 3 19 I believe. This is an email dated 10 February 2009 but, 20 as I said before, you only received it on 7 May -- 21 A. Yeah. 22 Q. -- according to the stamp. It refers to speaking to: 23 "... several current and former subpostmasters, who 24 say that random flaws in the IT are causing deficits in 25 their weekly accounts, sometimes thousands of pounds at 60 1 a time. The complaint is that, instead of listening to 2 their problems and investigating the software or 3 equipment, the Post Office is making them pay back this 4 money without any investigation into what is going 5 wrong." 6 It continues as such. 7 Do you recall receiving this and reading it? 8 A. Yes, well, this was the moment, right. Now, strangely, 9 I saw the article from Computer Weekly before I saw 10 this, only because, as you remarked, the letter was date 11 stamped in 7 May. It went out with a deadline -- if 12 anything came in from Pat McFadden, it was dealt with 13 quick -- for me to reply about a week later but, in that 14 week, the Computer Weekly article came out so we're only 15 talking about a couple of days but the reality is I saw 16 the Computer Weekly article before I saw this 17 correspondence and, actually, I didn't particularly put 18 the two together because my head was full of the 19 Computer Weekly article. 20 Q. Yes, we'll come to that shortly. 21 A. Yes. 22 Q. That email can come down. At paragraph 79, page 27 of 23 your witness statement -- it doesn't need to be turned 24 up -- you say that, when you received that letter, you 25 indicated to Michele Graves, Executive Correspondence 61 1 Manager, that you would like the matter thoroughly 2 investigated? 3 A. Yeah. 4 Q. Okay. Can we look then at the Computer Weekly article 5 now, please. That is POL00041564. As you say, the 6 article is by Rebecca Thomson in Computer Weekly. If we 7 could go down slightly, please. Thank you. It refers 8 to the case of Lee Castleton, and -- I'll ask this 9 first: were you aware of Lee Castleton before reading 10 this article? 11 A. No. 12 Q. It states that: 13 "[He] was declared bankrupt after he refused to pay 14 the Post Office £27,000 ... 15 "Castleton insists he did not owe the money -- 16 although it showed as a loss on the Post Office's 17 Horizon system, which is used by postmasters to do their 18 accounting. He is one of several postmasters to come 19 across losses they could not explain." 20 If you could turn over the page, please. The second 21 paragraph says: 22 "Having lost the case, Castleton was left with costs 23 of £321,000. In 2007, he filed for bankruptcy. 'I was 24 in too deep -- I see that now. The whole thing has been 25 heartbreaking', he says." 62 1 The Castleton trial, the Post Office v Castleton, 2 was heard while you were Managing Director. 3 A. Apparently so. 4 Q. You say you were unaware of it? 5 A. I was unaware. 6 Q. £321,000 or money -- that amounted to significant debt 7 to be owed, isn't it? So, in other words, the legal 8 costs that Post Office spent in pursuing that claim was 9 significant? 10 A. Sorry, just to be clear, when I say I was unaware about 11 this particular case, but we have seen earlier the 12 reports that were being issued but they were summarised 13 reports with totals on them. So I'm sure this case 14 would have been in there but it may not have been 15 separately identifiable. 16 Q. So you might not have known the name Lee Castleton? 17 A. That's right, yeah. 18 Q. But you -- 19 A. I can't remember, but there was reporting. So I, you 20 know, which we've seen already this morning. 21 Q. Did you not think to ask why there was such 22 a significant legal spend on one case? 23 A. I just don't recall. I can't -- 24 Q. Do you think why you wouldn't ask that? 25 A. I can't think why I wouldn't, and so either it was 63 1 a mistake on my part or it wasn't in the report. 2 I don't know. Put it this way: this article was a shock 3 to me. Should it have been a shock to me? No, it 4 shouldn't have been. But it was. 5 Q. That can come down. Thank you. 6 That's 11th May. You say in your statement, and 7 you've already alluded to it, in fact make can bring it 8 up. Please can we go to page 28, paragraph 85 of the 9 statement. At the bottom, you say: 10 "... at the time, I did not connect the Computer 11 Weekly Article to the complaint raised in the Porteous 12 Letter." 13 A. Yes, if I could just expand it, when I wrote that, 14 I hadn't worked out that overlap. I hadn't spotted the 15 date stamp on the letter, so the reason I didn't connect 16 it was the Computer Weekly article was the first thing 17 I read, not the complaint, if you see what I mean. 18 Q. It is your evidence now that you did connect the two? 19 A. Well, I connected it afterwards, what I'm saying is when 20 I saw the Computer Weekly article, I hadn't seen the 21 complaint case. 22 Q. So do you think when you read the complaint after the 23 Computer Weekly article, you would have connected the 24 two? 25 A. I can't remember, I mustn't claim things I can't 64 1 actually remember, but it seems likely. But ... 2 Q. Can we turn, please, to POL00141142. If we can go to 3 page 2, please, and to the bottom. 4 This is an email from Dave Posnett. Now, we see 5 there that the email looks to be dated 05/10/2009. 6 A. Yeah. 7 Q. Immediately above, it's 20/10/2009 and, if we can go -- 8 just go up slightly, please, there should be a date 9 stamp. It might be on the other page, sorry. Can we go 10 to the bottom of page 1, please. It gets quite 11 confusing because you've got 05/10 and then, further up, 12 02/10. The question I have is, in October 2009, are you 13 aware of any investigation that was requested into 14 Horizon integrity issues? 15 A. Yes, because it post-dates the Computer Weekly article. 16 Q. So you think this all leads from the Computer Weekly -- 17 A. Yes, I would have thought so, yeah. I don't equally 18 understand the dates because they appear to be in the 19 wrong order but it's October. It sort of doesn't really 20 matter, I suspect. 21 Q. If we can now please turn to POL00158368. Could we go 22 to page 23, please. Down to the bottom, please, thank 23 you. It's an email from Michael Rudkin. Do you 24 remember Michael Rudkin? 25 A. Yes, I recognise the name, yes. Although, obviously, 65 1 I've read this stuff but, before that, I recognised his 2 name. I think he was Federation connected in some way. 3 Q. It says: 4 "See attachment!!! 5 "I presume you have already seen the article in the 6 convenience store magazine." 7 Then there's a bullet point, and the next paragraph 8 goes on to say: 9 "This should also minimise adverse publicity to our 10 industry which is already receiving enough bad press at 11 the moment. Currently, the BBC, Panorama and Watch Dog 12 researches are digging the dirt here in Leicestershire." 13 If we can then go up to see the forwarding email, 14 please, I think it's on the beginning of the next page. 15 Thank you. Yes, the Alan Cook email, thank you. So 16 this is 15 October. You send an email to Mary Fagan. 17 Do you remember who Mary Fagan was? 18 A. I definitely do, I definitely remember this email. 19 Q. Who is Mary Fagan? 20 A. She was the -- well, the PR Officer for the Royal Mail 21 Group. 22 Q. It says in the second paragraph: 23 "For some strange reason there is a steadily 24 building nervousness about the accuracy of the Horizon 25 system and the press are on it as well now." 66 1 Were you seeing this as a significant and escalating 2 issue? 3 A. I was then, yes. Hence my -- well, I then expressed in 4 the next sentence my confusion as to why but, yes, 5 I accepted that we had an issue. 6 Q. Were you connecting the various Horizon challenges at 7 that point, so the Porteous Letter, the Computer 8 Weekly -- 9 A. Yeah, that's right, yeah, this is -- this was around 10 that time that it came to the fore for me, if you see 11 what I mean. 12 Q. You go on to say: 13 "My instincts tell that, in a recession, subbies 14 with their hand in the till choose to blame the 15 technology when they are found to be short of cash." 16 Why was your instinct to think that subpostmasters 17 who alleged that Horizon caused shortfalls were stealing 18 from the Post Office? 19 A. Well, that's an expression I'll regret for the rest of 20 my life, so it was an inappropriate thing to put in 21 an email, not in line with my view of subpostmasters. 22 But one of the often cited problems was, at this time, 23 Mike Hodgkinson talked sort of quite eloquently about 24 the challenges that Post Office had faced in -- 25 financial challenges and the danger is that we only 67 1 think about the profit or not that Post Office Limited 2 were making but I always used to say "We haven't got one 3 bottom line here, we've got 12,001 bottom lines", and, 4 if the Post Office isn't working, then it isn't working 5 for subpostmasters. 6 You know, they've probably got a shop with a sub 7 post office in it, that sub post office needs to produce 8 enough profit for them to make it worth having it there 9 at all. And so, getting the business profitable again 10 meant getting it profitable again for subpostmasters. 11 We had been through a few years when I joined when 12 I don't think the Post Office earnings for 13 subpostmasters were worth the effort they had been 14 putting in, and so that was -- and so I think a number 15 of them were struggling and, when we ran the branch 16 closure programme, was an aim to reduce the number of 17 offices, such that -- and then the same traffic would 18 come through a smaller number of post offices and they 19 would be more profitable, which, of course, is what 20 happened. 21 Q. You're talking in a different context there -- 22 A. Yes, I sort of digressed, I'm sorry. 23 Q. Because what's happened here is you've faced challenges 24 by subpostmasters -- 25 A. Yeah. 68 1 Q. -- saying that the system is faulty, and saying that 2 it's caused shortages, correct? 3 A. (No audible answer) 4 Q. In perhaps an unguarded comment, you've put that the 5 instincts were for it to effectively be that the 6 subpostmasters were stealing and then blaming the 7 technology. Does that represent your actual views at 8 the time? 9 A. No, but it was said, it was -- 10 Q. Why did you say it if it wasn't your views? 11 A. Well, I had a friendly informal relationship with Mary 12 Fagan and, it was just an email, I shouldn't have -- 13 it's just an email I shouldn't have written but it was 14 important to me that she understood exactly where we 15 were at. But she was a Royal Mail person and it was one 16 of the areas where I was very, very happy with the 17 support got it from Royal Mail, so she was very helpful 18 to me, she was a sounding board and I was probably more 19 open and frank with what I was thinking with her, than 20 many other people. 21 She was also in a different building, which meant 22 that we swapped emails a lot. And so, as I say, I -- 23 that sentiment was expressed, what I wrote in that email 24 was unacceptable. 25 SIR WYN WILLIAMS: It wasn't just to her, was it? It was to 69 1 Mr David Smith as well? 2 A. Yeah, quite. Yes. 3 SIR WYN WILLIAMS: Was it your view at the time that he 4 would have shared your view? 5 A. I don't know, to be honest. It was regrettable, 6 I was -- it was like I was just chatting to her in the 7 corridor but, as you say, sir, it was actually -- there 8 were other people on the copy list. 9 MR STEVENS: You said earlier that you were very shocked 10 when you read the Computer Weekly article, correct? 11 A. Yes, yes. 12 Q. You'd received several letters from MPs, making the same 13 complaints? 14 A. Afterwards, yes. 15 Q. Yes? 16 A. Yes, yes. 17 Q. But there was, I think, a body of opinion growing 18 here -- 19 A. Yeah. 20 Q. -- or at least a body of complaints, I should say -- 21 A. Yes. 22 Q. -- and you say at this point you saw it as escalating 23 and significant? 24 A. Yes. 25 Q. Why didn't you arrange for an independent investigation 70 1 at this point into the allegations? 2 A. Well, I -- the first step seemed to be to investigate it 3 ourselves. So that was what we did and we referred to 4 the correspondence a few minutes ago where that process 5 of, I forget the expression, integrity or whatever it 6 was, was used, was -- you know, we needed to examine it 7 ourselves and ask ourselves what could be wrong. 8 Q. Well, what steps did you take to oversee that 9 investigation? 10 A. Well, I asked for the investigation to be done, I was 11 keen to know who would do it. 12 Q. Who did it? 13 A. Andy McLean, who reported to Ric Francis. The reason 14 I wanted to know who to do it was what did I think of 15 the person that was going to do it and Andy was a, you 16 know, no nonsense, knowledgeable guy who, to my mind, 17 would, you know, speak out if he needed to. 18 I suspect -- one of the problems, I think, is that 19 we were still, I think, investigating the cases that had 20 been highlighted, as opposed to the whole thing, if you 21 see what I mean. So there -- I still thought we've got 22 these cases that have got wrong, we've got to find out 23 the answer. 24 Q. But what stopped you from getting an external body in to 25 do that? 71 1 A. Well, nothing stopped me. I felt we should do the 2 internal review first. Now, it is complicated by the 3 fact that I left the business a few months afterwards 4 but, at that stage, it -- you know, you wouldn't get in, 5 an external review until you'd asked your own people to 6 investigate. 7 Q. So was your thinking that the -- you'd do an internal 8 review first and then, from there, determine whether 9 an external review was necessary? 10 A. Yes, but I had no particular expectation of what would 11 be found, because, at that stage I thought we were 12 talking about a handful of cases, and it could have been 13 a different problem for each one. Now, I have to be 14 honest, by the time it all came out, I don't know what 15 the problem was, but it was clearly wider than the cases 16 that had been highlighted to me. 17 Q. Could we bring back up, please, POL00141142. Thank you. 18 That's an email from Dave Posnett on 20 October 2009, so 19 five days after your email which we were just at. 20 You're not in copy. 21 A. No. 22 Q. It refers to some conference calls. It says: 23 "David Smith phoned me last week -- asked me a few 24 questions, and indicated that Alan Cook is asking for 25 more robust defence of Horizon." 72 1 Were you asking for a defence of Horizon, rather 2 than an investigation into its integrity. 3 A. Definitely not looking for a robust defence. Just 4 looking for answers. 5 One of the perils of being the boss is that people 6 use your name to get things done and, you know, it -- 7 I would have responded to that if I'd been copied and 8 said "That's not what we're after". 9 Q. Dave Posnett could have used your name and said, "Alan 10 Cook is asking for an independent review of Horizon" or 11 "Alan Cook is asking for a review into its integrity"; 12 what was put was, "Alan Cook is asking for a more" -- 13 A. Yes, I know. 14 Q. -- "robust defence of Horizon". 15 Are you saying those words didn't come from you? 16 A. I wouldn't have said that, I'd have said -- "Robust" was 17 a word I used, which I meant thorough and vigorous, but 18 "defence" wouldn't have been a word I'd use. 19 Q. You'd use "robust" to mean thorough? 20 A. Yes, but defence is a different point. At this stage, 21 there was the Computer Weekly article and a few 22 complaints on specific cases, and I was more than 23 prepared to believe that the answer would be different 24 to each of them and that the answer wasn't that there's 25 nothing wrong. But, obviously, that's the stance that 73 1 the organisation took in the event. 2 Q. The manner of the investigation or how you chose to 3 respond to these allegations, was that influenced by 4 your instinctive view which we went to earlier about the 5 subpostmasters raising -- 6 A. No, it wasn't, actually. My belief would be that we 7 would find things that were wrong. I'll put it another 8 way: we would find things that were not the fault of the 9 people running those Post Office branches. Now, it 10 could have been the procedures they were required to 11 follow, it wouldn't necessarily have to be the 12 technology, but it seemed to me unlikely to have -- 13 I know it wasn't loads -- but that many cases -- what 14 was it, seven, nine or ten cases -- that are all coming 15 to my attention at the same time; sounded like there was 16 a problem. 17 Q. So what happened to the review? 18 A. Well, I have difficulty in remembering. I think it went 19 on past my departure. 20 Q. Sorry, I missed that. 21 A. I think it went on past my departure. 22 Q. Can we go back then please to POL000158368. I think 23 it's page 22. No, sorry. The next page. My apologies. 24 So we've got the Michael Rudkin email we went to at the 25 start at the bottom there. Then, if we go, if we can go 74 1 up, please. That was the response, the end of the 2 response which we referred to, and you're forwarding it 3 saying: 4 "We should therefore be careful of approaching him 5 for further info without talking to Paula first." 6 Who are you referring to there? 7 A. Paula Vennells. 8 Q. Paula Vennells? 9 A. Yeah. 10 Q. Why did you need to talk to Paula Vennells first? 11 A. I'm not sure, really. I obviously thought it was a good 12 idea at the time, but this was a network issue, and she 13 was responsible for the network. So I didn't want to -- 14 there were two lines I could go down. I could go down 15 the Operations Director line, responsible for the 16 technology, or I could go down the network line, which 17 was Paula. And we were focusing, I was focusing too 18 much on the Operations line and Paula needed to be 19 brought into the picture. 20 Q. Could we go to the page before, please, just to see the 21 email chain. Thank you. Just carry on going up please. 22 So that email, which was on 15 October, is forwarded by 23 Ruth Barker to Paula Vennells on 5 November. We then 24 see the next day Paula Vennells replies to Ruth Barker 25 and you're in copy. 75 1 A. Yeah. 2 Q. It says: 3 "Ruth, the attachment needs to be in email format, 4 please -- Alan and I are out of the office and so need 5 to view it on BlackBerrys. 6 "Also, we need the original email; what was attached 7 looked more like a PowerPoint of a press cutting." 8 Do you recall what conversation you had with Paula 9 Vennells about this email? 10 A. I don't, actually, no, sorry. 11 Q. Do you remember discussing anything to do with 12 an investigation into these issues with Paula Vennells? 13 A. I issued the investigation request down the sort of 14 Operations line, if you see what I mean. So -- because, 15 because I was seeing it as a technology issue. It was 16 the reference to the Federation which meant I felt Paula 17 should be in the loop, plus it was her branches, if you 18 like, that we were dealing with questions from. 19 Q. In your statement, you say at paragraph 101 that: 20 "I gave notice of my resignation to Adam Crozier 21 around late October or early November of 2009, and it 22 was accepted." 23 A. Yeah. 24 Q. So around the time that you forwarded this email -- or 25 sorry not you -- the email was forwarded to Paula 76 1 Vennells? 2 A. Yes, it would have been that sort of -- 3 Q. So do you think at that time you were -- you had 4 resigned or were thinking about it? 5 A. Well, it's embarrassing that I can't tell you the actual 6 date but, I mean, I kept all the correspondence but 7 I kept it for the seven years for the tax purposes and 8 then binned it all. So I can't remember the exact date, 9 but I would have said it was -- well, I can't say more 10 than what I put in the statement, really. It was late 11 October or early November that I went to see Adam, and 12 said, "I'd like to resign". I said "I'd like to see out 13 the financial year, because one of my criteria for 14 success was would the business get back into profit, and 15 we wanted the end of the year, and he asked me to not 16 say anything until the New Year. 17 Now, following that, I then realised that, if I said 18 something at the beginning of the New Year, that 19 Parliament would be in recess and Pat McFadden, who was 20 the Minister, I was very supportive of, he'd worked 21 quite closely with me so I rang Adam and said, "Can 22 I tell Pat before Parliament recesses?" So I rang Pat 23 McFadden in December and told him and then I told my top 24 team on 4 January, so -- 25 Q. That was the public position, effectively, or 77 1 am I misunderstanding you? 2 A. Yes, so it -- so it went public after -- I told the top 3 team, then there was an internal communication, and we 4 told the world, as it were, that I was going. 5 Q. Standing back, why do you think you were on the 6 6 November speaking about your email of 15 October with 7 Paula Vennells? 8 A. Why do I -- sorry, say that again? 9 Q. Let's bring the email back up. POL00158368. 10 A. I wasn't planning on leaving until the end of March, 11 that's not how it transpired. So I -- me resigning 12 wouldn't change my behaviour. 13 Q. Can we go to page -- I think it's page 22. So we have 14 the email at the bottom on 15 October 2009. 15 A. Mm-hm. 16 Q. Then at the top is Paula Vennells, 6 November, in which 17 you're copied. 18 A. Yeah. 19 Q. It says: 20 "Ruth, the attachment needs to in email format 21 please -- Alan and I are out of the office ..." 22 A. Yeah. 23 Q. So it's implied the two of you are together? 24 A. No, not necessarily. We didn't go out together much at 25 all. No, we'd be in different parts of the network 78 1 would be my guess. 2 Q. But does it imply that you were -- because she's 3 requested this email with you in copy, does it imply 4 that you were working on it together or discussing it 5 together? 6 A. Yes, I'm sure we would have done, but it -- 7 Q. So my question is, why, at this stage, were you 8 discussing it with Paula Vennells? 9 A. Well, for the reasons I said: this was an important 10 issue and she needed to be aware of it. 11 Q. I'll leave that. 12 I'll move on. I'm going to go back in the 13 chronology slightly as my last topic, on the IMPACT 14 Programme. Do you recall what the IMPACT Programme was? 15 A. Yes, yes. 16 Q. So it was a major change to the accounting procedures, 17 effectively? 18 A. Correct, yeah. 19 Q. Before the IMPACT Programme, subpostmasters would 20 balance a cash account, correct? 21 A. Yes. 22 Q. Yes. That cash account would be completed at the end -- 23 well, not at the end, on a Wednesday on a weekly basis, 24 yes? 25 A. I couldn't have told you that, but it sounds right, yes. 79 1 Q. Do you remember the change that came about because of 2 the IMPACT Programme? 3 A. I probably don't, to be honest. You have a point, but 4 I'll -- 5 Q. Well, before the IMPACT Programme, if a subpostmaster 6 balanced their books and had a discrepancy which they 7 couldn't explain -- 8 A. Oh, this is the rolling forward the discrepancy? 9 Q. -- they were able to ask for authorisation to put it in 10 a suspense account? 11 A. Yeah. 12 Q. Correct -- 13 A. I've learnt this since, yes. I've learnt this by 14 reading all the correspondence, yeah. 15 Q. -- and then roll over into the next -- 16 A. Yeah. 17 Q. -- trading period while it was investigated. Following 18 the IMPACT Programme, rather than weekly, the 19 subpostmasters had to balance every four or five weeks, 20 yes? 21 A. Yes. 22 Q. If there was a discrepancy that they couldn't explain 23 they no longer could keep it in a suspense account and 24 roll into the next trading period, correct? 25 They had to -- Post Office sought debt recovery from 80 1 them at the end of the trading period or it could be 2 settled essentially and paid off in due course? 3 A. Mm, mm. 4 Q. Could we turn please to POL00032147. This is a meeting 5 on the -- board meeting, sorry, on 17th August. You'll 6 see third line down, you're there as a Non-Executive 7 Director? 8 A. Yeah. 9 Q. If we turn to page 7, please, if we could go down to the 10 "IMPACT Programme", thank you. (b), it says: 11 "The objective of the programme was to save costs, 12 replace obsolete back office systems, improve branch and 13 client accounting, improve debt recovery ..." 14 When it says "debt recovery", from whom were those 15 debts being recovered? 16 A. From subpostmasters, Crown Offices, franchisees. 17 I assume that's what it meant. I mean, this was -- we 18 had a finance function in Chesterfield and, in my head, 19 when we were in this meeting, this was new technology 20 for Chesterfield which flowed out into the branches. 21 Q. Yes, but the Board is effectively discussing how it can 22 get improved debt recovery from maybe others, but from 23 subpostmasters? 24 A. Amongst other things, yes. 25 Q. And -- 81 1 A. No, it is to save time in branches, as well, it was 2 a very labour intensive process, so this was -- 3 Q. But this was for the benefit of Post Office Limited? 4 A. And saves time in branches, which is of benefit to all 5 branches. But it -- 6 Q. At (e), Mr Corbett speaks, it says, "The rollout was not 7 expected to be 'noise free'", and one of the risks was 8 concern regarding debt recovery. Do you remember what 9 that concern was? 10 A. No, I don't. I remember the higher call volumes. As 11 I said, this was about the Chesterfield operation and 12 that new procedures would generate a lot more phone 13 calls from people coming to terms with, you know, the 14 different procedures. As is often the case with these 15 things, you introduce a labour saving device but there's 16 a bump to get through when people are coming to terms 17 with new procedures or different buttons to press on the 18 system or whatever, that produces more activity, more 19 mistakes for a while, and then things settle down. 20 So I think what Peter was highlighting in general is 21 this was quite material change, and there would be 22 a disruption, as a result of it, and he then goes on to 23 outline what risk mitigants he'd got in place to counter 24 it. 25 Q. If we can turn over the page, please, thank you. At the 82 1 top, in (f), it says: 2 "Planned completion of the new finance system was 3 24 August 2005. A branch trading pilot would commence 4 14 September, and full branch rollout was planned for 5 30 November ..." 6 Those words "branch trading pilot", branch trading, 7 that's the specific terminology used for balancing and 8 trading periods, isn't it? 9 A. I would assume so, yes. Yes, it's probably -- there's 10 probably a word missing. It might have been branch 11 trading statement or something, I don't know, but -- 12 Q. In your statement -- we don't need to turn it up, but 13 it's page 13, the top paragraph -- you refer to the 14 IMPACT Programme. My understanding of your evidence is 15 you weren't -- or your evidence is you weren't told that 16 the ability to put discrepancies into the suspense 17 account was taken away; is that -- 18 A. No, I didn't know that then, no. 19 Q. Is your evidence it wasn't discussed at that Board 20 meeting? 21 A. Yes, I certainly don't recall it. I mean, I was then, 22 in quotes, "just" a non-exec, so it was an item of 23 detail which they probably felt they didn't need to 24 share. Subsequent knowledge indicates that that was 25 quite an important development, really. 83 1 Q. Could we look, please, at POL00021419. It's a Risk and 2 Compliance note. It's your apologies, because you're 3 not in attendance? 4 A. This the non-exec period yes, that's right. 5 Q. Yes. 6 A. Yes. 7 Q. But you would have read the minutes? 8 A. Yes, I would have hoped so. 9 Q. Can we turn to page 5, please. It talks about the 10 IMPACT -- the programme status, "several problems but 11 workarounds are in place for servicing clients", and 12 there were issues with system response times, mapping 13 and systems. 14 If we go down, please, to "3.4 Branch Audit 15 findings", you've got: 16 "Positive action has been taken through Branch 17 Control since last year. This has reduced the incidence 18 of 'suspense accounts' being abused to conceal fraud. 19 However, there is an increase in the number of losses 20 covered up by inflating cash figures. IMPACT will in 21 the longer term improve MI here ..." 22 What does "MI" stand for? 23 A. Management information. 24 Q. "... but short-term action is needed between teams 25 involved in cash to improve the analysis and 'clean up' 84 1 of data." 2 Was the board implementing the IMPACT Programme 3 precisely to avoid subpostmasters using the suspense 4 account? 5 A. No. That would be -- this was a major piece of 6 expenditure. This was about upgrading the financial -- 7 I mean, obviously it was all initiated before I joined 8 but it was about equipping Chesterfield correctly to do 9 the finances and how that flowed through, you know, into 10 the branches of all types. So there was, there was 11 nothing -- that would have not been the motive. 12 Q. Did anyone, whenever you were in any discussion about 13 the IMPACT Programme, question how it would affect 14 subpostmasters? 15 A. I don't recall a conversation like that and, you know, 16 interestingly, the way I'm talking, I had this 17 impression it was more about computerising Chesterfield, 18 but not without consequence in branches because that's 19 where the money was coming from, but it wasn't the 20 objective, if you see what I mean. 21 MR STEVENS: Sir, that's my questions. If I may just take 22 a moment to confer with Ms Price on a matter? 23 SIR WYN WILLIAMS: Yes. (Pause) 24 MR STEVENS: Thank you, sir. I understand that two sets of 25 Core Participants wish to ask some questions. I'm told 85 1 that they will be five minutes each. 2 SIR WYN WILLIAMS: Okay, let them ask their questions, then. 3 Questioned by MR STEIN 4 MR STEIN: Mr Cook, my name is Sam Stein I represent a large 5 number of subpostmasters and mistresses, I am instructed 6 by Howe+Co. 7 Did you watch the evidence of Sir Michael Hodgkinson 8 yesterday? 9 A. I did, yes. 10 Q. You seemed to use the term "prosecuting authority", 11 which I assume you took from the evidence of Sir Michael 12 yesterday? 13 A. I did, yes. 14 Q. You understood the word prosecuting authority from his 15 evidence yesterday -- 16 A. Yes. 17 Q. -- the term you used? 18 A. Yes. 19 Q. You are aware that later on in your term, as Managing 20 Director, that you were the Prosecution Authority for 21 the Post Office; is that correct? 22 A. Well, as I've already explained, but my view of that 23 changed during my time. 24 Q. Right. Well, let's have a quick look at that then, 25 please. Can we go to the document which is POL00048361. 86 1 First page, please. Thank you. If we look, please, at 2 the very top of that document, we see it says: 3 "Post Office Limited Investigation Team Monthly 4 Report." 5 We get from that that you got these monthly. 6 A. Mm-hm. 7 Q. It says "Confidential", and it then goes on to say to 8 who it was written: POL ET -- let's move on from that 9 for the moment; Director Security Corporate; Head of 10 Investigations Corporate; Head of Criminal Law; Head of 11 Security Post Office Limited. 12 Let's just go through that. At that time, the Head 13 of Criminal Law was Rob Wilson, a solicitor; do you 14 remember him? 15 A. No, I don't, I'm afraid. 16 Q. No? What did you think the Criminal Law Team did within 17 the Post Office? 18 A. Well, it looks like it's at Royal Mail, isn't it? It 19 says Corporate Head. 20 Q. What do you think the Criminal Law Team did, Royal Mail 21 or Post Office? 22 A. Well, they would have been involved with these 23 prosecutions, I guess. 24 Q. Involved with the prosecutions? 25 A. Yes. 87 1 Q. Yes? 2 A. Yes. 3 Q. Right. So this document in 2006, in reference to you, 4 because you were part of looking at this sort of 5 material; head of Criminal Law, Rob Wilson, still 6 doesn't ring a bell? 7 A. No, it doesn't, I'm afraid. Sorry. 8 Q. Okay. The Investigation Team that clearly this is in 9 relation to, this monthly report, shall we have a quick 10 look at what's going on with that? Middle of the page 11 there, you see in the document we've got on the screen, 12 "Investigation Team Report Period 9 -- December 2006": 13 "The [principal] aims of the Investigation Team are 14 to stop criminal offences taking place, apprehend and 15 prosecute those who commit offences against us in order 16 to maximise our recovery and reduce loss to POL and its 17 clients through the identification of areas of weakness 18 throughout the business both operationally and within 19 our product offerings." 20 It does appear, on the face of this document, that 21 you've got information that there's a Criminal Law Team 22 that's operating within the business and, secondly, 23 an Investigation Team, with aims of stopping criminal 24 offences taking place, apprehending and prosecuting 25 people. 88 1 A. Yeah, well look at item 1, it's all about postal order 2 cashback offers and the fraud losses that we were 3 experienced, as a result. That was nothing to do with 4 subpostmasters. This -- 5 Q. What did you think when it refers -- 6 A. It's customer fraud. 7 Q. What do you think -- 8 A. We call them "scams" today but, you know, this is what 9 it was there for. There was -- there's always going to 10 be lots of criminal activity around an organisation that 11 creates a lot of money. That doesn't mean it's the 12 subpostmaster's fault. 13 Q. So you had reports in relation to subpostmasters that 14 were being prosecuted -- 15 A. Mm-hm. 16 Q. -- and that there was the involvement of 17 an Investigation Team; is that correct? 18 A. Yeah. 19 Q. So you had oversight of an Investigation Team that 20 investigated subpostmasters; is that correct? 21 A. It is. 22 Q. Right, and we can now see that there was a Criminal Law 23 Team engaged as well, yes? 24 A. Yes. 25 Q. Right. 89 1 A. But it's broader than just subpostmasters. 2 Q. Well, let's just stay with subpostmasters for the moment 3 because you may have noticed that this Inquiry is about 4 subpostmasters. 5 A. Yes, I have noticed that. 6 Q. All right? 7 A. I have noticed that. 8 Q. Right, well let's then move on and have a look and think 9 about what was happening to subpostmasters being 10 investigated by the Investigation Team operating under 11 your Managing Director directorial responsibilities, 12 yes? 13 A. Mm. 14 Q. Okay? Did you, as an example, consider the numbers of 15 cases that were being prosecuted? 16 A. I didn't have the total number that was being pursued 17 no. 18 Q. Okay, let's go to the bottom of page 2, please, of the 19 same document. Look, please, at 2.0. 20 A. Yeah. 21 Q. "Investigation Operations: This month's recovery figure 22 is £63,000. Period 9 case raise figures for 23 deficiencies at audit alone were £140K." 24 Where it says "raise figures for deficiencies at 25 audit", what did you think that meant? 90 1 A. Yeah, you're right, you're right, we did have the 2 numbers in that report, yeah. 3 Q. Then it goes on to say: 4 "In total, 31 new investigation cases were raised 5 during the period, with a current loss of £245,000." 6 That's not the same as prosecutions, obviously but 7 there were cases that were being looked at. 8 Q. Next: 9 "At present, the team is dealing with 248 ongoing 10 investigations with a loss value of in excess of 11 [£9 million] of these 80 are currently going through the 12 courts." 13 A. Yeah. 14 Q. So you're getting these sorts of reports monthly, there 15 were discussions involving the investigation operation, 16 and discussions and information regarding cases being 17 prosecuted and losses. You had all of the information 18 that was possible to have, to actually have governance 19 over this area, didn't you, Mr Cook? 20 A. I had the relevant information there. I certainly -- 21 well, I've already said that I could have done more, 22 but -- 23 Q. Well, then let's go over the page. We can see, at the 24 bottom of page 2, it says: 25 "Also provided is a summary of major enquiries 91 1 ongoing." 2 Top of page 3, please, same document. 3 We can see across there it looks like Excel 4 documents that are being referred to, ignore the first 5 one, "Over 100K Live cases", which appears to be no 6 doubt a list of the cases worth over £100,000, all 7 right? 8 Then underneath that, you have then got references 9 to 4.0, "Financial Investigations", as regards two Post 10 Office branches. 11 So the information you were getting was pretty 12 comprehensive regarding the ongoing investigation and 13 conduct of prosecutions as they've been going onwards 14 under your time at the Post Office, wasn't it, Mr Cook. 15 A. It was, but I -- I don't wish to let the impression be 16 created that this was there to chase subpostmasters. 17 This was there to chase fraud in general. 18 Q. Okay, well, let's just say, as I've said before, we'll 19 stick with subpostmasters, if you don't mind. 20 A. Yes, but I need to make sure that context is understood. 21 Q. Paragraph 59 of your statement -- 22 A. Thank you. 23 Q. Yes, Mr Cook? 24 A. I said thank you for acknowledging my comment. 25 Q. Paragraph 59 of your statement, you say this: 92 1 "To the best of my knowledge, the Risk and 2 Compliance Committee was not given any information or 3 reporting, nor did I have any oversight of the 4 prosecution of SPMs. As a result, I did not take any 5 steps as a member of the Risk and Compliance Committee 6 to ensure that POL was acting in compliance with its 7 legal obligations in relation to those prosecutions and 8 civil proceedings against SPMs. I was not aware they 9 were taking place." 10 It is just a straight out lie, isn't it, Mr Cook? 11 A. The point I was trying to make was about the initiation 12 of prosecutions. I have -- I have had repeatedly 13 acknowledged that there were cases under investigation 14 and that I was aware there were cases under 15 investigation. 16 Q. What you're saying in your statement is this: you did 17 not take any steps as a member of the Risk and 18 Compliance Committee to ensure that POL was acting in 19 compliance with its legal obligations in relation to 20 those prosecutions and civil proceedings against SPMs, 21 "I was not aware they were taking place". 22 Well, first of all you do agree you were aware they 23 were taking place -- 24 A. Mm. 25 Q. -- and, secondly, in your statement you're pretending 93 1 that you weren't aware to avoid the implication, which 2 you needed oversight of the things? 3 A. No -- 4 Q. That's simply not true, is it -- 5 A. That was not my intention. 6 Q. Then why did you write that in your statement, Mr Cook? 7 A. Well, I believed it at the time, certainly. 8 SIR WYN WILLIAMS: Is that it, Mr -- 9 MR STEIN: One moment. 10 Thank you, sir. 11 SIR WYN WILLIAMS: Right. Who is next? 12 MR HENRY: I am, sir. Mr Henry. 13 Questioned by MR HENRY 14 MR HENRY: Hello, Mr Cook, 17 years ago on 12 April 2007, 15 you were the Managing Director of the Post Office, 16 weren't you? 17 A. I was. 18 Q. You probably have no idea what you were doing that day, 19 I suppose? 20 A. No, I'm sure not. 21 Q. But Mrs Janet Skinner, who sits to my right, whom you 22 can see here, knows exactly what was happening to her 23 that day because on 12 April 2007 she was being released 24 from prison, having served a nine-month sentence for 25 false accounting. 94 1 A. Mm. 2 Q. She'd been jailed on the lie, Mr Cook, that Horizon was 3 infallible. But you say you had no idea that these 4 prosecutions were being instituted in your name; is that 5 right? 6 A. No, well, I knew there were prosecutions. 7 Q. She pleaded guilty to false accounting only because 8 she'd been told that, if she did not, the Post Office 9 would prosecute and pursue her for theft. 10 A. Mm. 11 Q. She hadn't stolen a penny, Mr Cook. All of this was 12 being done in your name and yet you claim you didn't 13 know? 14 A. I just can't be more apologetic. It is -- it's -- 15 Q. Mrs Skinner was the mother of two young children. 16 Wrongly accused of theft, she was told that if she 17 pleaded to false accounting as an alternative to that 18 baseless theft charge, she wouldn't go to prison. Now, 19 this was common practice by the Post Office: charge 20 theft and accept a plea to false accounting. Were you 21 aware of that stratagem, Mr Cook? 22 A. No, in fact worse than that, I -- when I had reports 23 about them and the individual had pleaded guilty, then 24 I thought we must have been in the right. I did not 25 appreciate that what was going on. 95 1 Q. So this stratagem was reinforcing your ignorance and the 2 general prejudice that these subpostmasters had their 3 hand in the till; is that right? 4 A. In the particular cases where the individual pleaded 5 guilty, I had assumed that they believed they were 6 guilty. It didn't occur to me at the time that that was 7 recommended to them by their lawyers for want of a -- 8 Q. It was the most profound structural injustice. 9 A. Yeah, I agree. 10 Q. An unmeritorious charge of theft was being used as 11 a jemmy or sledge-hammer to force a plea or to crush 12 subpostmasters into submission. 13 A. I don't know if that was a deliberate strategy by the 14 Post Office but that's how it manifested itself and it's 15 unacceptable. 16 Q. It was a strategy and you ought to have been aware of 17 that strategy; do you accept that now, not with 18 hindsight, but what you ought to have known at the time? 19 A. I did not know that at the time -- I -- 20 Q. Well, you ought to have known it at the time, Mr Cook; 21 do you accept that? 22 A. Yes, I do accept I ought to have known it. I didn't 23 know it. It would be nothing that I would ever 24 willingly want to do. 25 Q. Now, of course, it didn't do Mrs Skinner any good 96 1 because she was sent to custody all the same, nine 2 months' imprisonment. But before she was imprisoned, 3 like so many subpostmasters, she'd suffered fictional 4 Horizon shortfalls and had made 116 calls to the 5 National Business Support Centre helpline complaining 6 about balancing faults in the 18 months before she was 7 dismissed, wrongly dismissed, Mr Cook -- 8 A. Yeah. 9 Q. -- because your auditors thought she'd had her hand in 10 the till. Are you proud of presiding over that culture? 11 A. Definitely not, no. 12 Q. Do you accept that the ultimate responsibility for her 13 torment lay with you, as Managing Director of the Post 14 Office? 15 A. It did, yeah. I was the Managing Director so I was 16 ultimately accountable. Whether I was aware is another 17 matter and, if I wasn't aware, I should have been aware. 18 Q. Right. But, as you have claimed, you maintain that you 19 had no idea that these prosecutions were actually being 20 instituted in your name? 21 A. I'd no -- well, nearly correct. What I was saying was 22 that I had no idea that the Post -- up until the 23 Computer Weekly article, that the Post Office could 24 initiate those without having to seek approval from any 25 other party or body, so there was no moderating 97 1 influence. That is what I was not aware of. 2 Q. Now, those prosecutions, the Court of Appeal Criminal 3 Division stated, should never have been brought because 4 they were an affront to the conscience of the court. 5 What do you have to say for yourself about that, sir? 6 A. Well, all I can do is repeat what I said at the 7 beginning, is I just apologise unreservedly. I'm not 8 the sort of guy that is malicious or would want to do 9 harm to anyone but it was -- and I was not aware, but 10 it -- that is not an excuse, it's an explanation. 11 There's no excuse for the fact that this happened and it 12 was on my watch. And, you know, this is what this 13 Inquiry is about, is to establish how that could have 14 happened and I've tried my honest best to portray 15 exactly what I recall happening many, many years ago, 16 and but it's not acceptable. It's not acceptable. 17 Q. Finally, do you have anything by way of a personal 18 direct apology that you would like to say to 19 Mrs Skinner? 20 A. I would. I would love to talk to her afterwards but you 21 may not want to, but I can only apologise on behalf of 22 the whole organisation for the way that you were 23 treated. It was disgraceful. I can only apologise 24 personally that, whilst I had not heard of your case, 25 I am nevertheless -- I have an accountability that 98 1 should have been on top of it and I wasn't. There's 2 nothing more I can say. This will be with you for the 3 rest of your life; it will be with me for the rest of my 4 life. 5 SIR WYN WILLIAMS: Thank you, Mr Henry. 6 I've just got a few questions, Mr Cook. 7 A. Yes. 8 Questioned by SIR WYN WILLIAMS 9 SIR WYN WILLIAMS: I'd like to go back to the instruction 10 you issued to Mr McLean to carry out an investigation. 11 A. Oh, yes, yeah. 12 SIR WYN WILLIAMS: I use the word "investigation" just in 13 a neutral sense. I'd like paragraph 79 on page 27 of 14 your witness statement to be put up on the screen, 15 please. It's WITN00190100. Thank you. 16 Now, if you'd just like to refresh your memory by 17 just scanning that for the moment. 18 A. Yes, I have. I have, thank you. 19 SIR WYN WILLIAMS: That's fine. Well, then these are my 20 questions: you have told me that, in early May 2009, 21 this possibility that there were a number of cases 22 involving a challenge to Horizon came as a bit of a bolt 23 out of the blue for you? 24 A. Yeah. 25 SIR WYN WILLIAMS: Yeah? 99 1 A. Yes. 2 SIR WYN WILLIAMS: And your first reaction was to instruct 3 Mr McLean to investigate and you did so because you 4 thought highly of him -- 5 A. Yes. 6 SIR WYN WILLIAMS: -- you say in your statement. But then, 7 reading the rest of that paragraph, it seems to me at 8 least, and this is what I want your help with, that this 9 inquiry just petered out because what you say is: 10 "I was assured at that time that the Horizon system 11 was functioning normally [but] I do not recall the 12 detailed of Mr McLean's investigation, nor have I been 13 provided with any documents relating to the 14 investigation by the Inquiry." 15 Now, breaking that down, it may be that you're 16 saying that either Mr McLean or someone on his behalf 17 said to you orally "Everything is fine" but, apart from 18 that, there doesn't appear to be any document or report 19 or anything else that you have seen which actually gives 20 us the result of Mr McLean's investigation; is that as 21 you understand it? 22 A. I agree, sir, yes. I wouldn't have settled for 23 "everything's fine" but I haven't been able to -- 24 I haven't been given any history or documentation that 25 shows what he produced. I can't remember what the 100 1 response was but I wouldn't have been able to carry on 2 without, you know, an investigation and I think we saw, 3 during the course of my evidence, that there was still 4 quite a lot of activity going on some time later. 5 So I believe that was the moment that the 6 organisation started examining itself but, as we've come 7 to learn, there were many people that wanted to just 8 prove that it was okay, put it that way. 9 SIR WYN WILLIAMS: Yes, but my understanding is that you 10 didn't actually leave Post Office until early the 11 following year? 12 A. Yes, about the end of January. That's right. Yes. 13 SIR WYN WILLIAMS: So approximately seven/eight months after 14 you had instigated an investigation by Mr McLean? 15 Forgive me if this sounds critical, and perhaps it 16 is critical, but there doesn't appear to be any urgency 17 on your part to get an answer from him, if you allowed 18 eight months to go by? 19 A. Well, I think we've seen evidence of activity still 20 going on in October/November but I just -- you know, 21 I just cannot recollect seeing a final report and I'd 22 love to be able to say that but I'm only going to say 23 what I completely clearly remember. 24 SIR WYN WILLIAMS: Yes. 25 A. I am -- throughout this process, as documents have 101 1 emerged, it fills in the picture for me, it helps me 2 remember. So I remember the story, I have difficulty 3 remembering the order and the dates. So I remember 4 moments. The Computer Weekly article was a moment, 5 right, that had a big impact on me, but I can't -- 6 without evidence sort of being produced, I can't point 7 to what happened next, which is why I wrote the witness 8 statement as I did, because I can't claim something that 9 I can't remember. 10 SIR WYN WILLIAMS: But can I take it that you have no memory 11 of Mr McLean producing a written report before you left 12 your position as Managing Director? 13 A. I find that difficult to believe that there wasn't one, 14 but I can't remember it and I haven't seen anything. 15 SIR WYN WILLIAMS: All right. Thank you very much. 16 Now, sorry to prolong it, but there's one further 17 short series of questions about the case that was 18 referred to in the Computer Weekly article, and that's 19 the case of Mr Castleton. All right? 20 A. Yeah. 21 SIR WYN WILLIAMS: You'd said that you had no idea of 22 Mr Castleton's case, certainly the name Castleton, until 23 you read that article. I just want to ask you about the 24 process for making decisions when the Post Office was 25 involved in quite high profile, High Court litigation, 102 1 all right? 2 A. Mm. 3 SIR WYN WILLIAMS: Post Office instigated proceedings 4 against Mr Castleton for approximately -- the figure 5 doesn't matter -- but approximately £25,000, said to be 6 a shortfall as evidenced by data from Horizon. 7 Mr Castleton defended it on the basis that there was no 8 shortfall and this was all the fault of the computer, 9 all right? 10 A. Mm-hm. 11 SIR WYN WILLIAMS: It gradually it grew from being what 12 might be called a fairly conventional action for the 13 recovery of a debt into a potential large-scale argument 14 about whether or not Horizon was reliable; okay? And 15 this was all unfolding in the first eight/nine/ten 16 months of you being Managing Director, but none of this 17 got to you, from what you told me? 18 A. No, I mean the learnings from this are -- sorry, go on. 19 SIR WYN WILLIAMS: Anyway, so let me carry on. There came 20 a point in time when the very experienced barrister who 21 was acting for the Post Office told the experienced 22 solicitor who'd instructed him, who in turn told the 23 Legal Department of the Post Office, that the costs 24 involved in this case were grossly out of proportion to 25 what you were trying to get from Mr Castleton and they 103 1 ought to think seriously about whether it was worth 2 spending all that money, all right? 3 But, in the end, all that money was spent so that 4 the total amount of the debt and the costs came to well 5 over £300,000. 6 A. Yeah. 7 SIR WYN WILLIAMS: Well, what I want to ask you about is 8 what was the process, back in 2006, for authorising the 9 expenditure of those sums of money in the Post Office? 10 A. Yeah, and that was what I was about to prematurely talk 11 about. I mean, there's an irony, isn't it, that, if 12 somebody in the organisation wanted to buy a piece of 13 equipment, they'd probably have to get umpteen forms 14 signed in order to be able to spend the money and yet, 15 somehow or other, these spend decisions were being made 16 in that prosecution, and there should have been a set of 17 delegated authorities that said, "You're authorised to 18 spend up to this much money", and because one of the 19 issues is a case starts off -- as you've explained, 20 a case start off modest and becomes big, so not only 21 should they require sign-off from an expenditure 22 perspective, there should be a cap on how far it can go 23 without coming back and asking for more. 24 Clearly, that was not in place and -- and it 25 certainly -- they certainly did not come to me for 104 1 approval. So we had delegated authorities in place that 2 would allow people below me, and this would have 3 probably lied with -- Paula Vennells as the Network 4 Director, would have been able to sign that off. 5 SIR WYN WILLIAMS: Right. So what it amounts to is that 6 there would have been a person within the Post Office 7 organisation who would have had authority to sign off -- 8 A. Correct -- 9 SIR WYN WILLIAMS: -- spending the money without taking it 10 either to you or to the Board -- 11 A. Correct. 12 SIR WYN WILLIAMS: -- and so did you tell me that most 13 likely person was Paula Vennells? 14 A. Yes, I think so. 15 SIR WYN WILLIAMS: All right. Thank you very much. 16 A. Of the legal function would have thought approval from 17 the business and the business in this case would have 18 been the person that ran the branches. 19 SIR WYN WILLIAMS: All right. Thank you. 20 A. Thank you. 21 SIR WYN WILLIAMS: Thank you very much, Mr Cook for 22 providing your witness statement, and for coming to give 23 evidence to the Inquiry this morning. I'm grateful to 24 you. 25 THE WITNESS: Thank you. Thank you, sir. 105 1 SIR WYN WILLIAMS: So Mr Stevens, how are we proceeding 2 next? 3 MR STEVENS: I think Mr Beer's preference is to switch 4 witnesses immediately, if we can, and make a start now. 5 SIR WYN WILLIAMS: Certainly, by all means I'll sit here 6 quietly until you do it, if you like. 7 MR STEVENS: I'm sorry sir, we may need a short break. The 8 transcriber needs a short break. 9 SIR WYN WILLIAMS: Yes, sure. 12.35, ten minutes? 10 MR STEVENS: Yes, that's fine. Thank you, sir. 11 (12.25 pm) 12 (A short break) 13 (12.35 pm) 14 MR BEER: Good afternoon, sir, can you see and hear me? 15 SIR WYN WILLIAMS: Yes, thank you. 16 MR BEER: May I call Adam Crozier, please. 17 ADAM ALEXANDER CROZIER (affirmed) 18 Questioned by MR BEER 19 MR BEER: Good afternoon, Mr Crozier. My name is Jason Beer 20 and I ask questions on behalf of the Inquiry. Can you 21 tell us your full name, please? 22 A. Adam Alexander Crozier. 23 Q. Thank you very much for previously providing a witness 24 statement to the Inquiry and for giving evidence today 25 to assist us in our investigation. Can we start, 106 1 please, with your witness statement. The URN is 2 WITN04390100. You should have a hard copy in front of 3 you. It's 34 pages long, excluding the exhibits pages, 4 and is dated 28 February 2024. If you turn to page 34, 5 is that your signature? 6 A. It is, yes. 7 Q. Are the contents of it true to the best of your 8 knowledge and belief? 9 A. They are indeed. 10 Q. Thank you. I'm not going to ask you questions about all 11 elements of the witness statement, it stands as your 12 evidence, and is being made available on the Inquiry's 13 website. Can I start with your background, please. 14 Between February 2003 and April 2010, so for just over 15 seven years, you were a Director and Chief Executive 16 Officer of Royal Mail Group -- 17 A. That's correct. 18 Q. -- and a Director of Royal Mail Holdings -- 19 A. Yes. 20 Q. -- the first being a limited company and the second 21 a Plc? 22 A. Yes. 23 Q. Before joining Royal Mail, you held senior roles in 24 Saatchi & Saatchi from 1988 to 1999; is that right? 25 A. 1995 -- well, I started there in 1988, all the way 107 1 through to 1999, yes. 2 Q. Yes, I think that's what I said, '88 to '99 -- 3 A. Sorry. 4 Q. -- but the last four years as a Joint Chief Exec? 5 A. Correct. 6 Q. Then you served until 2003 -- ie immediately before 7 joining the Royal Mail Group -- as the Chief Executive 8 of the Football Association? 9 A. Correct. 10 Q. Can I start, please, looking at the corporate structure 11 of Royal Mail, and I'm going to try and summarise and 12 see whether you agree, in the interests of time, with 13 the summary. First, there was a parent company, Royal 14 Mail Holdings Plc? 15 A. Yes. 16 Q. That was wholly and directly owned by the single 17 shareholder, the Government? 18 A. Yes. 19 Q. Royal Mail Holdings Plc had its own board? 20 A. Correct. 21 Q. It had its own Management Board? 22 A. Correct. 23 Q. You attended all Royal Mail Holdings Plc Board meetings 24 and you sat on the Management Board? 25 A. That's correct. 108 1 Q. The Chairman of Royal Mail Holdings Plc, in your tenure, 2 was firstly Allan Leighton, between 2002 and 2008; is 3 that right? 4 A. That's correct. 5 Q. Then Donald Brydon from 2009 onwards? 6 A. Yes. 7 Q. Royal Mail Holdings Plc's Board, I'm going to call that 8 the main board, the main board had its own Audit and 9 Risk Committee -- 10 A. Yes. 11 Q. -- upon which you sat? 12 A. Yes, attended, yes. 13 Q. Yes, were you a member of it or were you an attendee? 14 A. I think I was an attendee, actually. 15 Q. Just for those not steeped in corporate governance, the 16 difference between being a member of a Committee and 17 an attendee is? 18 A. I think the members were all Non-Exec Directors. 19 Q. Can we move on in the summary. There were a range of 20 separate businesses within the Royal Mail and they were 21 separated out in different ways, some of them being 22 subsidiaries of Royal Mail, and others not; is that 23 right? 24 A. Yes. 25 Q. Post Office Limited was one of those entities and that 109 1 was a separate legal entity; is that right? 2 A. That's correct. 3 Q. That was Post Office Limited? 4 A. Yes. 5 Q. Post Office Limited had its own board? 6 A. It did. 7 Q. It had its own Chairman? 8 A. It did. 9 Q. In your tenure, they were Sir Michael Hodgkinson, from 10 whom we heard yesterday, and then from 2009, Donald 11 Brydon? 12 A. That's right. 13 Q. I think that means that Mr Brydon, from 2009, was 14 Chairman of both Royal Mail Holdings Plc and Post Office 15 Limited? 16 A. Yes, he was. 17 Q. The Post Office had its own Managing Director or CEO, 18 the title changed? 19 A. That's correct. 20 Q. In your tenure, that was David Mills, from whom we hear 21 next week, and then, from 2006, Alan Cook from whom we 22 have just heard? 23 A. Yes. 24 Q. That person, the MD or the CEO, sat on both the Royal 25 Mail Holdings Plc and the Royal Mail Management Board? 110 1 A. Yes. 2 Q. The Post Office Limited had its own Risk and Compliance 3 Committee? 4 A. That's right. 5 Q. Now, I think, in one way or another, I've taken all of 6 those points from your witness statement; you make all 7 of those points in one way or another in your witness 8 statement. Taking all of those points together, are you 9 effectively saying, in your witness statement, that 10 within Royal Mail Holdings Plc's group of separate 11 business units, the Post Office had a relatively high 12 degree of autonomy from Royal Mail Group? 13 A. Yes, under its delegated powers of authority. 14 Q. Of the business units within the Group, did the Post 15 Office enjoy the greatest level of autonomy? 16 A. Yes, it did. It was the only one with its own 17 governance set-up. 18 Q. I missed the last word, the only one with its own 19 governance set-up? 20 A. Set-up, yes, sorry. 21 Q. Why was it that it enjoyed the greatest level of 22 autonomy from Royal Mail? 23 A. I think it was -- it goes right back to when -- the 2000 24 Act, the Postal Act, where the Government set up the 25 company and it had two very different objectives. For 111 1 Royal Mail it was to be modernised and be a commercial 2 company in a market that was to be opened up to 3 competition and, on the Post Office side, it was to try 4 to become a sustainable public service, so two very 5 different objectives, and that separate governance ran 6 right through to them also having their own direct 7 relationship with the shareholder and, within the 8 Shareholder Executive, a different team within that 9 team. 10 Q. Thank you. Was the result of that that you, as CEO of 11 Royal Mail, placed very substantial reliance on the Post 12 Office Board and the Post Office Executive Team in the 13 running of Post Office Limited? 14 A. I did indeed, and it's partly why both the Chairman and 15 the CEO of the Post Office also sat on the Holdings 16 Board, the Chairman of Royal Mail sat on the Post Office 17 Board and the other piece of glue was the Company 18 Secretary who sat on both. But what it did mean, 19 through those delegated authorities, was that the Post 20 Office largely was able to go about its business, 21 without reference to the Royal Mail Board, other than on 22 two really key things: one was on funding, which 23 fundamentally impacted on the solvency of the whole 24 group; and, secondly, on certain major, multi-year 25 contracts where it took it beyond its delegated 112 1 authority limits. 2 Q. I think later we'll come on to the fact that the Fujitsu 3 contract was one of those? 4 A. It was indeed, yes. 5 Q. Looking back now, do you think there should have been 6 maybe a third added to the list of things that the Post 7 Office ought to have come back to Royal Mail Holdings 8 more and more frequently on, namely the conduct of 9 investigations and criminal prosecutions? 10 A. Not at the time, no. I certainly thought that all the 11 correct checks and balances were in place, both in terms 12 of internal and external audit, in terms of internal and 13 external legal advice, there was the POL Risk Committee, 14 the POL Exec Committee and the POL Board and, through 15 all those checks and balances, I think there was some 16 confidence that things were working and, certainly, no 17 one in that chain at any stage expressed any concerns 18 about the conduct in the area you've just mentioned. 19 Q. If Royal Mail and you within Royal Mail was reliant on 20 the Post Office to represent Post Office matters, 21 whether in the Management Board or the main board of 22 Royal Mail, if they did not raise or mention any issues 23 to you of concern or which were problematic, was there 24 any mechanism by which you and Royal Mail could find out 25 about such issues? 113 1 A. Of course. Well, of course there was the structure 2 I just mentioned of all the checks and balances, which 3 I won't go through again -- 4 Q. But the checks and balances you mentioned were within 5 the Post Office? 6 A. They were, but on top -- 7 Q. I'm talking about the checks and balances in you 8 learning about things that they didn't want to tell you 9 about? 10 A. Yeah, well, first of all, there were constant one-to-one 11 meetings with the CEO of the Post Office. 12 Q. Just stopping you there, Mr Crozier, does that place 13 a high burden on the Managing Director or CEO of Post 14 Office Limited to be open and transparent with Royal 15 Mail Holdings and, in particular, with you? So -- 16 A. Both myself and the Board, yes, absolutely. You know, 17 there was constant -- the whole company, because of what 18 we inherited, effectively, on the Royal Mail side, 19 a broken company that hadn't been invested in for 20 a decade, hadn't hit its quality of services, was the 21 least modernised postal company in Europe, what that 22 meant was, on the Royal Mail side, there was no option 23 other than to be fundamentally transparent in the fact 24 that most of what we inherited wasn't working. 25 And that encouraged a lot of transparency and we set 114 1 up a properly functioning internal audit unit, which was 2 of course one of the ways that we could also find out 3 what was happening elsewhere in the group, and we 4 strengthened that. We created a whole risk agenda in 5 the business, where we got, from the ground up, people 6 to let everyone know what their key risks were. They 7 looked at that risk register, that risk register was 8 debated at the executive -- 9 Q. Just stopping you there -- 10 A. Of course. 11 Q. -- can you recall whether the conduct of prosecutions 12 and the possibility of bringing subpostmasters to 13 justice, including by imprisoning them, and the issues 14 that arise when conducting prosecutions, was on the 15 Royal Mail Holdings risk register? 16 A. I don't believe so and I don't believe I recall seeing 17 it on the Post Office register, no. 18 Q. Is that a failing? 19 A. With the benefit of hindsight, yes. 20 Q. Ie conducting an activity which is unusual for the 21 company, would you agree? 22 A. Yes. 23 Q. An activity that, of itself, carries unusual risks? 24 A. Indeed. 25 Q. Would you agree that that unusual activity would require 115 1 a different type of supervision and oversight because it 2 brings the company into contact with the criminal 3 justice system? 4 A. Yes, and that's why there were lots of checks and 5 balances around the internal and external legal advice, 6 and it's -- 7 Q. Sorry, say that again? That's why there were lots of 8 checks and balances around the -- 9 A. Internal and external legal advice. 10 Q. What do you mean by that? 11 A. Well, we had lots of external lawyers involved with the 12 company. We also had prosecutions on the Royal Mail 13 side, as I'm sure you know, and there, there were 14 multiple interactions, much more straightforward things 15 with police and Crown Prosecution Services. 16 Q. What external lawyers are you referring to that gave 17 comfort in the prosecution of subpostmasters? 18 A. I don't recall which ones the Post Office used at the 19 time, I'm sorry. 20 Q. Did you think at the time that prosecutions of 21 subpostmasters were conducted by external lawyers? 22 A. I believe they had a big role in that, yes. 23 Q. By "conducted", do you mean the person standing up in 24 court, ie the barrister or employed barrister or 25 a solicitor with rights of audience, or do you mean 116 1 conducted the whole thing? 2 A. I am not sure. 3 Q. Okay. Was there a way for people within the Post Office 4 to report issues to you or to the Royal Mail Board if 5 the Post Office MD or CEO was not inclined to do so? 6 A. Yes, through a function called -- well, we had 7 whistleblowing in operation and we also -- which we 8 constantly updated and tried to improve, and we also had 9 a survey called Have Your Say, which was entirely 10 anonymous and allowed people to effectively give us 11 whatever feedback they thought would be helpful. 12 Q. Was that effectively a department or a business 13 function, both of those things? 14 A. A team ran both of those things, yes, and two different 15 teams, actually. 16 Q. How were the complaints or issues raised from that fed 17 through to you, if at all? 18 A. The Have Your Say results, initially they were done 19 annually, we then moved to doing them every month, 20 a section every month and those were reviewed by the 21 business units, by the Management Team, by the Audit 22 Committee and, indeed, by the Board. 23 Q. In each of those three cases within Royal Mail, rather 24 than Post Office doing it? 25 A. Well, I think they did their own when it was reviewed by 117 1 their business units, so I'm assuming they did that with 2 theirs. I'm not sure, I genuinely can't recall, 3 whether -- Have Your Say for the Post Office obviously 4 covered all the people who worked for the Post Office as 5 personnel, and that would include people in the Crown 6 Offices. They often talked about doing a separate one 7 for the agents but I'm not -- or the subpostmasters. 8 I'm not sure if they ever did that or not. I genuinely 9 can't recall. 10 Q. But I've taken from your evidence there that that was, 11 in each case, a Post Office-run function -- 12 A. Yes, it was, yes. 13 Q. -- and the results of it were looked at analysed by the 14 Post Office? 15 A. Correct, and then on to the Post Office Board. 16 Q. I'm looking for something that jumped from the agents, 17 as you called them, the subpostmasters, to you and your 18 Board. Was there a facility to do that, without going 19 through either of those mechanisms that the Post Office 20 managed? 21 A. I don't believe there was, no. 22 Q. I think it's right that you made limit appearances at 23 Post Office Limited Board meetings; is that right? 24 A. I think it was two, which were both in between David 25 Mills leaving at the end of 2005, and Alan Cook arriving 118 1 in March or April 2006, and partly -- well, in fact, 2 only because those two meetings were very strongly about 3 the latest negotiations with Government around the 4 subsidy to ensure that we were able to sign the company 5 off as a going concern. 6 Q. You say in your statement -- no need to turn it up, it's 7 paragraph 27 -- that you attended those meetings because 8 they were in relation to matters of shared interest. 9 A. Yes. 10 Q. So why was it that you attended two board meetings of 11 the Post Office Board in your seven and a bit years as 12 CEO? 13 A. For a number of different reasons. Number 1, when 14 I arrived, the CEO of the Post Office was David Mills, 15 who reported directly to Allan Leighton, the Chair of 16 Royal Mail. So I was not involved in the running of the 17 Post Office. That was a direct line relationship. And 18 when it switched to Alan Cook, Alan had a slightly more 19 normal dual reporting, which was obviously to the Board 20 of the Post Office and the Chairman of the Post Office 21 on the one hand, and then to me with regards to how Post 22 Office interfaced with the Royal Mail Group, for 23 instance funding or the commercial relationship between 24 the two companies. 25 And I was advised by the Company Secretary that it 119 1 was -- that both the shareholder and the Board wanted 2 the two things kept separate and, therefore, I shouldn't 3 be on that Board. 4 Q. We've spoken about the responsibility on Post Office 5 Executive Team and its Board to refer things up to Royal 6 Mail Management Board and the main board, were there any 7 mechanisms for other main board members or Management 8 Board members to, as it were, go down into the Post 9 Office Board to take a look at what was going on? 10 A. Yes, there were. So because what we were trying to do 11 was a very big people and cultural transformation and, 12 certainly on the Royal Mail side, a huge technology 13 revolution in terms of putting in sorting machines and 14 tracking and tracing for parcels, and what have you, 15 very unusually, we had our Group HR Director on the 16 Board of the Royal Mail, and the Group Technology 17 Director on the Board of the Royal Mail, and obviously 18 those also had tentacles into the Post Office in terms 19 of people and technology. 20 Equally, Allan Leighton, who was Chair of Royal 21 Mail, was also on the Post Office Board, and the Company 22 Secretary, Jonathan Evans, was Company Secretary on the 23 Royal Mail Board and attended all the POL Boards as 24 well. 25 Q. So were the principal links between the two through 120 1 Mr Leighton and Mr Evans? 2 A. Correct. 3 Q. Can we look, please, at POL00362335, page 20, please. 4 Can we rotate it, please, 90 degrees clockwise. 5 We can't, I'm told. 6 I can't date this because it comes within a loosely 7 assembled pack of papers -- 8 A. Right. 9 Q. -- and it's not dated itself. But, given it's got the 10 Chairman of the Plc as Allan Leighton, and David Mills 11 as CEO of Post Office, it must be before 2006, right? 12 A. Yes. 13 Q. As we see at the top, the Chairman is Allan Leighton. 14 The deputy chairman, Elmar Toime -- 15 A. Yes. 16 Q. Off to the left, the Company Secretary of Royal Mail 17 Holdings is Jonathan Evans. 18 A. Mm-hm. 19 Q. The Chief Executive of Royal Mail, you. Then a line 20 round to company-wide functions from you? 21 A. Yes. 22 Q. Then two direct responsibilities, Parcelforce Worldwide 23 and Logistics to you, yes? 24 A. Yes. 25 Q. Then on the right-hand side, we see -- sorry, we should 121 1 have worked our way across the business unit, 2 Parcelforce, Logistics, Royal Mail Letters, GLS, Royal 3 Mail International and then, on the right-hand side, 4 Post Office Limited. 5 A. Yes. 6 Q. That has obviously David Mills as the Chief Executive at 7 this time. It has a line into, I think, Allan Leighton, 8 the Chairman of Royal Mail Holdings Plc; that would be 9 correct, wouldn't it? 10 A. That would be correct, yes. 11 Q. Not to the Deputy Chairman? 12 A. No. 13 Q. That would be correct? 14 A. Yes. 15 Q. Not into Jonathan Evans? 16 A. No. 17 Q. That's correct as well, is it? 18 A. Also correct, yes. 19 Q. Then, I think, the line goes across to you; would that 20 be correct? 21 A. In the sense that I reported in to Allan Leighton, yes. 22 Q. I see. 23 A. Yeah. So all three, myself, Elmar and David, all 24 reported indirectly to Allan and Elmar, as the Executive 25 Deputy Chairman, was in effect -- I can't think of 122 1 a better phase -- a first among equals so was 2 effectively the lead executive. 3 Q. So this diagram represents or should be taken to 4 represent issues arising from David Mills, the Chief 5 Executive of the Post Office, coming through you? 6 A. No. 7 Q. No? 8 A. No, not at all. No. As I said, he reported directly to 9 Allan Leighton. 10 Q. What does the line above the Chief Executive, Post 11 Office Limited, David Mills, that comes up and goes 12 across the page and comes back down to you, mean? 13 A. I think that's just the way these things are drawn. 14 It's -- it -- very clearly, all three of us directly 15 reported individually into Allan Leighton. 16 Q. So we should take this to mean that you, at this time, 17 had no role; you're on the opposite side of the 18 diagram -- 19 A. Correct. 20 Q. -- and nothing in relation to the Post Office passed 21 through you or, indeed, any other part of Royal Mail 22 Holdings, except insofar as it went straight to the 23 Chairman? 24 A. Correct. 25 Q. Thank you. That can come down. 123 1 Is that a reflection of the great autonomy that the 2 Post Office enjoyed? 3 A. Yes. 4 Q. You told us a moment ago that you think you attended two 5 meetings of the Post Office Board. When you didn't 6 attend, did you receive minutes of the Post Office 7 Board? 8 A. Yes, the Royal Mail Holdings Board received minutes from 9 each of the operating companies -- were included in the 10 board pack. 11 Q. You said Royal Mail Holdings received them. Did you 12 personally receive the minutes of the Post Office Board? 13 A. Yes, as a Director of Royal Mail Holdings, yes, sorry. 14 Q. Did you receive the minutes of the Post Office Limited 15 committees? 16 A. No, I don't think we did. I think -- 17 Q. I'm thinking in particular of the Audit and Risk 18 Committee? 19 A. The Audit and Risk Committee, I think if there was 20 a poor audit that went to the Royal Mail Audit Committee 21 meeting, for further looking and work, I'm not sure if 22 they always received the minutes of the Risk Committee, 23 no. 24 Q. You personally didn't always receive the minutes of the 25 Post Office Limited Audit and Risk Committee? 124 1 A. I definitely did not, no, as far as I recall, I don't 2 think. 3 Q. So can we look at an example of the meeting of the Post 4 Office Limited Board that you did attend? 5 A. Yes. 6 Q. POL00021492. We can see that it's Post Office Limited 7 Board Meeting, 20 April 2006. 8 A. Yes. 9 Q. We can see those who are members of the Committee who 10 are present and we can see in attendance, second down, 11 is you? 12 A. That's correct, yes. 13 Q. Can we look, please, at page 4. We can see that the 14 solvency of the Post Office was being addressed? 15 A. Yes. 16 Q. Does that reflect the point that you made earlier, that 17 the very financial viability and existence of the Post 18 Office was of a critical concern to you? 19 A. It was, and it didn't just impact the Post Office but, 20 obviously, because of its scale, it impacted the 21 solvency of the Group as a whole, and the Group's 22 ability to sign its accounts as a going concern. 23 Q. Mr Corbett is recorded as outlining the company's 24 current financial position in further detail. It was 25 clear that the company was insolvent and that, in the 125 1 absence of support from its parent company or ultimate 2 shareholder -- that's the Government -- 3 A. Correct. 4 Q. -- it would be unable to meet its debts as they fell due 5 over the foreseeable future. 6 It was reported to the Board that the Government had 7 agreed in principle, with the support of Royal Mail, to 8 write a letter to the company, under which the 9 Government acknowledged the solvency issues facing the 10 directors of the company and directors were prepared to 11 continue trading on a going concern basis only on the 12 basis of the following support. 13 If we scroll down, we can see that it's set out. 14 A. Yeah. 15 Q. So was that why you were attending this meeting -- 16 A. It was, yes. 17 Q. -- because it's a solvency of the Post Office issue, 18 which, in turn, affects the accounting and potential 19 viability of Royal Mail Group? 20 A. Indeed. 21 Q. Can we go on, please, to page 10. If we scroll down, 22 please, we can see there's an Operations Report, and 23 a document will have been produced, and then it's 24 summarised, the "Horizon S90 Release". There's a four 25 point explanation of what the Horizon S90 release was. 126 1 If you just read that to yourself. Then under (c), 2 an issue of the network resilience was raised. 3 Am I right in thinking that you would have picked 4 these things up, in a sense, by chance because you were 5 at this meeting? 6 A. That's correct. 7 Q. Save for picking things like this, which are about 8 Horizon and network resilience, up by chance, were you 9 entirely reliant on the information pushed up the line 10 to you, whether from the MD or CEO of the Post Office, 11 or from the Company Secretary? 12 A. Yes, or if anything was brought to my attention by the 13 Group Technology Director. 14 Q. How would that occur? 15 A. He -- the IT Director in the Post Office would have 16 reported to the CEO of the Post Office. That was a -- 17 sorry, it's management speak, but a hard line 18 relationship. 19 Q. Yes. 20 A. But the Group Technology Director who was largely 21 focused on driving through this automation and 22 modernisation of Royal Mail was also there for advice 23 and help to the Post Office Technology Team if required. 24 Q. So, if, as we now know there to be the case, there were, 25 putting it neutrally, issues with the Horizon 127 1 technology, would you have expected, or was the system 2 that the POL IT structure, the Post Office IT structure, 3 would have pushed those issues up for your attention and 4 for the Royal Mail Group Board's attention through the 5 Group IT Director route? 6 A. First of all, I don't recall the POL IT team ever doing 7 that. That's the first thing to say. Second of all, 8 I would have expected them to raise it with the POL 9 Executive Team, first of all, that was the reporting 10 lines; they were running and controlling the Post Office 11 and they had responsibility for Horizon. If they needed 12 some technical expertise, yes, I would have expected 13 them to speak to the Group Technology Director, but if 14 there were any real issues, that was why both the CEO of 15 Post Office and Chairman of Post Office were on the 16 Group Board -- was to enable them to have a direct line 17 to relay any issues in Post Office to the rest of the 18 board. 19 Q. In paragraph 11 of your witness statement, which is on 20 page 4, if we can turn that up, please -- 21 paragraph 11 -- you say, whilst you've tried to address 22 as best you can your recollection of the corporate 23 structure: 24 "... I must stress that my responses are not in any 25 way intended to detract from the fact that it is clear 128 1 to me now that this structure did not help facilitate 2 vital information regarding Horizon and the conduct of 3 criminal proceedings reaching me or the board of Royal 4 Mail as it should have done." 5 There is no need to turn it up but you make 6 precisely the same point in paragraph 98.1 of your 7 witness statement on page 33. 8 Before getting into the detail, can we address first 9 what you say is clear to you now but was not clear to 10 you presumably at the time. Firstly, what in the 11 corporate structure prevented or did not facilitate 12 vital information from reaching you and the Board? 13 A. I think it was -- if I may expand a little, I think it 14 was -- this is a reflection, trying to help, in the 15 sense of what could have gone wrong here. I should 16 stress, at the time, actually it made perfect sense to 17 me because the two companies had been set up with such 18 a different objective, one in an entirely commercial 19 market, one really trying to become a sustainable public 20 service; and one that needed to modernise at enormous 21 speed, as it opened up to competition, and the other one 22 that absolutely had difficult issues in terms of 23 managing the size of the network, but largely through 24 the same business, if you like, as it had previously 25 had, albeit with less Government revenue and more 129 1 financial services revenue. 2 I think the issue, looking back, that I could see, 3 that was unhelpful was actually one in the way in which 4 it impacted on the two attitudes or cultures of the two 5 companies, which is that, in Royal Mail, because 6 everything, as I said earlier, was fundamentally broken, 7 everyone on the Board was aware of that. The starting 8 position was everything didn't work and, therefore, 9 there was no option but total, utter transparency 10 because if anyone had brought a presentation saying 11 everything is fine, they wouldn't have been believed. 12 So it was all about getting everything out on the 13 table, transparently dealing with it and trying to make 14 progress. 15 I worry, with the benefit of hindsight, that, 16 because POL didn't have that same burning bridge, for 17 want of a better phrase, that that same transparency 18 didn't allow information to flow up through that 19 governance system on its own and that, potentially, the 20 separation of the two aided and abetted people not 21 getting at that information. 22 Q. Here, you point to the corporate structure prevented or 23 didn't help facilitate. What about the corporate 24 structure, rather than the culture within each 25 organisation? What acted as a bar in the corporate 130 1 structure to the provision of information to Royal Mail? 2 A. I think just because, internally, it was very clear that 3 people worked for the Post Office or the rest of the 4 Group, I think it just generated that sense of two 5 different companies, and I think the structure just, 6 again, benefit of hindsight, I think it didn't allow for 7 the easy flow of information. 8 Q. What was the vital information about Horizon which the 9 structure of the companies prevented you from being told 10 about? 11 A. As far as I recall, I don't remember anyone in the Post 12 Office governance system, whether that's the Board, the 13 Risk Committee, the Exec Team, the General Counsel, the 14 Legal Teams, most importantly the Operations and IT 15 Teams who owned Horizon, I don't remember any of those 16 people flagging up any concerns in that system. 17 Q. What -- 18 A. I don't know whether they flagged it internally but it 19 never reached the Holdings Board. 20 Q. What was the vital information about the conduct of 21 criminal proceedings which the structure prevented you 22 from being told about? 23 A. I think for me, I'm not a lawyer, obviously, but it's 24 clear to me that, central to all of this, is the issue 25 of disclosure. I noted more recently the judgments of 131 1 the Appeals Court and, clearly, there were some material 2 deficiencies with the disclosure process. That seems 3 very, very clear. 4 Q. What was it about the structure that prevented or did 5 not help facilitate information about the conduct of 6 criminal proceedings from reaching you? We're going to 7 come on to it after lunch but the proceedings were 8 instituted, pursued and completed by a Legal Team that 9 sat within Royal Mail Holdings, not the Post Office. 10 A. Yeah, working with the Post Office team, and I don't 11 recall the Company Secretary, Jonathan Evans, who had 12 responsibility for that area, talking about that at any 13 of the Holdings Board meetings. 14 Q. That's a separate issue, Mr Crozier, whether in fact he 15 talked about it. What was it about the structure that 16 did not help facilitate, as you say, information about 17 the conduct of criminal proceedings reaching the Board 18 of Royal Mail? 19 A. I'm not sure I mentioned anything about the structures 20 specifically with regards to that question. 21 Q. It's this sentence here that's on the screen: 22 "... it is clear to me now that this structure did 23 not help ... vital information regarding ... the conduct 24 of criminal proceedings reaching me ..." 25 What about the structure prevented information about 132 1 criminal proceedings reaching you or the Board. 2 A. I think I was meaning more with regards to the Horizon 3 than the proceedings themselves. 4 MR BEER: Sir, that's an appropriate moment to break, if we 5 may. It's quarter past now. I wonder whether you'd 6 mind breaking until 2.05. 7 SIR WYN WILLIAMS: Yes, that's fine. 8 MR BEER: Thank you very much. 9 (1.16 pm) 10 (The Short Adjournment) 11 (2.05 pm) 12 MR BEER: Sir, good afternoon can you see and hear us? 13 SIR WYN WILLIAMS: Yes, I can. Thank you. 14 MR BEER: Good afternoon, Mr Crozier. Can I pick up where 15 I left off. 16 SIR WYN WILLIAMS: Before you do, I understand that you 17 would like me to sit until 3.45 this afternoon, which 18 I'm prepared to do but, at about 3.00, I'd like you to 19 check with the transcriber whether or not she needs 20 a break or whether we can go on until 3.45 without 21 a break. 22 MR BEER: Thank you, sir. I'll do that. 23 Mr Crozier before lunch, you spoke about the 24 autonomy that the Post Office enjoyed from Royal Mail. 25 Was it not patent or obvious from the structure of the 133 1 organisation and the autonomy that the Post Office 2 enjoyed, that there was a significant risk for issues 3 that the Post Office did not wish to raise with Royal 4 Mail to go unnoticed by Royal Mail? 5 A. That was the purpose of ensuring that the Chief 6 Executive, the Chairman and the Company Secretary of 7 Post Office were on the Royal Mail Holdings Board as 8 I understand it. That was a decision before I arrived. 9 Of course, we built up a strong internal audit function, 10 which was able to go anywhere in the company, and their 11 audit plan was checked by the Holdings Board, the Audit 12 Committee and the Exec Team. And also there was 13 external audit, who similarly were involved in the -- 14 right across the company and, again, had the ability to 15 go anywhere and look at anything, and I met regularly, 16 and privately, with internal audit and external audit, 17 and was able to check privately whether there were any 18 concerns that they had. 19 Q. In your seven years, are you aware of any external audit 20 of the Horizon system? 21 A. External, do you mean external in terms of Ernst & 22 Young, as in financial auditors, sorry? 23 Q. No, any form of out of the Horizon system? 24 A. No, I don't think I am no. 25 Q. In your seven years, are you aware of any form of 134 1 external audit or review of the Post Office's 2 prosecutorial function? 3 A. I don't believe so, no. 4 Q. Are you aware of any form of internal audit of the Post 5 Office's prosecutorial function in your seven-year 6 period? 7 A. I don't recall. 8 Q. Can I start by looking at the responsibilities of 9 a director of a business or of a CEO; would those duties 10 include a director's duty to the accuracy of accounting 11 information and accounting records? 12 A. Yes, it would. 13 Q. Taking it shortly, is it right that company law requires 14 directors to prepare accounts for each financial year 15 which give a true and fair view of the state of affairs 16 of the company and, indeed, of a group, if it's within 17 a group, and of the profit and loss of the group for 18 that relevant period? 19 A. That's correct, yes. 20 Q. Does a director have to have confidence in the figures 21 being produced in respect of a business's profit and 22 loss before they can take a definitive view on the 23 financial statements of the business? 24 A. Yes, they do. 25 Q. If there are any doubts about the integrity of the 135 1 figures which are produced in the accounts of 2 a business, that would be a matter of significant 3 concern for any director of the business? 4 A. Yes, it would. 5 Q. Accounting integrity, or concerns over accounting 6 integrity, would be a significant issue, would you 7 agree, for the director, irrespective of whether the 8 business was a unitary enterprise or franchised across 9 ten or 1,000 outlets? 10 A. Under the combined codes, you had the same duties as 11 a director, yes. 12 Q. Would you, as CEO, expect any concerns or even 13 allegations about concerns that the accounting integrity 14 of a business was lacking or problematic to be escalated 15 to you and then to the main board? 16 A. Yes, either from the external auditors, the financial 17 community, both within POL, or the group Chief Financial 18 Officer, or the internal Audit Team. If they had any 19 concerns, I would have expected them, if it occurred 20 within POL, to report that to the POL Board but also to 21 the Holdings Board and the Audit Committee, yes. 22 Q. Is the CEO responsible for ensuring that the board to 23 whom they report is fully briefed on the reliability of 24 accounting systems that are used to support the figures 25 for the business? 136 1 A. Generally speaking, that would be led by the CFO but 2 supported by the Chief Executive, yes. 3 Q. In the case of a group such as Royal Mail, would that 4 include responsibility for the oversight of business 5 units, such as the Post Office? 6 A. Under our structure, that was -- as I've explained 7 before, that was a separate reporting function in to the 8 Holdings Board. Obviously, the financial numbers were 9 collated by the Group Chief Financial Officer, yes. 10 Q. What were your line management responsibilities? 11 A. Generally speaking? So -- well they changed over 12 a period of time, as I think I say in my statement. 13 I was the -- initially responsible for Parcelforce and 14 Royal Mail Logistics, which were two businesses at that 15 time, also involved in GLS, so the parcel side, and 16 I was responsible for trying to help modernise the 17 Letters business. I had Marketing, Finance, and Group 18 Technology, which, as I said before, was very focused on 19 the huge job we had to do to modernise the Royal Mail 20 Letters business, in terms of sorting machines, 21 automating machines, tracking and trace capability, so 22 that we could build a parcels business that would allow 23 the business to compete in the future. 24 Q. It's my fault for a poor question. Can we look at it 25 the other way round: did any of your line management 137 1 responsibilities include responsibility for any senior 2 executives within the Post Office? 3 A. Between 2000 and the end of 2005, when David Mills left, 4 no. From 2006, when Alan Cook took over from David, as 5 I said earlier, he had dual reporting from me on group 6 issues, with regards to things like funding and budgets 7 and the commercial relationship between the Post Office 8 and Royal Mail, which, of course, was huge, but also he 9 had a direct reporting line into the Chairman of the 10 Post Office and the Post Office Board, as you would 11 imagine. 12 Q. After 2006, and other than in relation to Mr Cook, did 13 any of the people within the Post Office Senior 14 Executive Team report to you? 15 A. No, I don't think so, no. 16 Q. Can you help us with line management responsibility for 17 the following people: the Head of Security within the 18 Post Office? 19 A. I believe they reported in to Jonathan Evans. 20 Q. Did -- 21 A. The company Secretary, sorry. 22 Q. The Company Secretary -- 23 A. Yes. 24 Q. -- of Royal Mail Group? 25 A. And Post Office, yes. 138 1 Q. In what capacity was Jonathan Evans directly line 2 managing that person, as the Company Secretary of Post 3 Office or of Royal Mail Group? 4 A. I'm not sure I recall, to be honest. 5 Q. Who had line management responsibility for the head of 6 Product Branch & Accounting within the Post Office? 7 A. That would have been the Post Office CFO. 8 Q. Any oversight of that function from within Royal Mail 9 Group? 10 A. That would have come from the Group CFO, which was 11 Marisa Cassoni and, in the latter years, Ian Duncan. 12 Q. Who had line management responsibility in respect of the 13 Head of Legal services within Royal Mail Group? 14 A. That was Jonathan Evans, Company Secretary. 15 Q. Who had line management responsibility for the General 16 Counsel within Royal Mail. 17 A. Jonathan Evans, the Company Secretary. 18 Q. The Head of IT in the Post Office? 19 A. Would have reported in to the Chief Executive of the 20 Post Office. 21 Q. Any line, whether direct or dotted, back to Royal Mail 22 Holdings? 23 A. Dotted for skilled advice, for want of a better phrase, 24 to the Group Technology Director. 25 Q. But that's in respect of advice? 139 1 A. Yes, they reported to the Chief Executive of the Post 2 Office. 3 Q. So the function stayed within Post Office? 4 A. Yes. 5 Q. Can I look at issues in a different way, namely which 6 parts of the business had responsibility and oversight 7 for certain activities, conduct or functions -- 8 A. Okay. 9 Q. -- rather than looking at the people involved. Can we 10 turn up page 14 of your witness statement, please, at 11 paragraph 41.1. You say: 12 "Oversight for criminal prosecutions and civil 13 proceedings brought by [the Post Office] would have sat 14 with [the Post Office] Legal Team, and oversight for 15 prosecutions brought on behalf of the rest of the Group 16 would have sat within the Group Legal Team." 17 Then you say: 18 "I believe that both legal teams would have been 19 under the supervision of the Company Secretary, Jonathan 20 Evans." 21 Were you not aware that, in fact, there was no Post 22 Office Legal team, it had no separate legal in-house 23 function and that civil and criminal proceedings were 24 brought by lawyers within the Royal Mail Group Legal 25 Team. 140 1 A. I was not, no. 2 Q. So lawyers from within the Group gave advice on 3 prosecutions, they made decisions about prosecutions and 4 within prosecutions, and they conducted the proceedings, 5 not any Post Office lawyers. You didn't know that? 6 A. Was that throughout the whole period or -- 7 Q. Yes. 8 A. And I -- I'm sorry -- 9 Q. Throughout the whole of your period. 10 A. My period? 11 Q. Yes. 12 A. I was not aware of that, no. 13 Q. Given the facts that I've just described, that would 14 mean, is this right, that your Board had 15 a responsibility for the conduct of a team of lawyers 16 within Royal Mail Group who were acting on behalf of the 17 Post Office, rather than the Post Office Board having 18 such a responsibility for them, wouldn't it? 19 A. In part yes, but also, they would be doing that at the 20 behest of the Post Office team who owned Horizon and any 21 issues deriving out of that. 22 Q. Well, they might be their clients. 23 A. Yes. 24 Q. Post Office Limited might be their client? 25 A. Yes, sorry, yes. 141 1 Q. I'm talking about responsibility for the conduct and 2 work of the lawyers. That fell, if I'm right, to Royal 3 Mail Group to manage and oversee? 4 A. My understanding at the time was that that was also 5 under the supervision of the Company Secretary at the 6 Post Office, in conjunction with the Royal Mail, and 7 they used, I thought, a mix of Post Office Legal team, 8 augmented by Royal Mail Legal Team and outside legal 9 people, as well. That was my understanding. 10 Q. So be it. Can we turn up page 28 of your witness 11 statement, please. Look to start at paragraph 83. You 12 say: 13 "Generally speaking, responsibility for criminal 14 prosecutions which [the Post Office] brought would have 15 sat under the relevant [Post Office] Executive Team 16 members under the oversight of [the Post Office] 17 Executive Team as a whole, the [Post Office] Risk and 18 Compliance Committee and [the Post Office] Board." 19 Then if we go on to 84, you say: 20 "In response to the questions I have been asked by 21 the Inquiry, I should add that I do not recall having 22 involvement in or knowledge of the oversight of 23 investigations and prosecutions brought by [the Post 24 Office] against subpostmasters, either for theft, fraud 25 and false accounting for alleged shortfalls in branch 142 1 accounts, or for the recovery of such alleged shortfalls 2 through the use of civil proceedings." 3 Then over the page to 87: 4 "To the best of my knowledge, I do not recall 5 reports of the number of prosecutions being brought by 6 [Post Office] against subpostmasters being escalated to 7 me, nor the fact that there were systemic issues 8 impacting the Horizon system." 9 I just want to test what you said in those three 10 paragraphs there about your lack of knowledge about 11 these activities of the Post Office. Can we start, 12 please, by looking at RMG00000006. I think that should 13 be, in my version there, upright. Thank you. If we can 14 go back to page 1, please. Right. 15 Sorry, you're going to have to tilt your head to the 16 side. Can you see that these are minutes of an Audit 17 and Risk Committee of the 11 November 2003. 18 A. I can, yes. 19 Q. Can you see that you were in attendance? 20 A. Yes, I do. 21 Q. I think you're the third person down in the "In 22 Attendance". Then if we go, please, to page 5, please. 23 Scroll down, please. Thank you. A security report. 24 A. Yes. 25 Q. The security report was received, so that's a document 143 1 that's tabled for the meeting and, in particular, the 2 following was noted: 3 "Royal Mail personnel related crime cost the 4 business approximately £26 million per year. In 2002/03 5 the company had prosecuted 324 people, cautioned 108 6 others, recommended 47 cases to the Procurator Fiscal 7 and taken legal action in a further 43 cases. These 8 were noted as minimum figures, since there may also be 9 cases where local action is taken to deal with 10 offenders." 11 This is relatively early in your tenure, is that 12 right, you took your post in April 2003, and this is 13 November 2003? 14 A. I think it was February 2003, I started, sorry. 15 Q. So eight or so months after you took up post. So, from 16 this point onwards, you would have known that the 17 company was prosecuting a vast number of people each 18 year? 19 A. Yes, but it refers to Royal Mail personnel. We wouldn't 20 have described subpostmasters as Royal Mail personnel, 21 so obviously I don't recall this particular meeting, 22 it's a very long time ago but I think by the description 23 here I would say that was very much focused on Royal 24 Mail personnel, both full time and casual workers. 25 Q. You think this figure here does not include any 144 1 prosecutions of Post Office employees -- 2 A. I don't think so I don't think -- 3 Q. -- or subpostmasters? 4 A. I don't believe so no. 5 Q. Why was that not reported to the group? 6 A. I don't know. 7 Q. Can you assist? 8 A. I beg your pardon? 9 Q. Can you assist? 10 A. Sorry, I don't know. 11 Q. Why would you have wanted to or why was it necessary to 12 be told about the number of people that Royal Mail were 13 prosecuting -- 14 A. Oh I see, I'm so sorry. 15 Q. -- but not of the Post Office? 16 A. Because, at this time, we were having a lot of problems 17 in Royal Mail, both in terms of theft of things like 18 credit cards out of the post, which was obviously 19 severely denting confidence in the post and, indeed, of 20 the companies that used it. There was a lot of mail -- 21 one of the reasons we were failing quality of service 22 targets is a lot of mail wasn't being delivered, it was 23 either being dumped or hoarded, so a whole host of 24 reasons in terms of why what we used to call -- it was 25 a programme run by ourselves, very much monitored by 145 1 Postcomm and Postwatch called Mail Integrity, which was 2 all about the integrity of the mail itself. 3 Q. In any event, through this route, you would have known 4 about the Royal Mail's prosecutorial activities? 5 A. Yes, indeed, yes. 6 Q. Would you get regular updates of the number of people 7 prosecuted in a year, the amount of loss estimated by 8 the criminal activities of Royal Mail Group employees or 9 other individuals, and the amount recovered? 10 A. I'm not sure I'd use the word "regular" but there were 11 updates in terms of prosecution -- investigations and 12 prosecution of staff that reached -- obviously came to 13 the fore around the time of the Channel 4 Dispatches 14 programme, which was in April 2004, which was obviously 15 a very big and not good event for the company, which 16 highlighted, through secret camera filming, all sorts of 17 very bad practices going on in delivery offices and mail 18 centres. 19 Q. Would you agree -- I think you did agree before lunch -- 20 that prosecuting before the criminal courts is 21 an unusual activity for a company to undertake? 22 A. It is. Although I believed, and I think I'm right but, 23 you know, I'm not a lawyer and I'm not the expert, but 24 I think, because the ones on the Royal Mail side were -- 25 I hesitate the use the words more straightforward, in 146 1 terms of theft and various other things, like hoarding 2 or dumping, that those were very often done in 3 conjunction with the police and other authorities. As 4 far as -- 5 Q. So you're saying that these prosecutions that you're 6 reading about here, you understood to be independently 7 prosecuted, rather than prosecuted by the Royal Mail? 8 A. A mix, I think. 9 Q. In any event, for the proportion that were prosecuted by 10 the Royal Mail, would you agree that that activity 11 requires a special kind of a supervision and oversight? 12 A. Yes, much more expert than I would claim to have. 13 Q. Would you agree that it requires particular care where 14 the company is the alleged victim of the crime, where 15 the company investigates, whether it's the victim of the 16 crime, and then decides whether to prosecute? 17 A. Yes. 18 Q. A phrase that's been described in the past as judge, 19 jury and executioner? 20 A. Right. 21 Q. What special supervision and oversight of such 22 an activity would you say was required? 23 A. I would have thought the supervision of the experts, 24 both internal and external qualified lawyers, legal 25 advice, the General Counsel, the Company Secretary and, 147 1 of course, any audit people looking at any of the issues 2 that arose. 3 Q. What about things like ensuring there's a separation of 4 functions? 5 A. As I said, the legal process is not my area of 6 expertise. 7 Q. What about things such as the independence of decision 8 makers? 9 A. Yes, I would have thought so, yes. 10 Q. What about things such as intrusive supervision and 11 regular audits and reviews of the way in which the 12 company is conducting its prosecutorial functions? 13 A. Yes. 14 Q. What about special attention being paid to who you're 15 recruiting to investigate alleged crimes against the 16 mail? 17 A. Yes, I would have thought so. I assumed that all of the 18 people in the teams were proper, qualified lawyers. 19 Q. Is the truth of the matter that you, in your position, 20 did not have any developed understanding of the extent 21 to which Royal Mail prosecuted or the way in which the 22 things that I've just mentioned were or were not carried 23 into effect? 24 A. No, as I've said earlier, I'm not a lawyer and I'm not 25 a -- I would not claim that that is my area of 148 1 expertise, no. 2 Q. Can we look, please, at RMG00000008, please. This is 3 the following year. You can see that it's 24 May 2004 4 and it's a minute of the Audit and Risk Committee of 5 Royal Mail Holdings. You are shown in attendance third 6 down? 7 A. Yes. 8 Q. Can we go to page 6, please. Under the heading 9 "Protecting Royal Mail assets": 10 "[Mr] Wilson, Director of Security, attended for 11 this item, The Committee noted that Royal Mail was 12 inherently vulnerable as a business to attacks on its 13 assets, whether through fraud or other events ... The 14 committee noted: 15 "The key activity of the business in protecting 16 Royal Mail's assets and pipeline, including increased 17 focus on fraud investigations, protection of information 18 and the level of prosecutions. Separate discussions had 19 taken place and action plans had been developed to 20 address the issues highlighted recently in the 21 Dispatches programme [that you mentioned a moment ago]." 22 A. Yeah. 23 Q. "The company had made 299 prosecutions last year. John 24 Neill asked if the policy on prosecutions was clear and 25 what level of resources will be required to improve the 149 1 prosecution rate. [Mr] Wilson did not feel that 2 an increase in resource was necessary or likely to be 3 effective ... the company had identified a problem in 4 recruiting people in cities where criminal activity was 5 at higher levels." 6 This is a discussion about protecting Royal Mail 7 assets and prosecutions? 8 A. Yes. 9 Q. Again, there's a note of the number of prosecutions made 10 in the previous year. Again, in your view, does this 11 relate and only relate to Royal Mail prosecutions and 12 not include, within the figure, Post Office? 13 A. I think so, yes. 14 Q. Again, why were the Post Office prosecutions and the 15 conduct of those not being sent up to the Royal Mail 16 Board, which you've said already, but also to this Audit 17 and Risk Committee? 18 A. Well, the headline says, "Protecting Royal Mail Assets", 19 so, not knowing what the conversation was at a previous 20 meeting, but it could be that this is a follow-up to the 21 Dispatches thing. One of the things we did 22 post-Dispatches was managed to get agreement from the 23 Government to allow us to check the criminal records of 24 anyone that was joining Royal Mail because we had 25 an issue with bringing people in who were there to do us 150 1 harm, particularly on the casual side. 2 And I should stress, by the way, that makes it sound 3 like there were lots of people at Royal Mail who were 4 bad people. Actually, there were lots of wonderful 5 people in that organisation and the vast, vast majority 6 were terrific people but, clearly, we had a problem here 7 and we had to ensure that those people who were joining 8 the organisation were ones that we had done the proper 9 checks on as a way of cutting down on the level of crime 10 that was being committed on the company and, indeed, 11 therefore the citizens of the UK. 12 Q. My question was: why have we seen discussion in the main 13 board and in this committee of the numbers of 14 prosecutions, you say, brought by Royal Mail, and about 15 prosecutorial policy here, being referenced to the 16 committee. But, on your account, none of this relates 17 to the Post Office? 18 A. No. 19 Q. Why was that not considered by either the committee or 20 the main board of Royal Mail? 21 A. I don't know. Because we had gone through that very 22 difficult and bad experience in Royal Mail, I think this 23 was part of, I guess, what I mentioned earlier, about 24 therefore being very transparent about the issues we 25 were trying to deal with on the Letters side of the 151 1 business, so this would have been brought forward by the 2 Letters Team to try to create that understanding of what 3 we were dealing with, clearly, for whatever reason, and 4 I don't recall why that same drive wasn't there from the 5 Post Office team. 6 Q. Can we look thirdly, we've -- looked at the Board, we've 7 looked at the Committee. Can I look at a third 8 potential source of oversight -- 9 A. Of course. 10 Q. -- the Management Board, please? RMG00000031, please. 11 If we just blow up the top part, thank you. This is the 12 Royal Mail Management Board which sat, essentially, 13 underneath the Royal Mail Holdings Plc main board as 14 I've called it; is that right? 15 A. That's correct, yes. 16 Q. It's for Tuesday, 20 January 2004, the minute, and you 17 are present, and you're shown as a person present 18 because you are a member of this Board? 19 A. Correct. 20 Q. Could we look, please, at page 5., and scroll down to 21 "Prosecution Policy, RMM(04)94", I think that's the 22 title of the paper: 23 "The Management Board received a paper which updated 24 the Board on current levels of legal expenditure and 25 seeking endorsement for a change in priorities and 152 1 considered which activities might be assessed or reduced 2 without significant risk to the business in order to 3 facilitate further headcount reduction. The Management 4 Board: 5 "Noted the balance between further headcount 6 reductions in Legal Services and increasing external 7 legal costs was being carefully managed; 8 "Endorsed the prioritisation of the resource used in 9 criminal prosecutions by the Company. The Company's 10 public position of having a strict policy towards 11 offenders would not be altered by this. [Mr] Evans 12 would investigate the possibility of increasing Police 13 and CPS involvement and report back to the Management 14 Board on the outcome of these investigations ..." 15 Then two action points are noted. 16 Would you say again this is about and only about 17 Royal Mail prosecutions? 18 A. I believe so, yes, for two reasons. You will have 19 noticed on a lot of the -- well, hopefully all of the 20 minutes that you see, we had a policy of asking the team 21 responsible to come to a meeting to present things, and 22 you'll notice from the front page that you put up, 23 there's no one from the Post Office in that -- 24 Q. Go back to page 1, please. If we scroll down, we'll see 25 the others attending, which is, I think, where they 153 1 would appear if they were there? 2 A. Yes. 3 Q. Thank you. 4 A. Yes. 5 Q. You're making the point that there's no Post Office -- 6 A. There's no Post Office there and, if you look at David 7 Mills', who was the Chief Executive of Post Office's 8 attendance, he didn't join until quite a bit after that 9 topic and I don't think there's any way we would have 10 taken that topic if it involved the Post Office without 11 him there and without any representative of the Post 12 Office there. 13 Q. Does that -- again, that can come down, thank you -- 14 A. To the best of my memory. 15 Q. Does that, again, reflect the fact that just like the 16 main board, just like the Audit and Risk Committee, the 17 Management Board did not oversee or supervise in any way 18 the conduct of prosecutions by Post Office Limited -- 19 A. No. 20 Q. -- even though such prosecutions were being conducted by 21 Royal Mail lawyers? 22 A. Yes, on behalf of the Post Office. And, again, I should 23 say, that's not my memory but, obviously, I completely 24 take what you're saying as read. 25 Q. Why was it the case that this prosecutorial activity of 154 1 the Post Office was not the subject of any scrutiny in 2 or by the three mechanisms that we've just looked at: 3 Board, Risk Committee or Management Board? 4 A. I'm assuming that's because the Post Office -- if you 5 remember I think there was a question, which is 6 somewhere in my statement, around who set the agendas 7 for the meetings. I think, as I mentioned earlier, at 8 Royal Mail we were really pushing things forward and 9 trying to improve things and deal with things very 10 openly and transparently. If POL at that stage had been 11 asked thorough the Chairman or the Chief Executive if 12 they wanted any items raised at the Holdings Board then 13 they would put those forward, obviously Mr Leighton was 14 also on the POL Board itself and I guess that would have 15 been because they didn't volunteer this issue as being 16 one that they wanted to be discussed in that forum. 17 At the Management Board, that was really about where 18 the two companies came together in a sort of trading and 19 commercial agreement, as I said earlier. 20 Q. Would another way of describing it be that you let them 21 get on with it? 22 A. I wouldn't have put it that way but I understand why you 23 might take that reference. 24 Q. Do you ever remember receiving reports about the conduct 25 of prosecutions by Royal Mail lawyers on behalf of the 155 1 Post Office? 2 A. No, I don't. 3 Q. Do you think, looking back with hindsight, this is 4 an activity that ought to have been the subject of 5 oversight and supervision by one or more of the three 6 boards or committees that I've just mentioned? 7 A. With the benefit of hindsight, yes, I do. 8 Q. To what extent is that issue that we've identified the 9 product of the structural difficulties that you 10 identified in paragraph 11 of your witness statement? 11 A. As I said, my -- again, looking back with hindsight, 12 I think that was one of my concerns, that, in this 13 structure, it allowed things to potentially appear in 14 the cracks for want of a better phrase, because I can't 15 think of a better one right now. 16 Q. What information ought the Royal Mail Board, its 17 Management Board or its Risk Committee to have received 18 from Post Office Limited about the conduct of 19 prosecutions? 20 A. Probably similar to what we've seen on Letters, which is 21 an explanation of what was going on and to what degree. 22 Q. We've seen that, in one of the minutes, that the Board 23 was exercising some control, was either turning the dial 24 up or turning it down on the extent to which an active 25 prosecution policy should be pursued. Would that be 156 1 a function of Royal Mail Group Board over the Post 2 Office that it ought to have performed? 3 A. Again, I think the level of awareness of this, because 4 of the lack of communication from the Post Office, was 5 probably very low. 6 Q. Where does the responsibility for the lack of 7 communication from the Post Office fall? 8 A. I think you would have to say for the Post Office Chief 9 Executive and the Chairman. 10 Q. That's -- 11 A. That assumes, by the way -- sorry, beg your pardon -- 12 Q. I think we're about to say the same thing. That assumes 13 that they knew? 14 A. Exactly that and, you know, obviously, I don't know 15 whether they did or not. My assumption is that they 16 didn't but I guess that's one of the roles of the 17 Inquiry, is to figure that out. 18 Q. As well as responsibility potentially resting with Post 19 Office's Chief Executive and Chairman, does 20 responsibility not rest with Royal Mail for designing 21 a structure in which none of its systems of oversight 22 picked up that this prosecutorial activity was even 23 going on, on your account? 24 A. I think it is a matter of real regret that all of those 25 checks and balances, the governance systems in both 157 1 companies, failed, as well as internal audit, external 2 audit, all the checks and balances that were put in 3 failed to surface this issue out of the Post Office to 4 a wider set of people. 5 Q. What was the level of your contact with Royal Mail's 6 General Counsel? 7 A. Mostly through the Company Secretary but, from time to 8 time, separately. 9 Q. Did you ever explore with the General Counsel the extent 10 to which he or she had involvement in the prosecutorial 11 activities of the Post Office? 12 A. I did not, no. 13 Q. Did you ever explore with such General Counsel how they 14 ensured adequate resources were available to ensure 15 effective oversight of the Post Office's own legal and 16 regulatory obligations? 17 A. It was quite a regular question, at most audit 18 committees, to the various teams through Jonathan in 19 Legal and internal Audit, you know, "Have you got enough 20 people to do the job that you need to do?" That would 21 be a question that would be regularly asked. 22 Q. What steps, if any, did the Royal Mail Board or you take 23 to ensure that the role of General Counsel was 24 effectively discharged, so as to ensure compliance path 25 Post Office with its legal obligations, so far as 158 1 prosecutions are concerned? 2 A. I think that -- because he reported to the Company 3 Secretary, I think his role would have been reviewed by 4 the Company Secretary, in terms of performance. 5 Q. So the answer I think is, for you personally, none, but 6 that's because it was Mr Evans' responsibility? 7 A. That's correct. 8 Q. You tell us in your witness statement -- no need to turn 9 it up, it's paragraph 43 -- that you trusted the 10 Managing Director/CEO of the Post Office, and the Chair, 11 to raise any significant systemic or reputational issues 12 relevant to the Post Office that would have had 13 an impact on the Group, either at the Royal Mail 14 Management Board meetings or the main board meetings; is 15 that right? 16 A. Yes. 17 Q. When you say you trusted, do you mean you assumed that 18 they would? 19 A. Not just that. I mean, obviously, I assumed there's 20 good people in the senior position very qualified for 21 the roles, that they would volunteer those issues but, 22 as you can tell in many places in my statement, I made 23 it very clear that our style of management from the 24 Board down was to go looking for problems. We were 25 fixing things across the business. I clearly wish we 159 1 had known about this, because I think when I look at 2 collectively what we were tackling, I'm sure we would 3 have done it if we were aware of it and, unfortunately, 4 which is a huge regret, we weren't. 5 Q. So you and your Board and your Management Board, you 6 tell us actively sought out problematic areas? 7 A. Yes. 8 Q. Not only was this one not found, those within Post 9 Office did not escalate it to you or your Board? 10 A. They did not. 11 Q. How would you define an issue that had "significant 12 systemic or reputational issues relevant to the Post 13 Office", ie what was the threshold that needed to be 14 crossed in order for an issue to be escalated to you? 15 A. I think something that would genuinely impact the 16 performance of the company that would also have 17 an impact on the group itself, whether that was 18 financially or reputationally. 19 Q. How was that made clear or communicated to the Post 20 Office Executive Team so that they would know -- for 21 example, the issues with which we are dealing -- whether 22 they fell on the "escalate" or "do not escalate" side of 23 the line? 24 A. Yeah, I don't think there would have been many Board 25 meetings without the Chairman and the Non-Exec Directors 160 1 and the Executive in the space of myself saying that we 2 needed to try to get to the bottom of all the issues. 3 It all started with inheriting a company in severe 4 trouble and we asked people, at all times, to be open, 5 transparent and for bad news to travel very fast. We 6 went looking for that. If I take an example, which is 7 in my statement, in the Letters business, you know, 8 myself and the Chairman would meet with thousands of 9 frontline delivery office managers on a regular basis. 10 We would get them to tell us everything that they 11 felt was wrong with the business, issues they needed 12 fixing. We'd go away, we'd come back the next time, 13 we'd tell them what we'd done in terms of fixing it and 14 we'd ask them what we needed to tackle next. 15 So all of those issues were just about trying to 16 make progress in a company that was starting from 17 a very, very terrible position. 18 Q. Were you relying on the judgement and discretion of the 19 CEO and the Chair within the Post Office to raise 20 matters which they thought ought to be before the Board? 21 A. Yes. 22 Q. Do you know what steps they took to motivate or 23 encourage their staff towards openness and 24 accountability and transparency in your period of 25 office? 161 1 A. I think Sir Mike Hodgkinson, I think, set up the Risk 2 Committee there and Chaired it himself. I think he 3 tried to install the right attitudes. Obviously, 4 I wasn't in any of those meetings, I wasn't in the POL 5 Board meeting other than on the two occasions I think 6 that we spoke about earlier, so I was never seeing that 7 firsthand. 8 Q. You've mentioned that there was a fundamental difference 9 in culture between Royal Mail and Post Office and that 10 related, in particular, to openness; is that right? 11 A. I'm not sure if I -- you might correct me and say I used 12 the word "fundamental" but, certainly, I thought there 13 was a real difference in -- 14 Q. A real difference, okay. 15 A. Yes. 16 Q. In what did that have its origins? 17 A. I don't -- obviously, this is looking back with 18 hindsight. 19 Q. Well, my next question was going to be: was it obvious 20 at the time? 21 A. Not obvious in that sense but I think the Post Office, 22 I think, internally within the Post Office, always 23 thought of themselves as a different organisation, the 24 public service, the face of Government, and felt that 25 that was very different from the space that Royal Mail 162 1 was increasingly inhabiting. So I think there was 2 a sort of difference in outlook, there was a difference 3 in the objective of the two companies and, as I said 4 earlier, I think all the separation things which, in 5 many ways, made sense, in terms of those different 6 futures, I think also probably exacerbated some of those 7 feelings of we're different. 8 Q. We've heard evidence in the Inquiry from more than one 9 person that they took decisions not to escalate concerns 10 about Horizon or the way that cases were prosecuted 11 because the Post Office was a highly politicised 12 organisation, it was very hierarchical, they would have 13 been seen, for example, as stepping out of line if they 14 had delivered such a message, that it wouldn't have been 15 good for their career, and they chose unconsciously to 16 protect themselves. Was that a culture of which you 17 were aware, within the Post Office at the time? 18 A. I'm very sorry to hear that. I mean, I certainly 19 encouraged the complete opposite. I wanted people to be 20 open. We encouraged people to be open. It's actually 21 partly why we created Have Your Say, it's why it was 22 anonymous, and I regret if that was the case within Post 23 Office but there were other ways anonymously to get 24 information to people if people were concerned. 25 There was also whistleblowing too, but I think Have 163 1 Your Say was another way of doing that, so there was 2 more than one route to be able to do that. 3 Q. You say that you trusted Mr Cook, when he was Managing 4 Director, to raise systemic or reputational issues that 5 had been devolved to POL, such as concerning legal or IT 6 functions, to you and to the main board; is that right? 7 A. I did, yes. 8 Q. Have you had any reaction or how do you feel about 9 Mr Cook's claim that, in his period of office, he did 10 not even know that the Post Office had a prosecutorial 11 function until 2009, ie until the Computer Weekly 12 article, despite having been Managing Director of the 13 Post Office since 2006 and a Non-Executive Director for 14 years before then? 15 A. I would find that surprising. 16 Q. He has told the Inquiry that, although he had 17 conversations with the Head of Security about fraud, 18 about liaison with the police, he remained in the dark 19 about the prosecutorial function. At the time, did he 20 strike you as a man who was so out of touch with the 21 business that he was running, that he wouldn't know that 22 one of its functions was to prosecute its own staff, 23 resulting in many of them being sent to prison? 24 A. He certainly always gave the impression of someone who 25 was very much in control of his brief. His particular 164 1 area of expertise was in Financial Services, which was 2 including his previous role. And, obviously, that 3 was -- given the amount of Government revenue that had 4 been lost, both the through the loss of benefits 5 payments and the forthcoming loss of the POL card, 6 Financial Services was one of the few ways that the Post 7 Office could fill that revenue gap. So he was brought 8 in specifically with that skill. I do know that he 9 spent -- I remember him always saying how much time he 10 spent with subpostmasters, with the NFSP, and he never 11 gave the impression to either myself or indeed the 12 board, in fairness, of being anything other than in 13 control of that brief. 14 Q. You tell us in your witness statement that, as you have 15 done today, that Mr Jonathan Evans, the Company 16 Secretary, sat on both boards, the main board and Post 17 Office Limited Board, correct? 18 A. He did, yes. 19 Q. Was his role, by sitting on both of those boards, 20 expected to be one which exercised any particular 21 function across both businesses, ie by reason of sitting 22 on both boards? 23 A. Well, as you know, the Company Secretary has a slightly 24 different role in the sense of not being part of 25 a management team, if you like, effectively they report 165 1 to the board and to the Chairman in a more independent 2 way. Jonathan also had a huge history with the company, 3 and so he played that sort of role of understanding the 4 history, both sides of the business, and was trusted by 5 everyone on the board, whether that was the Holdings 6 Board or indeed the Post Office Board. 7 Q. My question is more was it by design, ie with a purpose, 8 or an outcome in mind, that he sat on both boards? 9 A. I think it was to ensure there was more glue there 10 across the two. Again, that's something that had been 11 decided quite a while before I arrived, but was there 12 and in place when I arrived, and seemed to work very 13 well. 14 Q. He was the line manager, essentially, of the Legal 15 Services team within the Royal Mail Holdings? 16 A. Yes, he was. 17 Q. Can you say whether or not that played any part in the 18 decision that he should be Company Secretary of both 19 organisations and should sit on both boards? 20 A. I genuinely don't know, partly because the decision had 21 been made quite some time before I arrived, I'm sorry. 22 Q. Can we turn, please, to your knowledge of Horizon. You 23 tell us in your witness statement that you recall that 24 the system was first piloted in 1995, and rolled out in 25 2000 with further development thereafter and was, 166 1 therefore, relatively established when you arrived in 2 2003? 3 A. When I say I recall, I now recall because I've read all 4 this stuff. When I arrived, it was just the system that 5 the Post Office used. 6 Q. Were you, therefore, not aware of the history of the 7 procurement for the contracting about and development 8 of, Horizon when you arrived? 9 A. Not in the slightest, no. It would be quite unusual for 10 someone to arrive and people to take them back 11 eight years, five years, whatever. So no, not -- 12 Q. I want to ask you about the extent to which any of that 13 back history was revealed to you. Were you aware of the 14 collapse of the wider contract between the Post Office, 15 Fujitsu -- then called ICL -- and the Benefits Agency? 16 A. No. 17 Q. That was a matter of quite some controversy in the late 18 '90s, before you joined Royal Mail. That was something 19 of which you were unaware? 20 A. No. 21 Q. Were you aware of or told about on arrival the issue of 22 the withdrawal of the Benefits Payment Card, and 23 therefore the Benefits Agency, from a joint programme 24 with the Post Office, which was seen as an existential 25 crisis for the Post Office? 167 1 A. No. You don't mean that when they decided to no longer 2 pay benefits -- 3 Q. Yes. 4 A. -- through the Post Office, do you? 5 Q. Yes. 6 A. I was aware of that because, obviously, that was 7 a dramatic loss of revenue for the Post Office, which 8 actually caused a lot of the initial subsidies to be 9 required from the Government. 10 Q. Was that linked in your briefings or your readings in, 11 in any way, with originally the Benefits Agency being 12 part of a joint programme -- 13 A. No, that was. 14 Q. -- to procure the system? 15 A. That was entirely linked to the fact that this was 16 coming from the DWP, Department for Work and Pensions, 17 which was -- their role, not surprisingly, was to get 18 value for money in terms of the public purse, and, 19 effectively, the cost, as it was described to me, the 20 cost of providing a benefits payment to a particular 21 individual through the Post Office, I don't remember the 22 exact figures, but roughly speaking might be £1 and, if 23 it was done directly into the bank account, it might be 24 a matter of 5p or 6p. 25 So, from a spending taxpayers money wisely point of 168 1 view, that was a change that they felt they had to make. 2 So, in that sense, the Government was both causing 3 the -- inadvertently causing the difficulty of taking 4 a lot of money away from the Post Office, and the 5 subpostmasters, but then was also trying to solve the 6 problem in another part of the field by providing 7 a subsidiary to help allow the company to continue to 8 trade. 9 Q. You weren't told or didn't read about, on joining the 10 company, that part of the equation for the DWP opting 11 for direct payments was that they had lost trust in 12 Fujitsu, ICL Pathway, and the quality and reliability of 13 the computer system that they were selling? 14 A. As it was told to me, it was all about the costs benefit 15 analysis for them and the use of public money. 16 Q. Were you told about a political decision having been 17 made, that the Post Office had to take the Horizon 18 system from Fujitsu, against many of its employees 19 wishes -- 20 A. No. 21 Q. -- because they too thought that it lacked, and its 22 supplier lacked, credibility and reliability? 23 A. No, I -- when was that? Was that -- 24 Q. That carried on for many, many years. 25 A. Okay, well, I'm not aware, no. 169 1 Q. Okay. 2 A. Long before my time, I assume. 3 Q. When the system was being developed, tested and then 4 rolled out, there were a series of so-called Acceptance 5 Incidents -- ie problems or issues with the system or 6 with processes -- that contractual provisions regulated 7 as to whether they needed to be solved before a national 8 rollout. Were you briefed about that process: the 9 Acceptance Incidents issue? 10 A. No. 11 Q. Were you aware of the autumn 2000 National Audit Office 12 report, which criticised Post Office Management and 13 indeed the Government in the management of the 14 arrangements in the contractual history for the 15 procurement of Horizon? 16 A. No. 17 Q. When you took up your role in 2003, did you have any 18 appreciation at all, or were you briefed about, any 19 issues with the contracting for, development of and 20 rolling out of horizon? 21 A. No, as I arrived, the system had effectively been rolled 22 out and people were, as far as I was aware, just dealing 23 with that as the system the company had used. And 24 organisations in my experience do have a habit of, once 25 they're up and running with something, there's 170 1 a tendency just to get on with things, and not look 2 back. 3 Q. So Horizon was relatively well established by 2003 -- 4 A. Yes. 5 Q. -- and was working? 6 A. As far as I was aware, yes. 7 Q. Did nobody brief you about the rather problematic birth 8 that it had had? 9 A. No. 10 Q. At any of the future meetings that you attended, did any 11 of those who had been in post at the time of the rather 12 difficult development of Horizon -- for example David 13 Miller or Jonathan Evans -- ever tell you about those 14 issues? 15 A. Jonathan did not and part of my briefing when I arrived 16 at the company was meeting Dave Miller, and I do not 17 believe he mentioned it at all. 18 Q. Would you agree that the Horizon system was one on which 19 the effective and efficient running of the business was 20 greatly dependent? 21 A. Yes, I would. 22 Q. It was a business critical system? 23 A. Yes. 24 Q. But what steps did the main board take in your 25 seven-year period to ensure that it was running reliably 171 1 and with integrity? 2 A. I don't recall exactly but I would have -- I would 3 naturally assume that it will have been part of the 4 internal audit plan. 5 Q. Can you recall whether any such steps were taken by the 6 Management Board or the Risk Committee? 7 A. Well, the -- the internal audit plan would all be 8 approved and come to the Management Board and the Audit 9 Committee and the Board for debate. 10 Q. Are you aware of an internal audit conducting any 11 review, or investigation in your seven years, of the 12 reliability and accuracy of the data that Horizon 13 produced? 14 A. I genuinely can't remember, sorry. 15 Q. Would Internal Audit, if they did conduct such 16 an investigation or a review, be the appropriate people 17 to do so? 18 A. Yes. 19 Q. What skills did Internal Audit, so far as the operation 20 of a computer system, have? 21 A. Well, it's a financial accounting system, they have 22 those skills and abilities. That's what good Audit 23 Teams do. They know how to get under the skin of 24 projects like that and to understand how the mechanics 25 of the system worked, if they were concerned about 172 1 anything like that, they would have the ability to call 2 in further expertise in any particular area and then to 3 bring forward a report. 4 And, as I said earlier, we encouraged -- you will 5 have noticed on some of the papers, certainly, I know 6 the ones that were sent to me, that our internal audit 7 reports were pretty brutal, and we asked them to be that 8 way because we wanted to understand, you know, the worst 9 of what we were dealing with. 10 As to when and if they did one on Horizon, as I said 11 earlier, I genuinely can't remember. I would have 12 thought so, on the grounds of over those years, and 13 an important issue, but I don't remember the individual 14 report, I'm very sorry. 15 MR BEER: Sir, I've sailed past 3.00. 16 SIR WYN WILLIAMS: How is the transcriber faring? 17 MR BEER: I think she said she wanted a 10-minute break. 18 SIR WYN WILLIAMS: Yeah, okay. So we'll begin again at 19 3.15 -- yes, 3.15. 20 MR BEER: Thank you, sir. 21 (3.06 pm) 22 (A short break) 23 (3.15 pm) 24 MR BEER: Good afternoon, sir. Can you see and hear us? 25 SIR WYN WILLIAMS: Yes, thank you. 173 1 MR BEER: Thank you. 2 Mr Crozier, you address in your witness statement, 3 no need to turn it up, paragraph 63 to 65, issues of 4 knowledge of bugs, errors and defects in Horizon. Is 5 the short summary this: that at no time did anyone 6 within the Post Office Executive Team, or its Board, 7 draw your attention or, so far as you're aware, your 8 board's attention, to any bugs, errors or defects in 9 Horizon. 10 A. As far as I recall, they did not. Could I just mention 11 one more point? If I may. 12 Q. Yes, of course. 13 A. Just, in case I misunderstood an earlier question, you 14 asked me about external audit of the Horizon system, 15 obviously the external auditors were constantly testing, 16 when they were reviewing the accounts and the numbers at 17 the half year and the full year, that the system was 18 working as it should work. 19 Q. Just stopping you there, if I may, without wishing to 20 probe on a clarification point raised, you said 21 obviously the external auditors were examining the 22 operation of Horizon. Why was that obvious to you? 23 A. Oh, sorry. Just a word, sorry. No particular meaning. 24 I just meant, in the sense of, obviously, they would be 25 checking the quality of earnings, the quality of the 174 1 numbers, in the work that they were doing for half year 2 and full year audits. Just in case I misunderstood you 3 in thinking that was an outside specific look at 4 Horizon. That is all. If it's a needless 5 clarification, I'm sorry. 6 Q. It's certainly not needless at all because we have seen 7 the audits and the extent to which they do undertake 8 that function, and that's a very open question. 9 A. Okay. 10 Q. Why did you believe that external auditors, as part of 11 their external accounting audit function, would assess 12 the reliability of the Horizon system? 13 A. Well, they would be looking at the numbers and the 14 quality of the numbers and the consistency of the 15 numbers that they were looking at, so I assume they 16 would be cross-checking all of that all of the time. 17 Q. So does it amount to this: you would expect that, if 18 they are to sign off the accounts, in circumstances 19 where the data within them is produced by a computer 20 system, that they would make some enquiries and conduct 21 some investigation on an annual basis into the 22 reliability of the data itself? 23 A. I would have thought so. Again, I'm a layman on this, 24 but I would have thought so. 25 Q. Was anything ever said or shown to you, so far as you 175 1 can now recall, that suggested that that is what they, 2 in fact, did? 3 A. Nothing that was shown to me suggests that they had 4 a concern about the quality of the numbers. 5 Q. Was anything shown to you to suggest, so far as you can 6 now recall, that their audit, in fact, involved any 7 examination of the integrity of the Horizon system? 8 A. I don't recall, sorry. 9 Q. Can we turn back then to the bugs, errors and defects 10 issue? 11 A. Yes. 12 Q. I think it remains the case that you say that, in your 13 seven-year tenure, at no time did the Post Office draw 14 your attention to any bugs, errors and defects in the 15 Horizon system? 16 A. No, and the Operations Team, whether that was David 17 Miller, Ric Francis or Paula Vennells, they attended 18 lots of different meetings. I do not recall them doing 19 that, no. 20 Q. You, I think, probably know now, in general terms, that, 21 as a result of the findings of a series of court cases, 22 it has been established that, within the period 2000 to 23 2010 -- so including your period of office from 2003 to 24 2010 -- there were a series of bugs, errors and defects 25 in the Horizon system, of which the Post Office knew and 176 1 which either caused or were capable of causing financial 2 irregularities and balancing problems? 3 A. I am now aware of that, yes. 4 Q. Would you expect the people within the Post Office who 5 you have just listed, if they had been aware of them, to 6 draw them to you and your Board's attention? 7 A. I would have expected them in the first instance to draw 8 them to the attention of the Post Office Exec Team and 9 Board and absolutely, yes, to, if they were serious and 10 systematic, to the Management Team and the Holdings 11 Board, yes. 12 Q. So you would have expected it not to have been a direct 13 communication to you but to have gone through the Post 14 Office Board route; is that right? 15 A. Well, to simplify it, I would have expected them to tell 16 the Post Office Chief Executive, and I would have 17 expected the Post Office Chief Executive to tell the 18 Board and myself very quickly and simultaneously. 19 Q. Did you know about a Post Office stock line on Horizon, 20 namely one in which it was said that the "system is 21 robust"? 22 A. Only from what the Inquiry has sent me in terms of some 23 of the responses sent by Alan Cook to various parties. 24 Q. I think you're referring to some internal Post Office 25 emails, which refer to what I've just said as being our 177 1 stock line? 2 A. Yeah, okay. 3 Q. Firstly -- 4 A. I was not aware of that, no, sorry. 5 Q. Okay. Were you aware of, had you heard the phrase when 6 you were in office, that the Post Office believes that 7 its system is "robust and has integrity"? 8 A. I certainly never heard -- I didn't hear that statement 9 but I never heard anyone say that it wasn't. 10 Q. So you hadn't, as you recall, heard the stock line nor 11 did you know it was called a stock line? 12 A. No, sorry. 13 Q. Is that because, from your perspective, the integrity or 14 lack of it in Horizon wasn't in issue? 15 A. It wasn't an issue that was being flagged up by anyone 16 in that sort of chain of checks and balances that 17 I outlined earlier, no. 18 Q. If Horizon's integrity was in question, but a stock line 19 was being used in which it was said that it was robust, 20 that would be a serious matter for not only the Post 21 Office but for Royal Mail Group, wouldn't it? 22 A. It would indeed, and it would also be entirely wrong. 23 Q. I'm sorry? 24 A. It would indeed. 25 Q. In late 2009 and early 2010, I think the business had 178 1 any just secured state subsidy to bring it barely into 2 profitability; is that right? 3 A. I think it finally came through after I left, some time 4 later in 2010, I believe. 5 Q. Had the securing of that state subsidy been a major 6 issue for most of your period of time in office? 7 A. I think there were three occasions, I think, when that 8 became an enormous debate. Probably one of the biggest 9 was around 2006 because, at that point, they'd announced 10 that the Post Office Card Account was also going, so 11 there was -- in terms of looking forward and going 12 concern basis, there was yet more revenue going to be 13 disappearing from the Post Office and that required -- 14 I think, part of the agreement then was a particular 15 subsidy, I can't remember the exact number, but it also 16 meant a reduction in the number of post offices by 17 around 2,500, I think. 18 So, from a Post Office point of view, you know, for 19 almost every subpostmaster, an issue was the declining 20 income and the closures of the Post Office, and I think 21 for MPs, for Select Committees, for Government, that 22 almost took over the whole agenda for the Post Office, 23 and at roughly the same time there was a thing called 24 the Hooper review, which was an independent Government 25 review, which they adopted, which came up with four 179 1 things: (1) that the Royal Mail should be allowed 2 private capital; (2) that the Post Office should stay in 3 public ownership; (3) there should be a change in 4 regulator; and (4), Government should look to try and 5 take care of the Post Office pension. 6 The code for outside capital was actually that was 7 a request from the shareholder to try to look to see if 8 Royal Mail could be sold, in part or in whole, to 9 another European player or private equity. 10 Q. Would you agree that the significance of the dire 11 financial situation of the business, the Post Office 12 business, would have been apparent to everyone in the 13 Post Office Executive Teams throughout your time in 14 post? 15 A. Most certainly. 16 Q. Would you agree that, if any, question marks over the 17 integrity of Horizon and the data it produced would be 18 a very significant matter not only for the Post Office 19 but also for the shareholder? 20 A. It would. 21 Q. In part, because that shareholder was also responsible 22 for the investment by way of the subsidy? 23 A. Indeed. 24 Q. You say that Royal Mail met with the shareholder -- the 25 Shareholder Executive, ShEx -- on a roughly quarterly 180 1 basis? 2 A. Yes. 3 Q. When you were providing feedback and updates to the 4 Government through the Shareholder Executive, were you 5 entirely reliant, if the matter concerned the Post 6 Office, on the information that the Post Office Board 7 and Chief Executive relayed to you? 8 A. The conversations that we had with the Shareholder 9 Executive, as the Royal Mail Management Team, were 10 mostly around, I think -- if I can find the right space 11 in my statement -- were around the financial performance 12 of the company, how far we were getting with our 13 modernisation programme, relationships with the unions, 14 and of course questions of ownership. I've mentioned 15 one around the potential sale of or in part of Royal 16 Mail, there was another large debate where myself and 17 Allan Leighton and the Board, we wanted to try to turn 18 Royal Mail into, in shorthand, a John Lewis partnership. 19 We wanted 20 per cent of the company to be owned by our 20 people, and I include in that subpostmasters. 21 We valued the subpostmasters, Allan, as 22 an ex-retailer, understood the importance of frontline 23 managers, and we want to the subpostmasters, actually, 24 to have an ownership of the Post Office. So we 25 discussed things like that but, obviously, we discussed 181 1 funding. 2 At the same time, the Post Office had very regular 3 meetings with Shareholder Executive but a separate team 4 within that, and that was the constant day-to-day on 5 Post Office business, closure programmes, revenue, all 6 of those things, so there was sort of parallel, if you 7 like, conversations going on. 8 Q. Was anyone from Royal Mail Group present at any of those 9 meetings or communications between the Shareholder 10 Executive and the Post Office? 11 A. No doubt some, but probably not all, and some would have 12 been Jonathan Evans, I think. 13 Q. So there were, as you've described it, essentially two 14 parallel routes back to Government? 15 A. Correct, yes. 16 Q. You tell us in your statement that the Shareholder 17 Executive rarely attended Royal Mail Board Holdings; is 18 that right? 19 A. That's right, yes. 20 Q. Why was that? 21 A. Well, the times I can remember them attending were, to 22 be honest, the things I've mentioned, which were around 23 potential ownership changes, were around the solvency 24 debate and the subsidies. That always had to be -- 25 I mean, another degree of separation was that had to be 182 1 very carefully done from a Royal Mail point of view, 2 those had to be commercial loans at competitive rates, 3 and -- 4 Q. Cutting thorough it, Mr Crozier, were they entitled to 5 attend? 6 A. They were absolutely entitled to attend. 7 Q. Every meeting? 8 A. Yes, sorry, but rarely did, save for those really big 9 topics, of funding, solvency and ownership. 10 Q. That was their choice; is that right? 11 A. That was their choice, yes. 12 Q. What about attendance by the Shareholder Executive at 13 Post Office Board meetings? 14 A. During my time, they did not do that nor did they have 15 a representative on the board during my time, no. 16 Q. What was the reason for that? 17 A. I don't know. You'd have to ask them. 18 Q. Finally then, please, you tell us in your witness 19 statement that your objective in your period of office 20 was to deliver a better group for all stakeholders, and 21 would you agree that, so far as this Inquiry is 22 concerned, that objective would include treating 23 subpostmasters as trusted trading partners -- 24 A. I would indeed. 25 Q. -- not assuming that they were on the take or some of 183 1 them were on the take? 2 A. No, I think some of the language I've heard over the 3 last few weeks is deplorable. 4 Q. Were you aware of the removal of the facility for 5 subpostmasters to query losses that were attributable to 6 them by the computer system? 7 A. No, I have wracked my brain on that and I genuinely 8 don't remember that coming to the Board, no. 9 Q. Would you agree that the removal of that function was 10 inconsistent with treating them as trusted trading 11 partners? 12 A. I don't know the detail of it. From the sounds of it, 13 I would have agreed with you. 14 Q. It was a form of requiring them to pay for all losses 15 attributed to their branch by a computer without the 16 facility for them to query or even to investigate how 17 that loss had occurred. 18 You, I suspect, have read some of the judgments of 19 the courts of the past few years -- 20 A. Yes, I have. 21 Q. -- concerning the Horizon system? 22 A. They've made it very clear in terms of the failures, in 23 terms of disclosure. 24 Q. In particular, the Horizon Issues judgment of 2019 sets 25 out a series -- and it's into double figures -- of 184 1 defects in Horizon, which were prevalent and were known 2 about by the Post Office during your seven-year tenure. 3 Looking back, who is responsible for the fact that 4 none of that, on your account, was escalated to you or 5 your Board? 6 A. I'm not sure it's fair or right for me to speculate on 7 something as important as this. All I can say, from 8 what I remember at the time, was that it did not get up 9 to the areas that I've mentioned earlier. Looking back 10 with hindsight now, clearly, at a certain level of -- in 11 the Post Office, it went no further. 12 Q. This happened, in a sense, on your watch? 13 A. Yes, it did. 14 Q. You must have had a period of self-reflection and 15 thought: what went wrong? What conclusions, if any, did 16 you arrive at? 17 A. I mentioned in my statement, you know, I can genuinely 18 say it's one of the toughest jobs I've ever done, from 19 a terrible starting point and the degree of difficulty 20 in making change in the Royal Mail. 21 I do look back and wonder, as we talked about 22 extensively earlier, whether the structure exacerbated 23 the problems, for want of a better word. I can see that 24 there was a lack of transparency now in the Post Office. 25 I had assumed they were making the same strides that we 185 1 were in the rest of the company and, you know, at the 2 time, what I don't understand now is why people -- it 3 seems like a perfectly normal thing for me to do is, if 4 you were worried about the performance or if you thought 5 there were issues, why you wouldn't get someone from the 6 outside in to look at that and give you a genuine, open, 7 independent view of what the problem was. 8 And I can see that those were mistakes and whilst 9 I used to like to look back on my time as it being very 10 hard but we made a lot of progress, clearly, it's 11 impossible to do that now without feeling that it's in 12 large part tainted by this, for obvious reasons. 13 MR BEER: Thank you, Mr Crozier. Those are the questions 14 I ask. 15 Sir, there are two lots of Core Participant 16 questions of no more than five minutes each. 17 I think we'll start with Mr Moloney if that's 18 possible. 19 Questioned by MR MOLONEY 20 MR MOLONEY: Thank you, sir. Mr Crozier, just two matters, 21 please. 22 Early in the questioning of you by Mr Beer this 23 afternoon, you were taken to Audit Risk and Compliance 24 Committee minutes, do you remember? 25 A. Yes. 186 1 Q. Prosecutions were referred to in those minutes, numbers 2 of prosecutions, cost to the business, and so on. Your 3 view was that the discussions to which those entries 4 referred must have related solely to Royal Mail 5 prosecutions. 6 A. I think so, yes. 7 Q. One of the reasons for that was that nobody from Post 8 Office was present at the meeting when they were 9 discussed? 10 A. It was also because they were referred to as Royal Mail 11 personnel, if I remember, and that's not how 12 subpostmasters would be referred to in the Royal Mail. 13 Q. I see. At the time of the meeting about which those 14 minutes were prepared, was it Post Office Legal 15 Department that conducted Post Office prosecutions or 16 Royal Mail? 17 A. I thought it was Post Office. 18 Q. If I suggested to you that Post Office only took over 19 prosecutions after separation of Royal Mail Holdings and 20 Post Office Limited in 2012, would you be able to 21 disagree? 22 A. I don't recall. I'm not sure I'd be able to disagree, 23 no. 24 Q. Right. So you don't know who was responsible, you're 25 not sure who was responsible for Post Office 187 1 prosecutions at the time at which those minutes were 2 prepared? 3 A. Well, I assume the client would have been -- well, those 4 minutes, I think, referred to Royal Mail. So just to 5 make sure I understand the question, if you're asking me 6 who was responsible for the Post Office, obviously the 7 Post Office was the client. 8 Q. Right. 9 A. Where they were sourcing that legal help from, I had 10 always assumed it was partly internal, partly through 11 a bit of Royal Mail resource and, obviously, external 12 resource too, as far as I can recall. 13 Q. Thank you. 14 You've just agreed with Mr Beer that Post Office was 15 facing real financial difficulty on your watch. 16 A. Yes. 17 Q. Yes. Insolvency was in issue? 18 A. From before I joined and during the time I was there, 19 yes. 20 Q. You agreed that those were factors that everyone in the 21 business would have been well aware of? 22 A. Yes, I believe so, yes. 23 Q. Anyone who read the annual reports or the press, indeed? 24 A. Yes. 25 Q. You agreed that Horizon was a business critical system? 188 1 A. Yes. 2 Q. If Horizon were to fail because it lacked integrity and 3 you had to start from scratch, it would have heightened, 4 even more so, the commercial survival of the Post Office 5 at that time, wouldn't it? 6 A. Yes, it would but that would have had to be faced into, 7 if there was a problem there because, you know, frankly 8 the issues we were facing on Royal Mail were, in terms 9 of cost and investment, far greater than that would have 10 been, so it would have had to have been faced into, and 11 the Post Office, as actually in fairness the Government 12 showed, was not something that the Government was ever 13 preparing to allow to truly fail. It was more 14 a question of what was appropriate in terms of the 15 revenue that was genuinely there versus the desire to 16 obviously allow the Post Office to continue its really 17 valued role as part of the social fabric of the UK, 18 particularly for certain segments of the population. 19 Q. In hindsight though, do you think that, essentially, the 20 existential problems that would have arisen around the 21 failure of Horizon would have been a disincentive to 22 those who'd been present at the difficult birth of 23 Horizon to, as it were, escalate that up, in terms of 24 telling you what went wrong in the early days and what 25 problems there'd been with Horizon in its development 189 1 and rollout before you arrived? 2 A. I'm not sure I do agree with that, if I'm being honest. 3 You know, I wasn't aware that Horizon had had this very 4 difficult birth, for want of a better phrase, but all IT 5 systems constantly need improving and fixing, and the 6 company in full mode was trying to fix everything. And 7 I do like to think -- I know this is incredibly easy to 8 say now, I hasten to add -- that if we had been aware 9 that there was a real issue that needed fixing I think 10 collectively people would have figured out a way to 11 tackle that and I think that case would have had to have 12 been made by the Government because, in the end, it 13 would have been more important to get it right. 14 So I still believe, whatever the difficulties, if 15 people genuinely felt there were problems, they should 16 have said something. 17 Q. If people knew of the problems before you arrived -- 18 A. Yeah. 19 Q. -- should they have said something about that to you? 20 A. I certainly wish they had. 21 MR MOLONEY: Thank you, Mr Crozier. 22 Questioned by MR STEIN 23 MR STEIN: Mr Crozier, I represent a large number of 24 subpostmasters and mistresses. 25 Towards the end of the evidence and the answers you 190 1 were giving to Mr Beer you said this, you said that, if 2 you were worried about the performance, if you thought 3 there were issues, why wouldn't you get someone from 4 outside in to look at that and give you a genuine 5 independent view of what the problem was? Mr Beer was 6 asking you questions about difficulties add failures in 7 the Horizon system. 8 Mr Crozier, there were people who were raising 9 queries about the performance of Horizon. They were 10 subpostmasters/mistresses, they were trying to do that 11 in the time that you were in charge by phoning the 12 helpline and saying, "We've got a problem, this thing's 13 got a shortfall. It's not my fault. There's something 14 wrong with the machine". 15 Do you know what they were told, Mr Crozier, during 16 your period? They were told to pay up, pay up for that 17 supposed shortfall. So people did raise problems with 18 Horizon system, they were the subpostmasters that were 19 under your care; what do you think about that? 20 A. I think that's obviously entirely wrong. I would have 21 expected -- I thought and would have expected that when 22 people raised issues, these would be openly and fairly 23 looked at. I know, from the evidence I've been sent, 24 that people sent letters which the Post Office team 25 replied to. I always assume, because I do it myself -- 191 1 I wouldn't send or sign a letter that I didn't believe 2 in, so I assumed that people will check those things out 3 properly, and I assumed that they would handle those 4 professionally and openly and ensure that any issues 5 that were raised were investigated properly. 6 Q. You probably heard, Mr Crozier, that what happened was 7 that, because subpostmasters and mistresses were being 8 told to pay up -- it's your contractual duty, they were 9 told, to pay up -- and many of them did, paying out for 10 shortfalls that were certainly not their fault. They 11 got that money from their own pockets, they got that 12 money sometimes from borrowing from friends, some, you 13 may recall, got that money from their kids' piggy banks, 14 others got money from loan sharks at extortionate 15 interest rates, tipping them into financial chaos and 16 bankruptcy. 17 Now, help us please understand what happened to that 18 money when it was paid in? Was it properly accounted 19 for, this money paid into balance supposed shortfalls? 20 A. I assume it was, through the financial team. 21 Q. Was it accounted for as profit? 22 A. I don't know. 23 Q. Well, the very early part of the questions being asked 24 by Mr Beer, he asked you a number of questions about the 25 corporate directorial responsibility and part of the 192 1 director's responsibility is a responsibility over the 2 accounts of a business; is that agreed? 3 A. Yes, it is. 4 Q. It is. It would be wholly wrong, would you agree, to 5 account for a payment for a shortfall as profit; do you 6 agree with that? 7 A. I'm not an accounting expert, so no, I don't -- 8 I wouldn't know exactly how you would account for 9 different payments in different -- 10 Q. Your background is you have a business qualification, 11 I believe -- 12 A. I do, I do. 13 Q. -- and you've obviously worked at senior levels -- 14 A. I have but -- 15 Q. -- and you have an understanding of accounts, don't you, 16 and you have a responsibility to read those accounts, 17 don't you? 18 A. I do. 19 Q. Yes, one of the accounts kept by a business is the 20 profit and loss account; do you agree? 21 A. It is. 22 Q. Right, so money being paid in by a subpostmaster on 23 being told "You need to pay up, for a supposed 24 shortfall", is that a profit, Mr Crozier? 25 Machine is saying "There's something wrong here, 193 1 there's £100,000 wrong". That subpostmaster, using my 2 example, is then paying that large sum of money in. Is 3 that actually meant to be recorded as a profit, 4 Mr Crozier? 5 A. I suppose it depends what it's replacing. I don't know. 6 Q. Shouldn't it be on the balance sheet? Because, in 7 theory, it's creating the opposite side to the loss? 8 A. I assume so, yes. 9 Q. Yes. That's where it should be. Now, the Directors of 10 Post Office Limited should have had their eye on these 11 accounts, shouldn't they? 12 A. Yes. 13 Q. The second reason for them to have eye on the accounts 14 is on the costs of the legal actions being taken against 15 subpostmasters, do you agree? 16 A. I would agree, yes. 17 Q. Because that's a way of looking at and tracking the 18 money that was being paid for the expensive costs of 19 taking people to court, or the cleaners. 20 Now, those directors, including yourself, from the 21 RMG Board level, did you pay attention to the costs, the 22 legal costs being spent on those people being 23 prosecuted, the legal costs of those people being taken 24 to the civil courts? 25 A. They would have been taken in the round, I suspect, both 194 1 at Post Office and the Royal Mail -- 2 Q. Forgive me for interrupting you. 3 A. It's okay. 4 Q. Because this period of time we're talking about, which 5 Mr Beer has emphasised, was a period of time for the 6 Post Office and RMG where the business was financially 7 in trouble? 8 A. Indeed. 9 Q. It was a period of time whereby Post Office branches and 10 numbers of them were being cut, yes? 11 A. Yes. 12 Q. So the question of these costs, costs being put in these 13 accounts, would have been under some scrutiny, wouldn't 14 they? 15 A. Yes, they would. There was reference to some of them in 16 the papers that have been sent through, yes. 17 Q. So one of the ways to get information about what is 18 happening within the business will have been through the 19 scrutiny of accounts; do you agree? 20 A. Yes. 21 Q. If money has been taken from subpostmasters for errors 22 made by the Horizon system and been put into the profit 23 accounts of Post Office, that would be wrong and 24 dishonest, wouldn't it, Mr Crozier? 25 A. Well, I don't know if it was, so it's difficult for me 195 1 to comment. 2 Q. If it was, Mr Crozier it would be wrong and dishonest, 3 wouldn't it? 4 A. On the face of it, yes, but, again, I don't know how 5 that was treated. 6 Q. Lastly, you heard the evidence of Lord Justice Hooper, 7 who gave evidence earlier this week, he said that, on 8 a number of occasions when he was trying to investigate 9 such matters, he asked for the accounts, tried to find 10 out where the money went and he never got a satisfactory 11 answer. He never saw those accounts. Do you know why? 12 A. When was this, sorry? 13 Q. This was later on after your time? 14 A. Okay. 15 Q. He was after the very sorts of accounts that I've been 16 describing. 17 A. Right. 18 Q. Do you know why he wasn't given those accounts? 19 SIR WYN WILLIAMS: I don't see how Mr Crozier can possibly 20 answer that, since he had gone four years previously. 21 MR STEIN: I understand, sir, you're right. 22 Where were those accounts kept, Mr Crozier? The 23 accounts that relate to profit and loss and balance 24 sheets? Where were they kept; were they kept at 25 Chesterfield? 196 1 A. Well, obviously all the information was also held at the 2 Head Office. 3 Q. Now, so far, we've heard from a number of people in 4 relation to POL and RMG and it appears that nobody took 5 responsibility for the prosecution of subpostmasters, 6 nobody took oversight of it, nobody at all. Are you 7 proud of that? 8 A. No. 9 Q. How much were you paid during your period of time as 10 chair of RMG? 11 A. I'd need to look back. I don't know; I'm sure it's 12 absolutely available in all the annual reports. 13 Q. It's in millions, isn't it, Mr Crozier? 14 A. Yes, it probably, is, yes. 15 MR STEIN: Thank you. 16 SIR WYN WILLIAMS: Thank you, Mr Crozier. 17 That brings to an end today's session. We will 18 resume again -- 19 Oh, sorry, I should formally thank you for your 20 witness statement and thank you for answering so many 21 questions during the course of today. 22 So we'll resume, again, at 10.00 on Tuesday, 23 I think, with Mr Miller, is it, Mr Beer? 24 MR BEER: That's right, we've got David Miller first and 25 then David Mills second. 197 1 SIR WYN WILLIAMS: How squeezed are we for time? We have 2 two witnesses and it's becoming clear to me that two 3 witnesses is a stretch, on occasions, in one day. 4 MR BEER: Yes, we'll review that, sir, in the light of 5 experience. 6 SIR WYN WILLIAMS: Thank you. See you all on Tuesday. 7 MR BEER: Thank you very much, sir. 8 (3.48 pm) 9 (The hearing adjourned until 10.00 am 10 on Tuesday, 16 April 2024) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 198 I N D E X ALAN RONALD COOK (affirmed) ...................1 Questioned by MR STEVENS ......................1 Questioned by MR STEIN .......................86 Questioned by MR HENRY .......................94 Questioned by SIR WYN WILLIAMS ...............99 ADAM ALEXANDER CROZIER (affirmed) ...........106 Questioned by MR BEER .......................106 Questioned by MR MOLONEY ....................186 Questioned by MR STEIN ......................190 199