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Post Office scandal offers lessons for employer-led investigations
29/04/2021
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John VDLD
John van der Luit-Drummond is editor-in-chief of International Employment Lawyer

In a landmark judgment issued last week, the UK Court of Appeal quashed the convictions of 39 people prosecuted for theft and fraud by their quasi-employer, the Post Office. On the face of it, many employers might assume there is little they can learn from one of the most widespread and long-running miscarriages of justice seen in the UK. But as private prosecutions become more common, there are certainly lessons to learn when investigating alleged employee wrongdoing.

First, some history for those who haven’t been following the case. Between 2000 and 2014, the Post Office prosecuted more than 700 sub-postmasters – who are deemed self-employed agents – based on information provided by IT system Horizon, a Fujitsu-developed accounting software installed in Post Office branches run by sub-postmasters. The problem was that the Japanese company’s product was faulty, reporting cash shortfalls where none existed.

The Post Office dismissed numerous complaints that the £1bn software was filled with glitches and errors, instead deciding to believe that hundreds of its sub-postmasters were criminals. Even after the accounting system’s failures become too numerous to ignore, the Post Office pressed ahead with its private prosecution strategy; the consequences for the victims were horrific. Many served custodial sentences, lost their livelihoods, family, and homes, and with criminal records some have yet to recover financially. At least one sub-postmaster committed suicide; others died before they could clear their names.

In his ruling last week, Lord Justice Holroyde said the Post Office “knew there were serious issues about the reliability of Horizon” and that they had a “clear duty to investigate” the software’s bugs. Instead, the company “consistently asserted that Horizon was robust and reliable”.

Holroyde LJ added that the Post Office “effectively steamrolled over any sub-postmaster who sought to challenge its accuracy” and sought to “avoid legal obligations when fulfilment of those obligations would be inconvenient and/or costly”. The court found that “failures of investigation and disclosure were so egregious as to make the prosecution of any of the ‘Horizon cases’ an affront to the conscience of the court”.

...you can’t just cherry-pick the evidence to support your case, you need to consider all the material in the round

“What lies at the heart of the Post Office issue are serious disclosure failures and apparently the destruction of documents,” says Jeffrey Jupp, a barrister at 7BR and chair of the disciplinary committee of the Institute of Financial Accountants. “If there is one takeaway for other large businesses it is that if you are involved in a private prosecution, then you really need to be fully aware of your disclosure and retention of document obligations.

“It is the same with any internal investigation into misconduct such as fraud. You need to be as transparent about the disclosure of evidence that assists in the case. In the Horizon case, there was information that assisted the sub-postmasters that wasn’t disclosed on the basis that it would assist them, which is plainly wrong. If you are doing an internal investigation, you need to consider all the material that may potentially exonerate the individual as well as that which is less favourable to them; you can’t just cherry-pick the evidence to support your case, you need to consider all the material in the round.”

As sub-postmasters begin to put their lives back together, the fallout for the Post Office and its employees, both past and present, continues. In addition to a government inquiry and a huge compensation bill, there are calls to prosecute Post Office bosses for their role in the miscarriage of justice and for regulatory action to be taken against the company’s lawyers. Fujitsu may also pay a price for its alleged failings, while companies not directly linked with the scandal are being dragged into it by having a former Post Office leader within their organisations.

“The people who made those mistakes were employees and, if there are any that still work there, it may be possible – if you could prove wrongdoing – to bring disciplinary action against them,” says Jupp. “And any lawyers who breached their professional codes could also face sanction.”

This scandal also raises the importance of organisational culture. “There was obviously a culture in the Post Office of a lack of transparency, a lack of trust in sub-postmasters, and a willingness to cover up,” says Jupp. “That kind of culture becomes embedded over time, so you need to be vigilant about what sort of culture your organisation is creating. If it is one of fear and cover-ups, then you are never going to get the best results and you are probably going to end up in trouble at some point.

“All that was needed was one of the Post Office’s investigators or prosecutors to say, ‘something is amiss here because the person I am interviewing is obviously telling the truth. Let’s get to the bottom of it and be transparent’. The problem is, it appears that they got in so deep, and had wrongly prosecuted so many people, that they couldn’t do that.”

Protecting your corporate culture is not merely a checklist of do’s and don’ts to be glossed over on a semi-annual basis; it is a broad issue that needs to be regularly assessed by an organisation’s leaders who must ensure their people are empowered to voice concerns when they are found.

“You need people brave enough to say when something is wrong, and that you need to do something about it before it’s too late,” says Jupp. “Otherwise, the cost may be too great.”