F&ed oar behalt cf the Deferda*t

i,1rr@c6: t{_ Oi.*ieson

Siatrernant t{a: F}sl
Date &rade: ?3 August ?018
?HE POST OFRCE GROUP LITIGATION

Clairn Noe: HQ'l 6XOt 238, HQTTX*2632 & HelTXO4?4*

IN ?HT ffiGH COURT OF JU$T'CE

SUEEN'S BENCI{ DIVISION
ROYAL COURTS OF JUSTICE

BETWEEN:

ALAN BAYSS A,N3 OTHERS

9lairna*ts,

AltlO

POSTOFFICE UM*ED
Defendant

:
WITNESS STATEMENT OF HEI-E}I D}GKIH$O!''

I, HELEN DICKI!{SOH of FUA$e lr{alk, WE$ Bars, Chesterfiek* S4g 1FF WtL $Ay as
tultows:

1. I am a Securi$ Vea* l-*der at Pos* Office Limlbd (Pret Offiee). I am

authorised to rnake this staterne*t an beha6 of Post Gffice.

The fack set out in t}rie statement are within my oy!.rl kncra&dge, *r ff *wy are
outside rny knowladga, I have acplained the source of rny infonrraiion or belieL

3. the&m $ubpostr*reter is used b generafly refertc *gents of

ln this statemenL
Post Office u/ho run branehe*, includir"rg gubpostrnasters, subpm{mistresses
franehisees, posffiters ard operator*.

IffTROBU$TtO!*

4. This staiement describes th* ri,*k of fraud and dishonesty in branches, inaluding
the potetltat for Subpmtmastere !o fatsely account to Po*t Offica and fr*r,
shaftblls can oeclrr in branches due to dishonesty-

A,C_I614983{8_.t
 Claim No: HQtOXO1ZgS, HetZX02637 & HeiZX{I4248

BACKGROUND

5. Istarted with Royal Mail in '.992 lurlrth a delivery job and in the aftemoons t
worked for Royal Mail Revenue Protection. This involved checking bulk postings
for business customers such as Bamsley Council and the Deparknent for Work &
Pensbns. This role evolved and after a few years I moved into Revenue
Protection futl time- Revenue Protection is the usual name given to the team
within a large organisation whose role it is to prevent loss of cash, stock and
assets by error, theft or faud.

I progressed through Revenue Protection as an Assistant Manager, Unit

Manager and evenfually Area Manager. I worked in Revenue Protection
management for around 5 years.

7" ln 2000, I moved into the Security and lnvestigation Service team within Royal
Mail. This team dealt with extemal fraud (that is, ftaud by someone who didn't
work for or within the business), customers attempting b post bulk mail without
payrnent and traudulent account Fstings where companies attempted to bypass
payment or understate the amount posted.

8. I moved across to Post Office in 2003 to join their investigation team. My role
was simitar to the role I had at Royal Mail. I investigated financial losses arising
from fraud although I was dealing with Post Office employees and agents
committing fraud rather than extemal sources, like customers.

L I learned how to trace assets and took steps to recover these using Proceeds of
Crime legislation. This involved restraining property, and converting realisable
assets to recover stolen funds.

10. I was promoted to Security Team Leader in 2013. My job is broad and mixed; my
team and I deal with security-related queries, intemal *auds, audit shortages
where dishonesty is suspecGd, and robberies and burglaries. We also deal with
incidents involving attacks on ATM machines, such as ram raids or gas attacks
and Cash & Valuables in Transit (CWT) robberies conducted on our fleel My
team are responsible for visiting branches to deal with incidents, carrying out
security investigations and assessing secunty issues.

FRAUD IN BRANGHES

11. ln my experience a large majority of Subpostmasters are honest. Those that do

commit acts of dishones$ are not necessarily "bad" and often don't have

AC_151498348-1
 Claim No: HQI6XO1238, HQI7X02B3I & He17X04248

histories of dishonesty. The "ftaud triangle" is a welt-known modelr in the field of

security that explains why an otherwise honest person may commit a dishonest
acL lt explains that frauds often begin where an individual is plaeed under a
financial pressure so that they need money. They then rationalize their actions
as being permitted, and commit the fraud or theft. This is a self-perpetuating
cycle, where problems tend to start srnall Jno tnen grow into larger and larger
frauds. I

12. This model underpins nearly atl frauds in the post office network that I have
witnessed. I set out below a typical scenario of how one small but improper step
by an honest subpostrnaster could escalate into a significant fraud on post
Offiee. I

't3- \A/hen completing their ac@unts, the subpostmaster might record that a shorffall
has been made good, without actually puting in the missing cash- This may be
for something like the simple reasons that tirey have been unable to go to the
bank to draw out the cash. Another not uncammon scenario is that the
subpostmaster "bonows" some cash from the branch to pay a debt arising fiom
their retail business or personal affairs, with an intention (or not) to pay it back
laGr I note that "borrowing" cash from the branch is stric$y prohibited .

'14. Time passes and the money is not pul back into the branch. The subpostmaster
intends to do it when the accounts are next done. They might not believe that
they have done anything wrong, as they intend to put the accounts righL

15. At the next accounting point, the shortfall has grown, now being the accumulation
of the unsetted shorfall from the previous month and anything accrued in the
current month. The shortfall to be made good is now larger and nobody at post
office has noticed the shortage in the cash, so the subpostmaster does the sme
again. Throughout they are rational-sing to lhemselves that they will correct the
inconsistency later.

16. This sequence continues for many weeks or months until the shortfall is so large
the Subpostrnaster can no longer afiord to pay it
Also, the accounts are now in a
muddle because to cover up the unpaid shorthlls, the Subpostmaster has had to
make more and more false entries in the accounts, e.g. by inputting false cash
declarations. By frris poini, it may be very difficult to separate the false entries
from the real ones or, more importantly, to sgparate a loss caused by a genuine
error from one caused by a false entry. This means that any genuine enors in

' See, for example, the website of the Association of Fraud Examiners -
hft p://www. acfe" com/fraud-trianqle.agox

AC_1514983t8_1 3
 Claim No: HQ16XO1Z38, He{7X02637 &HertK}4zilA

the branch accounts will go uncorrected and grow, creating further shortfalls.
The Subpostmaster cannot openly ask Post Office for help because this would
reveal the problem. lt also limits their ability to properly supervise and monitor
assistants because the main tool to do this is the branch accounts and these are
now unreliable.

17. At this point the Subpostmaster is bced with a choice. They cao continue to
cover up tfre shortfalls in the hope they are never spotted and that they come into
a windfall that allows them to pay off the shorthll. Or, tlrey can produce an
accurate set of accounts that would show the accumulated shortfall- By now they
would have realised that What they have done is wrong and so admitting their
actions comes with a risk of their contract being terminated for dishonesty. To
keep hold of their business, which may be a primary source of income, the
Subpostrnaster decides to ,keep declaring fialse accounts in the hope that the
pmblem will go away - but in reality it only gets bigger.

18. Eventually.the shortfall is so large that it causes operationat difficulties (e.g- the
:

branch running out of cash) or the problem is spotted by Post Office. Once
spotted, the correct accounts are produced based on the real amount of cash in
the branch, and all the shortfalls that have accumutated over the months show up
as one large shorthll.

CONCEALING SHORTFALLS

19. The above scenario describes only one of the many ways that f-alse accounts
could be rendered so as to conceal shortfalls. Not alt false accounting is because
the Subpostmaster is stealing cash or stock trom the branch and then covering
that up"

24. Other ways to render false accounts include:

20.1 A Subpostmaster might try to conceal a shortfull by putting a cheque in

the till for the value of the shortfall in the hope that Post Office's auditors
might think that the;cheque has sirnpty been missed when completing the
accounts- ln an audit, accounts would normally be completed and
cheques would be presented during the audit to be included in the audit
result, thus conecting the shortfall, ln reality, the Subpostmaster has no
intention of submitting the cheque to Post Office to be banked until the
shoftage is discovdred. However, if the cheque was accepted by Post
Office, there is no guarantee that there is sufficient funds available for the
cieque to clear when presented.

AC_151498348_1
 Claim No: HQ16XO1238, HQt7XOZ637 & He17X04248

20.2 A more sophisticated way would be to create a false stock unit A stock
unit is similar to a cash floal The Subpostmaster is able to add stock
units on Horizon to suit how they wish to operate their branch. ln a small
branch you might only have one stock unit, but in a larger branch you
might have various stock unib for different staff, the ATM or for the
Lottery- One of the benefits of a stock unit is that it keeps pots of cash
separate and it is then easier to balance or identify where a discrepancy
has occuned. The Subpostmaster could make up a stock unit with a
false balance but which actually has nothing in it so this hides the
shortf;all from other staff members.

20.3 A cash collection pouch can be used as another way of concealing a

shortfalt. The Subpostmaster could er(er a transaction on Horizon
indicating that they, had put an amount of cash in a pouch to be collecled
from the branch. They would scan it as "awaiting collection" and then
reverse that transaction later on so that the cash is not actually
dispaiched. ln reality there is no cash awaiting dispatch.

21. It is also worth noting that the process of declaring a shortfall involves a manual
check of the accounl The Subpostmaster is required to count the cash in the
branch and then manually enter the arnourit into Horizon (or more precisely a
breakdown of that number by denomination of notes and coins). This is a
manual process that does not rely on any calculation or computation by the lT
system. Once all of the denominations have been entered, the Horizon system
will display if there is a discrepancy in what the system expected based on the
branch.
I

transactions recorded in the

?2. It also means that a Subpostrnaster will know if they have entered a false number
as it will not match their manual cash count. A small ermr in one month might be
down to a counting'enor or typo, but in my experience any large or r+occuring
discrepancy would highlight to a Subpostmaster that there is an issue that should
be checked- Where a to have a shortfall of cash but the
branch is found
accounts declare no shortfalls, this can, in my view, only be because false
accounting information has been intentionally and knowingly submitted by a
Subpostmaster (or their assistanis).

23. \Alhen false cash declarations have been made, it becomes very dfficult, if not
impossible, to determine exactly when money has been taken, because the audit
trail of transactions in the.accounts becomes unreliable and you cannot know
whicfr entries are accurate, which were ,honest mistakes and which were
intentlonally false. For example, if false declarations have been made for the tast
six months, it might be the case that a small amount has been taken or been lost

AC_1s1498348_1
 Claim No: HQ16XO1238, HQ1ZX0Z63T &He1TXO4Z4B

every week Altematively, alt of the money could have been taken or lost in one
go- Wthout conoborating evidence, it is very difficult to identify exacfly when the
money was taken. lf there has not been an audit by Post Office for a number of
years then there is potentially a very long period of time during which misconduct
could have occurred.

SHORTFALLS CAUSED BY DISHONESTY

24. Dishonesty €n go beyond concealing shortfalls to outright taud or theft. There

are various different types of frauds that a Subpostmaster might try with varying
degrees of sophistication. At the most simple end of the spectrum is
straighfforward theft - physicatly removing cash from a branch for the
Subpostrnastefs own purposes- This is normally accompanied by some form of
false accounting (otherwise the theft would be quickly revealed as a shortfall in
the accounts).

25. I set out below a few examples of the more sophisticated frauds that could be
conducted.

25.1 Benefit payment friuds. Before pensions and other benefits were paid
directly into custonners' accounts, customers would be issued with a
benefit book. The book had two vouchers per page, like a cheque book
with a stub. The vouchers did not have a barcode and you would simply
be required to enter the benefit type and amount payable into Horizon.
AII vouchers that had been paid out during the day would be bundled up
at the end of each day and sent off weekly with a covering Horizon
printout to the Departrnent for Work and Pensions. However, vouchers
may not exist and a fictitious claim could have been entered.
Altematively a voucher could be taken out of the bundle and then
resubmifted with a later batch of vouchers. ln effect the payment could
be claimed twice: once, conectly, by the customer, and the second time
by a fraudulent Subpostmaster or assistanl Unless the bundle rvas
checked by the DWP, the discrepancy would not be noted. This h no
longer possible asrbenefit payments are now paid directly into a bank
accounL

25.2 Bank account fraud: \Alhen a customer asks for a cash withdrawal from
their bank account, the Subpostmaster might ask the customer to enter
their PIN twice.for the same card transaction and by doing so may draw
out a double amougt of cash. They give one of the withdrawals of cash
to the customer and keep the other withdrawal for themselves. This

AC_I51498348_1
 Claim No: HQl6XOl238, HQ17X02O3Z &HQ|TXO4Z4B

ftaud would only be revealed by a customer realising and submitting a

complaint of a double withdrawal.

25.3 Suppression: lf someone goes in to a branch and pays in, say, f1,000 in
cash to their business accounl the Subpostmaster might not enter the
transaction or reverse the transaction once the customer has left before
using that cash for their orn purposes. When the next person comes in
to pay in a.similar amount in, that might be transfened across to the first
customer to cover the shortfall, and so on, until eventually it is impossible
to bace where it began without knowing all of the customers affected.
Post Office do not;hold any customefs details so would not know what
customers have used their branches unless a comptaint was submitted
by the customer or receiving bank

25.4 Staged robberies: The Subpostmaster conspires with a third party to

stage a robbery and then splits the proceeds, or fabricates a story that
money is missing as a result of a robbery that never took place.2

ITIONTTORING ASSISTANTS

26. All of the above dishonest acts could also be conducted by an assistanl I
believe that the Subpostrnasters are in a good position to monitor and detect
dishonesg conducted by their assistants. They are certainly in a better position
than Post Office which does not have first-hand knowledge of the day-today
actons of an assistant, A Subpostmaster running a branch could and should
have contrcls in place to prevent fraud by assistants.

27. lf the Subpostmaster is not checking the accounts or what has been done in the
branch and someone in the branch is intent on committing a fraud, this could give
them the opportunity to get away with this without the fraud being identified for
some time. Potentially, an assistant could have left to work elsewhere before the
fraud is identified-

STATEMENT OF TRUTH

I believe that the facts stated in this wihess statement are true.

Signed:

Date: 23ro{^-rQu\J- 3: rf

2
htos://wvrarv. bbc.co. uk/newsluk-scotland-qtasqow-west-42051 620

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