Thread by @nickwallis

Good morning from the Salvation Army café near the International Dispute Resolution Centre where Day 2 of Week 3 of Phase 2 of the Post Office Horizon Inquiry is taking place.

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Yesterday we heard from Keith Todd, former CEO of ICL (the British company owned by Fujitsu which won the Horizon project as the ‘Pathway Consortium’)

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I’ve had a chance to review Mr Todd’s evidence this morning. What follows is a mini-fisk of his witness statement and oral evidence…

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Please note references to the Pathway project essentially means an early iteration of what was eventually Horizon, and all references to ICL, ICL/Pathway or just Pathway essentially mean Fujitsu - ICL was 80% owned by Fujitsu at the time it won the contract and was…

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… fully absorbed and re-branded as Fujitsu in 2002.

Pathway was initially a separate company (Pathway Consortium) set up to win the PFI tender to deliver what became Horizon, but soon the other partners fell away and it…

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became Pathway, a company fully-owned by ICL.

Glad all that’s clear.

The first interesting statement by Mr Todd in his witness statement is at par 45, where he states…

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‘I have now seen the evaluation scorecard against which each of the three competitors were marked. This shows that Pathway had the best proposition and value for money based on the public procurement selection criteria.’

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There is a footnote referencing the evaluation scorecard, which is considered in an NAO report called The Cancellation of the Benefits Payment Card project, which you can read here: nao.org.uk/reports/the-ca…

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The NAO report notes ‘Pathway’s solution was ranked behind its competitors’ in terms of delivery, but was deemed acceptable and was the only one that was clearly compliant with the Private Finance Initiative. The lowest evaluation in each of the criteria is shaded.’

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Pathway comes last in ALL scoring criterial marked ‘Viability’. Mr Todd fails to mention this.

Todd says ‘Ultimately, I believe that Pathway was awarded the contract because it was prepared to take risks to ensure the success of the project and had the best value for …

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... money proposition of the competitors and skills to deliver it.’ which at least squares with the assessment made in my book that Fujitsu/Pathway won because it was cheapest for the govt and shouldered most of the risk.

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Todd spends some time on the nightmare ICL had dealing with the government departments which jointly procured Horizon (Post Office and DSS), especially as DSS eventually abandoned the project. He cites ‘a letter from Sir David Hancock to me dated…

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… 3 June 1999 - Sir David notes that ’ICL were very badly treated by the Benefits Agency and the Post Office'. Sir David was a highly respected senior civil servant and it was telling that an individual who had no economic benefit in Pathway believed…

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... we were being very badly treated.’ Todd also notes a congratulatory note from ‘Sir Michael Butler to me (the former chairman of Pathway and an experienced civil servant and diplomat) dated 4 June 1999, Sir Michael states that 'it was an amazing achievement…

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… to steer this wretched government machine home to port'.

It’s not clear whether Sir Michael means the machinery of government or Horizon itself. I suspect the former.

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In par 118 Todd reflects on the withdrawal of the DSS from Horizon and write ‘The product was still fit for purpose: the physical architecture, the software system and the accounting behind it still worked’

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The ‘accounting behind it still worked’ is factually incorrect.

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Moving on to his oral evidence yesterday Todd was told about a contract Fujitsu signed with the PO (and the DSS, still hanging in there at that stage) which included a provision called ‘Prosecution support’. This required Fujitsu to…

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… ‘ensure that all relevant information produced by [the Post Office Counters Limited] service infrastructure at the request of [Post Office Counters Limited] shall be evidentially admissible and capable of certification in accordance…

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… with the Police and Criminal Evidence Act (PACE) 1984, the Police and Criminal Evidence (Northern Ireland) Order 1989 and equivalent legislation covering Scotland.’

and…

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‘At the direction of [Post Office Counters Limited] audit trail and other information necessary to support live investigations and prosecutions shall be retained for the duration of the investigation and prosecution…

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… irrespective of the normal retention period of that information.’

Todd agrees it would have been ‘necessary’ for Fujitsu to (in the words of the inquiry counsel Jason Beer KC) ‘some advice on what the criminal law requires and/or speaking to the customer as to its…

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… understanding of what the criminal law requires in order that these provisions could be complied with in practice.’

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There is an interesting discussion over a document where ICL attempt to assert themselves over the DSS and PO with a ‘Position paper’ on the Pathway project. The heading to the letter states ‘Without prejudice’.

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Todd explains the thinking behind the position paper: ‘I do recall a time, discussing with my colleagues, that I was concerned that Chinese whispers may be occurring, that briefings were getting miscommunicated and that the…

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… antidote to that was to try and write, what I believe still is, a clear paper outlining the position that we saw through the eyes of ICL Pathway and ICL.’

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The paper was written by Todd with the ‘Pathway team, John Bennett, almost certainly Tony Oppenheim, but Richard Christou, who was, at the time, commercial and legal head and was my, sort of, right-hand on commercial and legal matters.’

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The position paper states ‘The problems which Pathway has faced and continuesto face on the Project arise from the fact that the Authorities [that's both BA and POCL] have breached these basic PFI principles. Moreover, [the Benefits Agency] has…

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‘… compounded the situation by separately misrepresenting the true position …"

Beer asks ‘So that they were making false statements, is that right, the Benefits Agency?’

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Todd responds: ‘Certainly, from my recollection of what was going on at the time, it felt that there was a greater knowledge that the camps' programme timescales, that I referred to earlier, were changing. We never got to the bottom of…

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‘… any conclusion, or any insights to be able to prove that one way or another.”

Beer pushes it: ‘You were certainly, by this stage, sufficiently sure of yourselves to allege against the government department misrepresentation?’

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Todd: ‘I would -- I'm not a lawyer. That was our opinion at the time. That document was not a formal breach document. It was our view about the position being misrepresented.’

Beer: ‘You don't throw allegations like that around just because they are written under…

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‘… cover of a without prejudice letter, do you? You must have some evidence to back them up?’

Todd: ‘Well, the schedule at the back’

Beer: ‘So it's true then that you did have evidence of misrepresentation by the Benefits Agency…?’

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Todd: ‘he fact we have attached to this document a schedule of when the delivery existed, or was going to be compared to the RFP [?], is evidence that the timescales slipped.’

Beer: ‘That's not evidence of misrepresentation, is it?’

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Todd: ‘That's true.’

Beer: ‘So why was the allegation of misrepresentation made?’

Todd: ‘I don't recall.’

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There are also interesting exchanges where it becomes apparent ICL are steaming ahead to meet delivery/acceptance/rollout targets on Horizon because the sooner Horizon gets rolled out, the sooner ICL gets paid. Todd pushes back on this…

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Beer: ‘"The contractual programme was based upon an aggressive implementation timetable …" Just stopping there, that's the timetable that Pathway had proposed, yes?’

Todd: ‘It had proposed it in response to our understanding of the times that the…

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‘…customers would want for the rollout of the infrastructure.’

Beer: ‘What does "aggressive" mean in this context?’

Todd: ‘I don't recall…. it was our proposed timetable.”

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Beer: ‘… you say that this was done partly to achieve fast business returns for the parties. Does that mean, in part, so that ICL can start to earn money…

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‘… by reference to the volume of transactions undertaken using the system?’

Todd: ‘… it was in the interests of all three parties to have as short a timetable as possible.’

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Note that Subpostmasters are entirely absent from this conversation. They were the ones who would have to use and be financially liable for the system. They don’t get a seat at this table.

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We are taken to a letter Todd wrote to Frank Field MP, then Sec of State at the DSS. Todd says:

‘I am glad that you have had an opportunity to see the ICL Pathway system and that we have been able to discuss the importance I place personally on delivering this system…

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‘… The system is technically sound. The entire project is deliverable within a relatively short timescale… The best way forward is to roll out the infrastructure as quickly as possible and to issue the…

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‘payment card to all legitimate claimants. Failure to do so will significantly damage ICL and its floatation, and the project's sponsors -- the only ones to benefit will be the fraudsters.’

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Beer notes: ‘So here you were tying the need to roll out the project quickly with, otherwise, the significant damage to ICL's floatation, weren't you?

Todd: ‘I think you’re - you’re taking the words in a specific context….

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‘… I don't recall writing those words, or - I did sign the letter, I'm certainly not suggesting I didn't sign the letter, I don't recall those particular words.’

[Dude, they’re in a letter you sent to a minister]

[After a bit more floundering, Todd answers…]

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‘…at no time did floatation have any direct impact on this project.’

Todd is taken to a ‘cable or email’ from British Ambassador to Japan dated 26 January 1999. It says

‘ICL chief executive calls [Todd] after discussions with Fujitsu….

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‘… Describes latter's [Fujitsu's] dismay, risk to ICL's floatation and of Fujitsu's disengagement from ICL if project Horizon fails.’

The Ambassador goes on to suggest Todd has told him Fujitsu will probably junk ICL if…

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…Horizon doesn’t go ahead. The ambassador thinks this is a fair assessment and says Todd:

‘repeated that a failure of project Horizon would undermine floatation and would result in 700-900 job losses.’

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Beer: ‘The floatation is the point that you consistently emphasise to external parties, isn't it, to Frank Field and to the British ambassador?’

Todd: ‘I would maintain that I recall emphasising all aspects of it… Floatation in the end was not stopped because of…

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‘… this project. It was stopped, as has been stated publicly, by the fact of the market conditions at the time. It was just before the market crash, I think, in 2001, but also the view of the Fujitsu team was the ICL performance -- and I would agree with this -- was…

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‘… not sufficient for the float to happen at that time… it was clear to me in July 2000 that an independent float of ICL was not going to happen and it seemed appropriate for me to resign.’

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To further summarise, it seems like Horizon was a s***show from pretty much start to finish, and Todd did his part in getting the Post Office to accept it - putting pressure on the govt not to can it by raising job losses and corporate failures as possibilities…

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In the final session of the day, Todd was questioned by three barristers representing Subpostmasters, Sam Stein, Ed Henry and Angela Patrick.

Stein goes back to the two paragraphs relating to a ‘Prosecution support’ provision in a contract between ICL and the PO and DSS…

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Stein: ‘Can you help us, Mr Todd, understand what was Fujitsu's understanding of the requirements of the law in relation to criminal proceedings?’

Todd: ‘I'm afraid I'm not going to be able to assist. I don’t have a specific recall of this clause.’

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And later, Stein: ‘Do you understand that, overall, these two paragraphs relate to the use of data from the Horizon System being put into the possible investigation of subpostmasters and whether or not they committed any offences? Do you…

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‘… understand that that's what this is about?’
Todd: ‘I do with your assistance, yes, and seeing this clause.’
Stein: ‘Do you understand that, if this isn't complied with and if the information isn't being…

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‘… passed into the investigations properly about bugs, errors, difficulties with the systems, that innocent people could go to prison?’
Todd: ‘Well, that clearly shouldn't happen.’
Stein: ‘No, we all agree it shouldn't happen. It did happen, Mr Todd.’

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Ed Henry goes to an undated HM Treasury document prepared for the Prime Minister assumed to be written in April 1999. It says:

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‘ICL want unconditional agreement today ... if they and Fujitsu are to avoid a provision in their accounts unforeseen terms and conditions [if they come up] ... the public sector would have no right to withdraw."

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Henry: ‘That is basically making POCL a hostage to fortune, isn't it?’
Todd: ‘Yes, and I think it misrepresents completely what would have been said. I think it's completely inappropriate to expect an unconditional agreement today, so…

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Henry: ‘So the Prime Minister is being misled?’
Todd: ‘No, no. I think that the way this has been documented is inaccurate from the conversation and I don't know who was at this meeting, but if this is the meeting I was at…

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‘… that was not the way it was put across.’

Henry reads on: ‘ICL are not prepared to allow part of the contractual payment to be dependent on the system performing satisfactorily when fully rolled out. This means that…

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‘… the Post Office could pay for a system which did not perform as necessary.’
Henry: ‘True or false?’
Todd: ‘It's nonsense.’

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Angela Patrick asked:

‘would any perceived failure of Horizon have impacted negatively on [your] commercial relationship with government?’

Todd: ‘If Horizon had been a massive failure, it would damage the reputation. What happened to your clients is —‘

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Patrick: ‘Let's not look at what happened next. In 1999 and 2000, if it became known that there were serious problems with Horizon, or if it was failing, that would have damaged …

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‘… your continuing commercial relationship with government; is that fair?

Todd: ‘If that was the case.’

If you want to read the transcript of all of Todd’s evidence or watch the video, you can find it on the inquiry website here: postofficehorizoninquiry.org.uk/hearings/phase…

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I’m going to be at the inquiry today, live tweeting anything of interest. Today, all day, we’ll be hearing from Tony Oppenheim – former Commercial and Finance Director, ICL Pathway.

Hashtags are #PostOfficeInquiry
and #PostOfficeScandal
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Your contribution funds the postofficescandal.uk website and the podcast I put together with @Rebeccathomson_ who will also be at the inquiry today.

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