Ex-Post Office boss sorry for 'brilliant news' prosecution email

There was lots to take in from former Post Office chairman Sir Michael Hodgkinson, but here are the key points:

• He apologised "unreservedly" and said he was "very very sorry" for the misery the Horizon software caused to sub-postmasters and sub-postmistresses

• Hodgkinson insisted problems with Horizon were not being raised to him or the board, from either within the organisation or from the outside - and that sub-postmasters were not being asked for feedback
• It was not clear whether Hodgkinson accepted any blame, and he suggested there was not much he could have done without the information being raised with him
• He said the Royal Mail umbrella group, of which the Post Office was part, trusted his organisation was being well run, and that in turn, the Post Office trusted the Horizon data
• During his tenure, the Post Office was facing very challenging financial circumstances and a lot of attention was focused on trying to restore the service to profitability, Hodgkinson said

You can see our summary of the morning evidence session, where we heard from a former managing director of the Post Office, David Smith, here.

The former subpostmistress, Seema Misra, who was jailed for 15 months over the Horizon IT, has rejected an apology from a former Post Office boss who at the time of her conviction called it "brilliant news".

Speaking to the BBC after the Inquiry session this morning, Misra said: "How can I accept the apology? They need to apologise to my 10-year-old, they took his mum away on his birthday.

“I was eight weeks pregnant - they need to apologise to my youngest son. It was terrible. I haven't accepted the apologies," she added.

David Smith told the inquiry this morning that in hindsight his email about Misra's case was "poorly thought through".

"Brilliant news. Well done. Please pass on my thanks to the team," Smith said in a 2010 email to colleagues.

Misra was handed a 15-month jail term while being eight weeks pregnant.

She had been wrongly accused of stealing £70,000 from her Post Office branch in the village of West Byfleet in Surrey and was sent to Bronzefield prison on the day of her eldest son's 10th birthday.

This latest phase of the inquiry is focused on "who knew what, and when?" But it is becoming clear this is not just about uncovering smoking guns. This is also about priorities and curiosity.

This morning, former managing director David Smith admitted he was not as focused as he perhaps should have been on problems with the Horizon IT system. He said - with hindsight - it was probably not right for the Post Office to investigate and prosecute its own cases.

Why was he not prioritising those things? He was focused on the financial health of the business.

We had the same message from Sir Michael Hodgkinson, who was at the Post Office at a different time.

The argument some sub-postmasters might well make is that with a bit more curiosity there may have been a different outcome for them.

That was a very tough bit of questioning at the end of today's evidence, which culminated in a lengthy apology from Hodgkinson to sub-postmasters.

Stein, a lawyer representing people impacted, forced Hodgkinson to accept that he did very little to investigate how and why the Post Office was taking people to court during his time as chairman.

After, Hodgkinson said he was "saddened and appalled" by the impact of the scandal and apologised for the "misery" it caused, and for not discovering problems with Horizon while he was at the Post Office.

That's not good enough for Stein, who told Hodgkinson he wanted to know what parts of the scandal were his fault, rather than what he is sorry for.

Hodgkinson said he's not sure what he could have done differently and that he did his best to run the company well.

This final, tetchy exchange pretty much sums up why the government is spending an awful lot of money to have it in the first place: we already know how very sorry everyone is - but who is actually to blame?

After his apology, Sam Stein asked Sir Michael Hodgkinson what part of the scandal was his fault.

"You just don't really know," he says, asking what else he could have done.

"I tried to make sure the business was run as well as I possibly could. Where there were issues reported to us, I tried to make sure that people took action. There's not much you can do," he says.

There were two ways he could get information, Hodgkinson said, and one was reporting up from within the organisation, but he claims that didn't happen.

The other would be to receive letters "from the outside", which he said would normally happen in such circumstances. He says he was and is surprised he didn't receive any about Horizon.

"I never got that kind of correspondence or messaging," he says, saying that "as a result", that's how he operated.

Sir Michael Hodgkinson said it was in August 2007 when he was told about a possible problem with Horizon - the investigation was at an early stage and he trusted it was all in hand.

Was that the general approach of the board to trust that all was in hand with Horizon? he was asked.

He said the general view was that the system was working quite well.

As far as the board was concerned, he says, they were getting lots of information back saying there was a big problem. And so, "we thought that Horizon provided what it was supposed to do, and that is [provide] good quality information."

Lawyer Sam Stein, who represents a number of sub-postmasters has given Sir Michael Hodgkinson a bit of a grilling. It was probably the feistiest exchange we've seen today.

In short, Stein was trying to get to the bottom of what Hodgkinson knew about the Post Office's unusual prosecution powers when he came in as chairman - which in effect meant it could take its own staff to court.

The lawyer repeatedly asked him what he did to learn more about the prosecutions, and after a bit of pressing, Hodgkinson said he hadn't done "anything". He had been aware of it after a time but only vaguely at the outset.

It looked like the point Stein was trying to get at is whether the Post Office was being run by businessmen with backgrounds in making money - an yet, they were at the top of an organisation which was also taking people to court.

Was there a lack of interest or oversight of this part of the Post Office? That's what Stein was trying to draw out here.

Sir Michael Hodgkinson concluded by saying that he has been saddened and appalled that the evidence has come out over the last 15 years since he left.

"So many subpostmasters and submistresses were undeservedly prosecuted under the Horizon system as a result suffered devastating consequences," he says.

"I apologise unreservedly for the fact that whilst I was the chairman of the Post Office I didn't discover the problems with the Horizon system.

"I am very very sorry for the misery this has caused."

Lawyer Sam Stein put some further questions to Sir Michael Hodgkinson, asking him when he learnt that the Post Office prosecuted its own people.

He said he didn't know about the prosecution by the Post Office at early stages. He was made aware much later on, "beginning of 2007".

Stein asks what Hodgkinson did to investigate whether the Post Office was properly prosecuting its own members. "I didn't do anything," he answered.

The inquiry has concluded for the day.

Stay with us as we catch you up on a few more posts summarising what Sir Michael Hodgkinson has said while giving evidence.

Sam Stein, a lawyer representing a large number of sub-postmasters, asks Hodgkinson if it occurred to him to ensure the “little people” were being dealt with fairly.

He replies that the process of prosecution was thought to be based on accurate information from Horizon, and outlines “several” stages and individuals involved which he said indicated it was “fairly objective”.

But he says he was aware there was an investigative system in place. Asked what he did to ensure it was carried out fairly, he says it was discussed at a committee he introduced, but at a "general level".

He says he knew what the process was, but not about individual cases.

Hodgkinson is telling the inquiry that there were serious discussions about ending the relationship with Fujitsu - but because of money, not issues with their Horizon software.

These talks happened against the backdrop of what he says was a financial “disaster” unfolding at the Post Office, which would have led to most businesses “folding” if it wasn’t for an injection of government cash.

The Post Office had to decide whether or not to sign up to a modernised version of Horizon, but they wanted to get the price down to save money.

Asked if this was a missed opportunity to get improvements in the software, Hodgkinson stressed they wanted a product that was “cheaper but no worse”.

Why is the inquiry lawyer asking about this?

Hodgkinson's answers show Post Office bosses were having very significant discussions about the future of Horizon - but even then, its major issues were not uncovered.

Horizon was an opportunity to reduce IT costs, documents shown in evidence to the inquiry suggest.

Sir Michael Hodgkinson is asked whether it is a fair generalisation that the emphasis was on saving money when signing the new deal with Fujitsu.

He says savings were crucial to make the business viable, so it was important to have a cost-effective Horizon system. But the Post Office was reliant on government money, so a provisional contract was signed to keep the discussions going.

Hodgkinson says the alternative was going back to "square one" and looking for a new provider, which was deemed the worst outcome.

It's been suggested to Sir Michael Hodgkinson that the Post Office board took no account of the "user experience" in its evaluation of the Horizon software - in other words, what it was like for the sub-postmasters and sub-postmistresses who were supposed to make it work.

He agreed that the board wanted to see "a cheaper Horizon", but no worse as a result.

He says that there were some discussions and they "went forward on the basis that the cost savings would not reduce the quality of Horizon".

"Can you recall any independent investigations during that period of renegotiations that looked into the effectiveness of Horizon and whether it was the right strategy for the user?" Hodgkinson is asked.

"I don't think there was a big survey done about the issues in the field, as it were," he answers and adds that they had their own offices to do the testing.

"Do you recall, during these discussions, any questions asked about the reliability and the integrity of the data produced by Horizon?" he is asked.

"Not specifically on those formats," he answers. "There were discussions that the quality wouldn't deteriorate at board level."

Sir Michael Hodgkinson is being asked about the Post Office's difficult financial situation around 2006 and 2007.

He says a lot of time was spent trying to ensure they could legally carry on trading and thinking of new ways to get money into the business.

Asked how bad things were, he says: "This was a disaster by most companies' standards."

Most companies would have folded, he says, but government money was coming, which he said made life "much more complicated".

They knew the business at that stage was not viable on its own, but they needed to ensure they had access to cash to carry on trading.

The inquiry has now resumed after the break, with former Post Office chairman Sir Michael Hodgkinson still giving evidence. We'll continue to bring you further developments.

The inquiry has seen an email from former Fujitsu employee Anne Chambers which says that there were known balancing problems in the Horizon system.

"It seems that it was taking several hours, which is too long for those problems to be noticed," the letter says. She also mentions a "magical £43,000 disappearing and appearing" quoted from a sub-postmaster's report on errors.

Sir Michael Hodgkinson was again asked if anyone raised any concerns as to the reliability of Horizon.

"No," he said.

"What do you think went wrong in terms of ability to report these things to the board?" he is asked.

"It's difficult to answer, I can't give an answer," he says.

Hodgkinson was also questioned about the minutes of another meeting which detailed the growing number of issues with the Horizon system.

Asked whether the minutes of the meeting appear to suggest that the Post Office was attempting to develop a strategy to "refute any suggestion that Horizon is unreliable", Hodgkinson agrees.

"That's what it seems to say," he says.

Before the break, the inquiry looked at another piece of evidence, a letter from auditing firm Ernst & Young, which is about the software testing phase of Horizon.

The letter says that as the auditor of the Post Office, Ernst & Young has been asked to give its views on "certain accounting integrity issues seen on the tests performed by the Post Office on Horizon data in the live trial".

"The following issue, as described to us by POCL [Post Office Counters Ltd] gives us concern as to the ability of POCL to produce statutory accounts to a suitable degree of integrity," the letter says.

It also says that POCL referred a severity rating of "high" to this matter.

When asked if anyone told him about the history of the acceptance process during that period, Sir Michael Hodgkinson says, "No, never."