CEOInterviews.AIAdam Crozier - Day 120 PM (12 April 2024) - Post Office Horizon IT Inquiry

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Counsel0:05

Good afternoon. Can you see and hear us?

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Adam Crozier0:07

Yes, I can. Thank you. Good afternoon.

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Counsel0:09

Mr. Crozier. Can I pick up where I left off? You spoke before, I'm so sorry.

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Adam Crozier0:15

I understand that you like me to sit until 3:45 this afternoon, which I'm prepared to do. But at about 3:00, I'd like you to check with the transcriber whether or not she needs a break or whether we can go on until a quarter to four without a break.

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Counsel0:33

Thank you, sir. I'll do that.

Mr. Crozier, before lunch you spoke about the autonomy that the Post Office enjoyed from Royal Mail. Was it not patent or obvious from the structure of the organization and the autonomy that the Post Office enjoyed that there was a significant risk for issues that the Post Office did not wish to raise with the Royal Mail to go unnoticed by Royal Mail?

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Adam Crozier1:09

That was the purpose of ensuring that the Chief Executive, the chairman, and the company secretary of Post Office were on the Royal Mail Holdings board. As I understand it, that was a decision before I arrived. We built up a strong internal audit function which was able to go anywhere in the company. Their audit plan was checked by the Holdings board, the audit committee, and the exec team. External audit also had the ability to go anywhere and look at anything. I met regularly and privately with internal and external audit to check for concerns.

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Counsel2:01

In your 7 years, are you aware of any external audits of the Horizon system? I mean in terms of Ernst & Young as financial auditors. Any form of audit of the Horizon system?

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Adam Crozier2:18

No, I don't think I am, no.

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Counsel2:20

In your 7 years, are you aware of any form of external audit or review of the Post Office's prosecutorial function?

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Adam Crozier2:29

I don't believe so, no.

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Counsel2:32

Are you aware of any form of internal audit of the Post Office's prosecutorial function in your 7-year period?

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Adam Crozier2:39

I don't recall.

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Counsel2:41

Can I start by looking at the responsibilities of a director of a business or of a CEO? Would those duties include a director's duty as to the accuracy of accounting information and accounting records?

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Adam Crozier2:56

Yes, it would.

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Counsel2:58

And is it right that company law requires directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the company and of the group's profit and loss?

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Adam Crozier3:14

That's correct, yes.

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Counsel3:16

Does a director have to have confidence in the figures being produced in respect of a business's profit and loss before they can take a definitive view on the financial statements?

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Adam Crozier3:27

Yes, they do.

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Counsel3:28

And if there are any doubts about the integrity of the figures produced in the accounts, that would be a matter of significant concern for any director?

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Adam Crozier3:39

Yes, it would.

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Counsel3:42

And accounting integrity concerns would be a significant issue irrespective of whether the business was a unitary enterprise or franchised across many outlets?

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Adam Crozier4:05

Under the combined code, you have the same duties as a director, yes.

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Counsel4:05

Would you as CEO expect any concerns or allegations about accounting integrity to be escalated to you and then to the main board?

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Adam Crozier4:22

Yes, either from the external auditors, the financial community, the CFO, or the internal audit team. If they had any concerns, I would have expected them to report that to the POL board, but also to the Holdings board and the audit committee.

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Counsel4:45

Is the CEO responsible for ensuring that the board is fully briefed on the reliability of accounting systems?

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Adam Crozier4:58

Generally speaking, that would be led by the CFO, but supported by the Chief Executive, yes.

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Counsel5:06

In the case of a group such as Royal Mail, would that include responsibility for the oversight of business units such as the Post Office?

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Adam Crozier5:16

Under our structure, that was a separate reporting function to the Holdings board. The financial numbers were collated by the group CFO, yes.

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Counsel5:33

What were your line management responsibilities?

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Adam Crozier5:37

They changed over time. Initially I was responsible for Parcel Force and Royal Mail Logistics, also involved in GLS, and I was responsible for modernizing the letters business. I had marketing, finance, and group technology focused on sorting machines, automation, and tracking for the parcels business.

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Counsel6:27

Did any of your line management responsibilities include responsibility for any senior executives within the Post Office?

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Adam Crozier6:39

Between 2000 and end of 2005, no. From 2006, Alan Cook had a dual reporting into me on group issues like funding and budgets, and a direct reporting line to the chairman of the Post Office and its board.

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Counsel6:53

After 2006, other than Mr. Cook, did any of the Post Office senior executive team report to you?

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Adam Crozier7:25

No, I don't think so.

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Counsel7:27

Who had line management responsibility for the head of security within the Post Office?

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Adam Crozier7:37

I believe they reported into Jonathan Evans, the company secretary of Royal Mail Group and Post Office.

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Counsel7:42

In what capacity was Jonathan Evans directly line managing that person?

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Adam Crozier8:03

I'm not sure I recall, to be honest.

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Counsel8:10

Who had line management responsibility for the head of product and branch accounting within the Post Office?

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Adam Crozier8:16

That would have been the Post Office CFO.

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Counsel8:22

Any oversight of that function from within Royal Mail Group?

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Adam Crozier8:29

That would have come from the group CFO, which was Marissa Cassoni and later Ian Duncan.

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Counsel8:39

Who had line management responsibility for the head of Legal Services within Royal Mail Group?

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Adam Crozier8:45

Jonathan Evans, company secretary.

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Counsel8:50

Who had line management responsibility for the general counsel within Royal Mail?

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Adam Crozier9:01

Jonathan Evans, the company secretary.

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Counsel9:02

The head of IT in Post Office?

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Adam Crozier9:06

Would have reported into the Chief Executive of the Post Office. There was a dotted line for skilled advice to the group technology director.

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Counsel9:33

Can I look at the issues in a different way, namely which parts of the business had responsibility and oversight for certain activities? Rather than looking at the people involved, can we turn to page 14 of your witness statement, paragraph 41.1?

You say oversight for criminal prosecutions and civil proceedings brought by the Post Office would have sat with the Post Office legal team. And oversight for prosecutions on behalf of the rest of the group would have sat within the group legal team. Then you say both legal teams would have been under the supervision of the company secretary, Jonathan Evans. Were you not aware that in fact there was no Post Office legal team? It had no separate in-house function, and civil and criminal proceedings were brought by lawyers within the Royal Mail Group legal team.

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Adam Crozier10:46

I was not, no.

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Counsel11:00

So lawyers from within the group gave advice on prosecutions, made decisions about prosecutions, and conducted the proceedings, not any Post Office lawyers. You didn't know that. Was that throughout the whole of your period?

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Adam Crozier11:23

My period. Yes. I was not aware of that, no.

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Counsel11:31

Given the facts I've just described, that would mean your board had a responsibility for the conduct of a team of lawyers within Royal Mail Group who were acting on behalf of the Post Office rather than the Post Office board having such a responsibility, wouldn't it?

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Adam Crozier11:55

In part, yes, but also they would be doing that at the behest of the Post Office team who owned Horizon and any issues deriving out of that. Post Office Limited might be their clients.

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Counsel12:06

Yes. I'm talking about responsibility for the conduct and work of the lawyers. That fell, if I'm right, to Royal Mail Group to manage and oversee.

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Adam Crozier12:21

My understanding at the time was that it was also under the supervision of the company secretary at the Post Office in conjunction with Royal Mail, and I thought they used a mix of Post Office legal team augmented by Royal Mail legal team and outside legal people.

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Counsel12:46

So be it. Can we turn to page 28 of your witness statement, paragraph 83? You say responsibility for criminal prosecutions which the Post Office brought would have sat under the relevant Post Office executive team members under the oversight of the Post Office executive team as a whole, the risk and compliance committee, and the Post Office board. Then paragraph 84 you say you do not recall having involvement in or knowledge of the oversight of investigations and prosecutions brought by Post Office against sub-postmasters. And paragraph 87 you say you do not recall reports of the number of prosecutions being escalated to you nor systemic issues impacting Horizon. I want to test that.

Can we start by looking at RMG 706?

Right. Sorry, you're going to have to tilt your head to the side. Can you see that these are minutes of an audit and risk committee of the 11th of November 2003? You were in attendance.

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Adam Crozier15:14

I can, yes. Yes, I do.

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Counsel15:26

And if we go to page five, scroll down. Security report. The security report was received. It noted Royal Mail personnel related crime cost the business approximately 26 million pounds per year. In 2002-3, the company had prosecuted 324 people, cautioned 108 others, recommended 47 cases to the procurator fiscal, and taken legal action in a further 43 cases. These were noted as minimum figures. This is relatively early in your tenure, is that right? You took up your post in April 2003 and this is November 2003.

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Adam Crozier16:38

I think it was February 2003 I started, so April so months after.

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Counsel16:48

And so from this point onwards, you would have known that the company was prosecuting a vast number of people each year.

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Adam Crozier16:56

Yes, but it refers to Royal Mail personnel. We wouldn't have described sub-postmasters as Royal Mail personnel. I think by the description here it was very much focused on Royal Mail personnel both full-time and casual workers.

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Counsel17:17

So you think this figure does not include any prosecutions of Post Office employees or sub-postmasters?

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Adam Crozier17:31

I don't believe so, no.

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Counsel17:33

Why was that not reported to the group?

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Adam Crozier17:38

I don't know.

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Counsel17:40

Can you assist?

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Adam Crozier17:43

I don't know. Why would you need to be told about the number of people that Royal Mail were prosecuting?

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Counsel17:55

Because at this time we were having a lot of problems in Royal Mail, both in terms of theft of credit cards out of the post, which was denting confidence, and mail not being delivered, dumped or hoarded. It was a program called Mail's Integrity.

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Adam Crozier18:55

In any event, through this route, you would have known about Royal Mail's prosecutorial activities.

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Counsel19:03

Yes, indeed.

Would you get regular updates of the number of people prosecuted, the amount of loss, and the amount recovered?

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Adam Crozier19:25

I'm not sure you use the word regular, but there were updates around the time of the Channel 4 Dispatches program in April 2004, which was a very big and not good event for the company.

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Counsel20:00

Would you agree, as you did before lunch, that prosecuting before the criminal court is an unusual activity for a company to undertake?

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Adam Crozier20:09

It is.

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Counsel20:10

And for the proportion prosecuted by Royal Mail, would you agree that that activity requires a special kind of supervision and oversight?

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Adam Crozier21:03

Yes, much more expert than I would claim to have.

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Counsel21:06

Would you agree it requires particular care where the company is the alleged victim, investigates, and decides whether to prosecute?

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Adam Crozier21:24

Yes.

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Counsel21:26

A phrase that's been described as judge, jury and executioner. What special supervision and oversight would you say was required?

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Adam Crozier21:40

I would have thought the supervision of the experts both internal and external qualified lawyers, legal advice, the general counsel, the company secretary, and any other people looking at the issues.

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Counsel22:05

What about ensuring a separation of functions?

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Adam Crozier22:10

The legal process is not my area of expertise.

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Counsel22:15

What about the independence of decision-makers?

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Adam Crozier22:21

Yes, I would have thought so.

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Counsel22:24

What about intrusive supervision and regular audits and reviews of the prosecutorial function?

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Adam Crozier22:35

Yes.

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Counsel22:37

What about special attention to who you recruit to investigate alleged crimes?

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Adam Crozier22:46

Yes, I assumed all the people in the teams were proper qualified lawyers.

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Counsel22:55

Is the truth of the matter that you did not have any developed understanding of the extent to which Royal Mail prosecuted or the way in which those things were carried into effect?

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Adam Crozier23:15

No. I'm not a lawyer, and I would not claim that is my area of expertise.

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Counsel23:23

Can we look at RMG 708? This is the following year, 24th of May 2004, minutes of the audit and risk committee of Royal Mail Holdings. You are in attendance. Under the heading protecting Royal Mail assets, Mr. Wilson, director of security, attended. The committee noted the key activity in protecting assets including increased focus on fraud investigations and the level of prosecutions. Company had made 299 prosecutions last year. John Neil asked if the policy on prosecutions was clear. Mr. Wilson did not feel an increase in resource was necessary. This is a discussion about protecting Royal Mail assets and prosecutions.

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Adam Crozier25:33

Yes.

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Counsel25:33

Again, in your view does this relate only to Royal Mail prosecutions and not include Post Office?

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Adam Crozier25:44

I think so, yes.

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Counsel25:44

Why were the Post Office prosecutions not being sent up to the Royal Mail board or this audit and risk committee?

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Adam Crozier25:55

The headline says protecting Royal Mail assets. This could be a follow-up to the Dispatches thing. One of the things we did post-Dispatches was get agreement from the government to check criminal records of anyone joining Royal Mail. I should stress that there were lots of wonderful people in the organization, but we had a problem and had to do proper checks.

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Counsel26:57

My question was why have we seen discussion in the main board and in this committee of the numbers of prosecutions you say brought by Royal Mail, and about prosecutorial policy, but on your account none of this relates to the Post Office?

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Adam Crozier27:17

No.

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Counsel27:18

Why was that not considered by either the committee or the main board?

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Adam Crozier27:28

I don't know. Because we had gone through that difficult experience in Royal Mail, this was part of being transparent about issues on the letter side. This would have been brought forward by the letters team. Clearly for whatever reason, the same drive wasn't there from the Post Office team.

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Counsel28:01

Can we look at a third potential source of oversight, the management board. RMG 6031.

This is the Royal Mail management board. It sat underneath the Holdings main board. It's for Tuesday 20th January 2004, and you are present as a member. Page five, prosecution policy. The management board received a paper on legal expenditure and prioritization of criminal prosecutions. Would you say this is again about and only about Royal Mail prosecutions?

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Adam Crozier30:22

I believe so, yes. For two reasons: we had a policy of asking the team responsible to present. There's no one from the Post Office in that meeting. David Mills didn't join till later. We wouldn't have taken that topic without him.

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Counsel31:18

And does that again reflect the fact that the management board did not oversee or supervise the conduct of prosecutions by Post Office Limited?

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Adam Crozier31:48

No. Even though such prosecutions were being conducted by Royal Mail lawyers on behalf of the Post Office.

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Counsel32:00

Yes.

Why was this prosecutorial activity of the Post Office not the subject of scrutiny by the board, risk committee, or management board?

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Adam Crozier32:28

I'm assuming that's because the Post Office didn't volunteer this issue. At Royal Mail we were pushing things forward openly. If Paul at that stage would be asked through the chairman if they wanted items raised, they would put them forward. I guess they didn't volunteer this issue. At the Management Board, it was about trading and commercial agreement.

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Counsel33:26

Would another way be that you let them get on with it?

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Adam Crozier33:32

I wouldn't have put it that way, but I understand why you might.

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Counsel33:38

Do you ever remember receiving reports about the conduct of prosecutions by Royal Mail lawyers on behalf of the Post Office?

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Adam Crozier33:49

No, I don't.

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Counsel33:53

Do you think with hindsight this activity ought to have been the subject of oversight?

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Adam Crozier34:08

With the benefit of hindsight, yes, I do.

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Counsel34:12

To what extent is that issue the product of the structural difficulties you identified in paragraph 11 of your witness statement?

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Adam Crozier34:28

Again, with hindsight, I think it allowed things to potentially appear in the cracks.

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Counsel34:43

What information ought the Royal Mail board, management board, or risk committee to have received from Post Office about the conduct of prosecutions?

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Adam Crozier34:56

Probably similar to what we've seen on letters: an explanation of what was going and to what degree.

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Counsel35:06

We've seen that the board was exercising control, turning the dial up or down on the prosecution policy. Would that be a function Royal Mail Group board ought to have performed over Post Office?

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Adam Crozier35:28

Again, the level of awareness because of lack of communication from Post Office was probably very low.

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Counsel35:40

Where does the responsibility for the lack of communication fall?

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Adam Crozier35:53

I think you would have to say with the Post Office Chief Executive and Chairman. That assumes they knew. I don't know whether they did. My assumption is they didn't, but that's one of the rules of the inquiry to figure out.

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Counsel36:29

As well as responsibility with the Post Office CEO and Chairman, does responsibility not rest with Royal Mail for designing a structure in which none of its systems of oversight picked up this prosecutorial activity?

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Adam Crozier36:56

On your account.

I think it is a matter of real regret that all those checks and balances, the governance systems in both companies failed, as well as internal audit, external audit, all failed to surface this issue.

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Counsel37:20

What was the level of your contact with Royal Mail's General Counsel?

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Adam Crozier37:29

Mostly through the company secretary, but from time to time separately.

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Counsel37:35

Did you ever explore with the General Counsel the extent of his or her involvement in the prosecutorial activities of the Post Office?

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Adam Crozier37:49

I did not, no.

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Counsel37:52

Did you ever explore how they ensured adequate resources for effective oversight of Post Office's legal obligations?

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Adam Crozier38:03

It was a regular question at most audit committees to the various teams through Jonathan in legal and internal audit: have you got enough people to do the job? That would be regularly asked.

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Counsel38:26

What steps did Royal Mail Board or you take to ensure the role of General Counsel was effectively discharged for Post Office's prosecutions?

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Adam Crozier38:46

I think because he reported to the company secretary, his role would have been reviewed by the company secretary in terms of performance. So for me personally, none, but that's because it was Mr. Evans' responsibility.

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Counsel39:11

You tell us in paragraph 43 of your witness statement that you trusted the Managing Director and Chair of the Post Office to raise any significant systemic or reputational issues relevant to the Post Office at the Royal Mail Management Board or main board meetings. Is that right?

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Adam Crozier39:35

Yes.

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Counsel39:40

When you say trusted, do you mean you assumed they would?

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Adam Crozier39:47

Not just that. I assumed as good people in senior positions, very qualified, they would volunteer those issues. But as I made clear, our style of management was to go looking for problems. We were fixing things across the business. I clearly wish we had known about this because I think we would have done if we were aware. Unfortunately, huge regret, we weren't.

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Counsel40:22

And so you and your board and management boards actively sought out problematic areas?

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Adam Crozier40:31

Yes.

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Counsel40:36

And not only was this one not found, but those within Post Office did not escalate it to you or your board.

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Adam Crozier40:44

They did not.

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Counsel40:47

How would you define an issue with significant systemic or reputational issues relevant to the Post Office? What threshold needed to be crossed for escalation?

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Adam Crozier41:02

Something that would genuinely impact the performance of the company and also have an impact on the group itself, whether financially or reputationally.

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Counsel41:21

How was that communicated to the Post Office executive team so they would know whether issues fell on the escalate or not side?

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Adam Crozier41:39

There would have been many board meetings where I said we needed to get to the bottom of issues. We asked people to be open and transparent, for bad news to travel fast. Myself and the chairman would meet with thousands of frontline managers regularly and ask them what was wrong.

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Counsel42:47

Were you relying on the judgment of the CEO and chair within the Post Office to raise matters they thought ought to be before the board?

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Adam Crozier42:58

Yes.

C

Counsel43:00

Do you know what steps they took to encourage openness and accountability?

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Adam Crozier43:14

Mike Hodgkinson set up the risk committee and chaired it himself. I think he tried to instill the right attitudes, but I wasn't in those meetings.

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Counsel43:41

You've mentioned a fundamental difference in culture between Royal Mail and Post Office, particularly in openness. In what did that have its origins?

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Adam Crozier44:08

Looking back with hindsight, the Post Office always thought of themselves as a different organization, a public service, the face of government, different from Royal Mail's space. The separation probably exacerbated those feelings.

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Counsel45:02

We've heard evidence that people took decisions not to escalate concerns about Horizon or prosecutions because the Post Office was highly politicized and hierarchical, fearing it would be bad for their career. Was that a culture you were aware of?

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Adam Crozier45:35

I'm very sorry to hear that. I encouraged the complete opposite. We wanted people to be open. We created 'Have Your Say' anonymously. There was also whistleblowing. So there were routes to do that.

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Counsel46:15

You say you trusted Mr. Cook to raise systemic issues. Have you had any reaction to Mr. Cook's claim that he did not even know the Post Office had a prosecutorial function until 2009?

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Adam Crozier47:10

I would find that surprising.

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Counsel47:21

He has told the inquiry he remained in the dark about the prosecutorial function. At the time, did he strike you as a man so out of touch that he wouldn't know the Post Office was prosecuting its own staff and sending them to prison?

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Adam Crozier47:58

He certainly always gave the impression of someone very much in control of his brief. His particular area of expertise was financial services, which was important given the loss of government revenue from benefits payments and the POL card.

Gap. And so, he was brought in specifically with that skill. He spent a lot of time with sub-postmasters and the NFSP, and never gave the impression of being anything other than in control of that brief.

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Counsel49:06

You tell us in your witness statement that Mr. Evans, Jonathan Evans, the company secretary, sat on both boards, the main board and Post Office Limited's board. Correct?

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Adam Crozier49:18

He did, yes.

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Counsel49:19

Was his role by sitting on both boards expected to be one which exercised any particular function across both businesses?

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Adam Crozier49:34

The company secretary has a slightly different role, not part of a management team. They report to the board and chairman in a more independent way. Jonathan also had a huge history with the company, understood both sides of the business, and was trusted by everyone on the board.

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Counsel50:07

Was it by design, with a purpose or an outcome in mind, that he sat on both boards?

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Adam Crozier50:20

I think it was to ensure more glue across the team. That was decided before I arrived, but was in place and seemed to work very well.

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Counsel50:34

He was the line manager of the legal services team within Royal Mail Holdings?

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Adam Crozier50:43

Yes, he was.

C

Counsel50:47

Did that play any part in the decision that he should be company secretary of both organizations and sit on both boards?

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Adam Crozier50:58

I genuinely don't know. The decision was made before I arrived.

C

Counsel51:08

Can we turn to your knowledge of Horizon? You recall it was first piloted in 1995, rolled out in 2000, and was relatively established when you arrived in 2003.

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Adam Crozier51:32

When I say I recall, I now recall because I've read all this stuff. When I arrived, it was just the system the Post Office used.

C

Counsel51:40

Were you aware of the history of the procurement, contracting, and development of Horizon?

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Adam Crozier51:50

No, I wasn't. It would be unusual for someone to arrive and be taken back eight years.

C

Counsel51:57

Were you aware of the collapse of the contract between the Post Office, Fujitsu (then ICL), and the Benefits Agency? Or the withdrawal of the benefits card and the existential crisis for the Post Office?

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Adam Crozier52:14

No. I was aware of the loss of revenue from the benefits change, but not linked to the procurement history.

C

Counsel53:17

Was that linked in your briefings with the Benefits Agency being part of a joint program to procure the system?

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Adam Crozier53:28

It was entirely linked to the DWP's cost-benefit analysis. The cost of providing benefits through the Post Office was about a pound, versus five or six pence directly into bank accounts. So from a taxpayer's perspective, they felt they had to make that change. The government both caused the difficulty and tried to solve it with subsidies.

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Counsel54:33

Were you told that the DWP opted for direct payments because they had lost trust in Fujitsu/ICL and the reliability of the system?

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Adam Crozier54:56

As it was told to me, it was all about the cost-benefit analysis and use of public money.

C

Counsel55:03

Were you told about a political decision that forced the Post Office to take Horizon against its employees' wishes?

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Adam Crozier55:16

No.

C

Counsel55:32

Were you briefed about acceptance incidents or the National Audit Office report criticizing the management of the Horizon procurement?

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Adam Crozier56:01

No.

C

Counsel56:25

When you took up your role, did you have any appreciation or were you briefed about issues with the development or rollout of Horizon?

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Adam Crozier56:41

No. The system was effectively rolled out and people were just dealing with it as the system the company used. Organizations tend to get on with things. Horizon was relatively well established and working by 2003.

C

Counsel57:10

Did nobody brief you about its problematic birth?

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Adam Crozier57:18

No.

C

Counsel57:20

Did David Miller or Jonathan Evans ever tell you about those issues?

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Adam Crozier57:41

Jonathan did not. I met David Miller as part of my briefing, and I do not believe he mentioned it at all.

C

Counsel57:55

Would you agree that Horizon was a business-critical system?

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Adam Crozier58:10

Yes, it was.

C

Counsel58:15

What steps did the main board take to ensure it was running reliably and with integrity?

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Adam Crozier58:29

I don't recall exactly, but I would naturally assume it was part of the internal audit plan.

C

Counsel58:40

Can you recall any steps taken by the management board or risk committee?

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Adam Crozier58:46

The internal audit plan would be approved and come to the boards and audit committee for debate.

C

Counsel58:56

Are you aware of internal audit conducting a review of the reliability and accuracy of Horizon data?

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Adam Crozier59:14

I genuinely can't remember.

C

Counsel59:16

Would internal audit be the appropriate people to do so?

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Adam Crozier59:24

Yes.

C

Counsel59:26

What skills did internal audit have regarding the operation of a computer system?

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Adam Crozier59:34

They have the skills for financial accounting systems. Good audit teams know how to get under the skin of projects and understand mechanics. If concerned, they could call in further expertise. Our internal audit reports were pretty brutal because we wanted to understand the worst. As for whether they did one on Horizon, I genuinely can't remember; I would have thought so given the importance, but I don't recall the individual report.

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Counsel1:01:03

Good afternoon, sir. Can you see and hear us? Yes, thank you. Thank you, Mr. Crozier.

C

Chair1:01:09

You're addressing your witness statement, no need to turn them up.

C

Counsel1:01:11

Paragraph 63 to 65: issues of knowledge of bugs, errors, and defects in Horizon. Is the short summary this: at no time did anyone within the Post Office executive team or its board draw your attention to any bugs, errors, or defects in Horizon?

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Adam Crozier1:01:41

As far as I recall, they did not.

Just one point: you asked about external audit of Horizon. The external auditors constantly tested the system when reviewing the accounts. They checked that the system was working as it should.

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Counsel1:02:13

Why was that obvious to you? You said 'obviously the external auditors were examining the operation of Horizon.'

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Adam Crozier1:02:31

Sorry, just a word. I meant they would check the quality of earnings and numbers for half-year and full-year orders. I didn't mean a specific look at Horizon.

C

Counsel1:02:56

That's a needless clarification.

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Adam Crozier1:02:58

It's not needless because we've seen the audits and the extent of their function.

C

Counsel1:03:13

Why did you believe external auditors would assess the reliability of the Horizon system?

A

Adam Crozier1:03:30

They would look at the numbers and their consistency. I assume they cross-check that. If they sign off accounts where data comes from a computer system, they would make inquiries into the reliability of that data. I'm a layman, but I would have thought so.

C

Counsel1:04:08

Was anything shown to you that suggested they did that?

A

Adam Crozier1:04:17

Nothing was shown to me that they had a concern about the quality of the numbers.

C

Counsel1:04:25

Was anything shown to suggest their audit involved an examination of the integrity of Horizon?

A

Adam Crozier1:04:40

I don't recall.

C

Counsel1:04:42

So you maintain that in your 7-year tenure, the Post Office never drew your attention to bugs, errors, or defects in Horizon?

A

Adam Crozier1:04:56

No. I do not recall Miller, Francis, or Vennells doing that.

C

Counsel1:05:10

You now know that court cases established that between 2000 and 2010 there were numerous bugs, errors, and defects that the Post Office knew about and that caused financial irregularities. Would you expect those people to draw them to you and your board?

A

Adam Crozier1:06:03

I would have expected them to draw them to the Post Office exec team and board first, and if serious, to the management team and Holdings board, yes.

C

Counsel1:06:23

So you would have expected it to go through the Post Office board route?

A

Adam Crozier1:06:31

Yes, I would have expected them to tell the Post Office chief executive, who would then tell the board and me very quickly.

C

Counsel1:06:45

Did you know about the Post Office stock line on Horizon, that the system is robust?

A

Adam Crozier1:06:59

Only from what the inquiry sent me, some internal emails referring to that as our stock line.

C

Counsel1:07:14

Had you heard that phrase when you were in office?

A

Adam Crozier1:07:31

I never heard that statement, but I never heard anyone say it wasn't robust.

C

Counsel1:07:38

So you hadn't heard the stock line nor that it was called that?

A

Adam Crozier1:07:45

No.

C

Counsel1:07:46

Is that because Horizon's integrity wasn't an issue from your perspective?

A

Adam Crozier1:07:55

It wasn't flagged by anyone in the chain of checks and balances.

C

Counsel1:08:03

If integrity was in question but a stock line said it was robust, that would be a serious matter, wouldn't it?

A

Adam Crozier1:08:19

It would indeed, and it would be entirely wrong.

C

Counsel1:08:25

In late 2009/early 2010, the business had just secured state subsidy to barely reach profitability. Was that a major issue during your tenure?

A

Adam Crozier1:08:50

There were three major debates, the biggest around 2006 when the Post Office card account was also ending. That required a subsidy and led to about 2,500 branch closures. Alongside, the Hooper Review recommended private capital for Royal Mail, public ownership for the Post Office, a change in regulator, and government handling of the pension.

C

Counsel1:10:39

Would you agree that the dire financial situation was apparent to everyone?

A

Adam Crozier1:10:51

Most certainly.

C

Counsel1:10:53

And that any question over Horizon's integrity would be significant for both the Post Office and the shareholder?

A

Adam Crozier1:11:09

It would.

C

Counsel1:11:21

Royal Mail met with the shareholder executive quarterly. Were you reliant on information from the Post Office board for matters concerning the Post Office?

A

Adam Crozier1:11:50

Our conversations with the shareholder executive were mostly about financial performance, modernization, union relations, and ownership. We also discussed a potential John Lewis partnership for Royal Mail. The Post Office had its own meetings with a separate team within the shareholder executive for day-to-day matters.

C

Counsel1:13:20

Was anyone from Royal Mail group present at those meetings?

A

Adam Crozier1:13:37

Some, particularly Jonathan Evans, but probably not all.

C

Counsel1:13:45

So there were two parallel routes back to government?

A

Adam Crozier1:13:49

Correct.

C

Counsel1:13:53

The shareholder executive rarely attended Royal Mail board holdings?

A

Adam Crozier1:14:00

That's right. They attended for big topics like solvency, funding, and ownership changes.

C

Counsel1:14:31

Were they entitled to attend?

A

Adam Crozier1:14:34

Yes, but they rarely did except for those major issues.

C

Counsel1:14:50

Did they attend Post Office board meetings?

A

Adam Crozier1:14:57

No, they didn't during my time.

C

Counsel1:15:08

You said your objective was to deliver a better group for all stakeholders. Would that include treating sub-postmasters as trusted trading partners?

A

Adam Crozier1:15:29

Yes, indeed. Some of the language I've heard is deplorable.

C

Counsel1:15:47

Were you aware of the removal of the facility for sub-postmasters to query losses attributed to them by the system?

A

Adam Crozier1:15:59

No, I don't remember that coming to the board.

C

Counsel1:16:07

Would you agree that removal was inconsistent with treating them as trusted partners?

A

Adam Crozier1:16:19

I don't know the detail, but from the sounds of it, I would agree. It required them to pay for losses without the ability to query or investigate.

C

Counsel1:16:49

The Horizon Issues judgment of 2019 sets out numerous defects known to the Post Office during your tenure. Looking back, who is responsible for none of that being escalated to you or your board?

A

Adam Crozier1:17:38

I'm not sure it's fair for me to speculate. All I can see is that it didn't get up to the areas I mentioned. Clearly, at a certain level in the Post Office, it went no further.

C

Counsel1:18:02

This happened on your watch.

A

Adam Crozier1:18:04

Yes, it did.

C

Counsel1:18:05

What conclusions did you arrive at from self-reflection?

A

Adam Crozier1:18:17

It was one of the toughest jobs I've ever done. I wonder if the structure exacerbated the problems. There was a lack of transparency in the Post Office. I assumed they were making the same strides as the rest of the company. If people were worried, why wouldn't they get an independent view? I can see it's impossible to look back without feeling it's tainted by this.

C

Counsel1:19:46

Thank you, Mr. Crozier. Sir, there are two lots of core participant questions. We'll start with Mr. Maloney.

C

Chair1:19:57

Yeah.

C

Counsel1:20:00

Mr. Crozier, you were taken to audit committee minutes that referred to prosecutions. You thought they related solely to Royal Mail prosecutions because no one from Post Office was present and they were referred to as Royal Mail personnel.

A

Adam Crozier1:20:25

Yes, that's my view.

C

Counsel1:20:49

Was it Post Office legal or Royal Mail that conducted Post Office prosecutions at that time?

A

Adam Crozier1:21:01

I thought it was Post Office.

C

Counsel1:21:04

If I suggest Post Office only took over prosecutions after separation in 2012, would you disagree?

A

Adam Crozier1:21:18

I don't recall; I'm not sure.

C

Counsel1:21:25

So you're not sure who was responsible?

A

Adam Crozier1:21:33

The client was Post Office. Sourcing legal help was partly internal, partly from Royal Mail, and external.

C

Counsel1:22:04

Post Office was in financial difficulty on your watch?

A

Adam Crozier1:22:08

Yes.

C

Counsel1:22:11

Insolvency was an issue?

A

Adam Crozier1:22:14

Yes, from before I joined.

C

Counsel1:22:18

Those facts were well known?

A

Adam Crozier1:22:20

Yes.

C

Counsel1:22:28

Horizon was business-critical?

A

Adam Crozier1:22:30

Yes.

C

Counsel1:22:33

If Horizon failed due to lack of integrity, it would heighten the commercial threat. Would that have been a disincentive to escalate problems?

A

Adam Crozier1:22:47

It would have had to be faced. The issues at Royal Mail were larger, and the government wouldn't let the Post Office fail. But if there was a problem, it should have been raised. I wasn't aware of a difficult birth. All IT systems need fixing. If people knew of problems, they should have said something.

C

Counsel1:25:09

If people knew before you arrived, should they have said something to you?

A

Adam Crozier1:25:18

I certainly wish they had.

C

Counsel1:25:27

Mr. Crozier, I represent sub-postmasters. You said why wouldn't you get an independent view? Sub-postmasters raised queries via the helpline, saying the machine had a shortfall. They were told to pay up. What do you think?

A

Adam Crozier1:26:44

That's entirely wrong. I would have expected issues to be openly and fairly looked at. I assume letters were checked properly.

C

Counsel1:27:28

They were told it was their contractual duty to pay up. Many did, from their own pockets, borrowing, even from children's piggy banks, or loan sharks. What happened to that money? Was it accounted for as profit?

A

Adam Crozier1:28:18

I assume it was accounted for through the financial team. I don't know if it was profit.

C

Counsel1:28:26

Directors have responsibility over accounts. Would accounting for such payments as profit be wrong?

A

Adam Crozier1:28:54

I'm not an accounting expert.

C

Counsel1:29:01

You have a business qualification and are responsible for reading accounts. One of the accounts is a profit and loss account.

A

Adam Crozier1:29:11

Yes.

C

Counsel1:29:16

Is money paid by a sub-postmaster for a supposed shortfall a profit?

A

Adam Crozier1:29:33

I suppose it depends on what it's replacing; shouldn't it be on the balance sheet? I assume so.

C

Counsel1:29:58

Directors should have had their eye on these accounts and legal costs. Did you pay attention to those costs?

A

Adam Crozier1:30:48

They would have been taken in the round at both Post Office and Royal Mail.

C

Counsel1:30:54

Given the financial trouble, these costs would have been under scrutiny?

A

Adam Crozier1:31:21

Yes, there was reference to them in papers.

C

Counsel1:31:26

So scrutiny of accounts would reveal what's happening?

A

Adam Crozier1:31:32

Yes.

C

Counsel1:31:34

If money was taken from sub-postmasters for errors and put into profit accounts, that would be wrong and dishonest?

A

Adam Crozier1:31:46

I don't know if it was, but on the face of it, yes.

C

Counsel1:31:57

Lord Justice Hooper asked for accounts to find where the money went and never got a satisfactory answer. Do you know why?

A

Adam Crozier1:32:29

I don't see how I can answer that; I'd left four years earlier.

C

Counsel1:32:35

Where were the accounts kept?

A

Adam Crozier1:32:45

All information was held at head office.

C

Counsel1:32:52

Nobody took responsibility for the prosecution of sub-postmasters. Are you proud of that?

A

Adam Crozier1:33:05

No.

C

Counsel1:33:05

How much were you paid as chair?

A

Adam Crozier1:33:11

I don't know. It's in the annual reports. It's in the millions, yes.

C

Chair1:33:22

Thank you, Mr. Crozier. That concludes today's session. We'll resume at 10:00 on Tuesday with David Miller and David Mills.

C

Counsel1:34:05

We'll review that, sir.

C

Chair1:34:09

Thank you. See you tomorrow.