We need a government with a will to break the iron-grip of corporations and elites on institutions of government.

The Post Office scandal has been described as one of the greatest miscarriages of justice in modern times. From 1999 onwards hundreds, if not thousands, of subpostmasters were prosecuted and convicted for frauds they did not commit. Many were pressured into handing the Post Office money that they did not steal. The biggest winners are directors who inflated the bottom line to secure higher bonuses, and lawyers who secured the convictions for massive fees.

The public clamours for justice and retribution, but the British establishment has a history of obfuscating and taking minimal action to leave the corrupt state-corporation nexus unscathed. It is likely to be the same again.

Between 2000 and 2023, the Post Office had over 80 directors. All knew of the flaws of the Horizon system and the precariousness of the prosecutions. This week, some 49 months after the December 2019 High Court judgement in the case of Alan Bates and Others v Post Office Limited, a Minister told parliament that “no prosecutions have been brought against Post Office directors to date. The Horizon inquiry will establish the facts of what went wrong. It would be wrong to take action before we have all the evidence”.

The Inquiry is scheduled to publish its report in summer 2025. It may raise issues requiring criminal investigations and the Police may take another year or two. Inevitably, there will be delays and wrangling. So, we are looking at the end of the decade before anything materialises. Court judgments would be contested through appeals, delaying retribution into the next decade.

Law enforcement is the sole responsibility of the government, and Ministers are deflecting attention away from that by seeking shelter in the Post Office Inquiry. There is nothing to prevent law enforcement agencies from acting in parallel with the Inquiry. In any case, the Inquiry’s remit does not seem to be concerned with violations of the Companies Act 2006. For example, Section 386 requires directors to “keep adequate accounting records”. In view of the High Court judgment that must be doubted. If the company did not keep adequate accounting record, then how did Ernst & Young manage to audit the resulting financial statements? The firm certainly knew that the internal control systems at the Post Office were flawed.

Section 172 of the Companies Act 2006 raises questions about whether directors’ discharged their duties. This section seems to invite shareholders to sue directors for non-compliance and is almost unenforceable. But the in the case of the Post Office the government is the sole shareholder and can sue directors, mostly appointed the government itself. That would require public production of ministerial papers, and the government has no appetite for that.

The delay in civil and/or criminal action means that most key players would avoid any retribution. Paula Vennells, Post Office CEO from 2012-2019, has received much media coverage. She is almost 65 years old. Some of the directors in the period in question are in their late seventies, and may not live long enough to face the music. No doubt lawyers for the well-heeled will argue that their clients are fragile or senile, and have selective amnesia and can’t go through court processes. Due to lack of resources, most injured postmasters are not in a position to bring personal prosecutions. Some civil lawsuits may be barred by the statute of limitations on the grounds that offences occurred more than six years ago and the state may not have the appetite for criminal prosecutions.

Auditors do not owe a ‘duty of care’ to any subpostmaster and they won’t be able to bring any successful case against auditors. The Post Office, as the company, could sue auditors but may well be time barred. Accounting firms, including Post Office auditors Ernst & Young, enjoy a privileged insider status in the state apparatus and have funded Conservative and Labour parties. The pay-off has been that despite numerous court judgements, successive governments have failed to prosecute any big accounting firm for their role in peddling unlawful tax avoidance schemes. They won’t blot that relationship with lawsuits over the Post Office failures. Regulatory investigations into the quality of Ernst & Young audits are likely to be thwarted with the claims that the firm hasn’t got the past audit files, or relevant staff and partners have left or died, or can’t remember things. The most likely outcome would be a puny fine and/or disqualification of an auditor already retired on a big pension.

What about Fujitsu and its directors? The company supplied the faulty Horizon system, and gave false evidence to the courts to convict and bankrupt innocent people. The Post Office could demand compensation for a faulty IT system but that is unlikely to succeed as its directors knew of the flaws. The government could take action for conspiracy and perverting justice, but has actually rewarded the company. Since 2012, the government has handed over 200 public contracts worth £6.8bn to Fujitsu. Recently, Fujitsu has offered to make voluntary contributions to a fund for the victims of the scandals, and that begs numerous questions about the rule of law. What would have happened if its role in the scandal had not been exposed by the High Court judgement? The company was content to give false evidence to the courts. Who will call it to account for that?

Law firms are deeply implicated in the scandal and pushed boundaries to serve the interests of their paymasters. A Counsel representing subpostmasters at the Horizon Inquiry referred to the role of Herbert Smith Freehills (HSF) and said that HSF had ‘aided, advised, assisted, dare I say abetted’ the Post Office in creating and managing those schemes despite its involvement in earlier stages of the saga. There is no evidence to show that the Department of Justice has any inclination to take on the legal profession. And what of the role of judges who easily accepted the flawed evidence and arguments of the Post Office and its lawyers. There is no mechanism for calling partisan judges to account.

Since 1999, there have been more than twenty Post Office ministers from Labour, Liberal Democrats and Conservatives governments. What did they or senior civil servants know or should have known? As the sole shareholder, the government approved executive pay and bonuses of directors. These were inflated because the bottom line was inflated by the amounts extracted from subpostmasters for monies that they did not steal. Are we to assume that despite mounting press coverage government ministers did not ask any questions about the bonuses or mounting critical press evidence? Any exposure of the inner workings of the government will also embolden the victims of Grenfell, Windrush, bank frauds and other scandals to seek evidence. So, secrecy will be the order of the day. Civil servants and ministers also enjoy immunities and are unlikely to ever face any retribution.

Most miscreants would escape retribution because the UK does not have the necessary institutional structures. The Serious Fraud Office (SFO) is under-resourced and has a dismal record of handling big fraud and corruption cases.

The UK does not have anything equivalent to the US Securities and Exchange Commission (SEC) or the Federal Bureau of Investigation (FBI) for investigation of nationwide crimes. The UK has a fragmented regional police force which is not centrally co-ordinated. No police force can afford to divert its resources to investigation of major criminal cases. Consider the case of the Thames Valley Police and Crime Commissioner Anthony Stansfeld who stepped in to prosecute six financiers, including a senior ex-HBOS banker, for frauds after the SFO and the Financial Conduct Authority (FCA) refused. Bankers were sent to prison for nearly fifty years, but it depleted the Thames Valley budget by £7m. The government refused to give it any additional funding. The clear message to the police is not to become involved with big criminal cases.

In the absence of a central enforcer of company law, the duty falls upon the Department for Business and Trade. It is judge, jury, prosecutor and promoter of businesses. It is highly conflicted and incapable.  For example, Carillon collapsed in January 2018 and six years later it is still struggling to disqualify its directors. Disqualification from directorships would hardly matter to ageing Post Office directors.

After the 2016 BHS and 2028 Carillion scandals, the government promised new laws to reform corporate governance. To date, no Bill has been published. The voluntary Corporate Governance Code issued by the Financial Reporting Council applies to companies with a premium listing on the London Stock Exchange. It is based on the ‘comply or explain’ rather than ‘comply or else’ principle. It gives no enforceable rights to any stakeholder, does not add anything to transparency or accountability, and does not check lies and corruption.

Even if numerous hurdles are negotiated, the UK courts don’t have the capacity for timely hearing of cases. Most recent estimates are that Crown Courts, which hear criminal cases, have a backlog of 66,547 cases; and Magistrate Court cases have a backlog of 352,945.

The Post Office scandal has ruined lives and perpetrators need to be held personally accountable. In common with previous scandals, there is little prospect of effective action though the elites will happily sacrifice some individuals to save their skins. This pattern has been repeated across so many scandals and is part of an institutionalised network of corruption that has seen the UK rapidly plunge in the Transparency International’s Corruption Perceptions Index (CPI). Some crime investigators have labelled Britain as the ‘world’s most corrupt country’.

The root cause of almost all scandals is the unchecked power of corporations and wealthy elites to bludgeon people into silence and submission. That won’t change until we have a government of the people and for the people, with a will to break the iron-grip of corporations and elites on institutions of government.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Image credit: Graham Knott – Creative Commons

Comments are closed.