Post Office 'knew of problem with accounting system'

The disclosure follows legal action by more than 500 sub-postmasters who claim they were wrongly blamed for financial discrepancies in their accounts.

Among them are Tracy Felstead, from Brookside in Telford, who was jailed for six months in 2001 after being convicted of false accounting. Miss Felstead, now 36, is suing the Post Office through the group action, claiming she is the victim of a miscarriage of justice.

Rubbina Shaheen, who kept Greenfields Post Office in Shrewsbury, is also trying to clear her name after being jailed for 12 months, although she is not part of the group action.

The Post Office was this week ordered to disclose the secret memo from August 2010, which admitted to a 'payments mismatch issue', and proposed three possible solutions to the problem.

The document, which was produced in the High Court, referred to a problem with the Horizon accounting system which caused money to 'disappear'.

It said the problem was affecting about 40 branches, and added: "At this time we have not communicated with branches affected and we do not believe they are exploiting this bug intentionally."

The Post Office maintains there is no significant problem with its computers.

The memo was written in response to a complaint from Pamela Stubbs, a 70-year-old sub-postmistress from Berkshire.

She was told she had 'lost' £27,000 and the Post Office demanded she pay it back, and was never told bosses privately suspected the losses were 'Horizon-related'.

Mrs Stubbs refused to pay the money, and was removed from her post office.

Giving evidence at the High Court, Mrs Stubbs said: "I was told there was nothing wrong with the Horizon system."

The Post Office's lawyer said QC said her replacement at the branch had no problems with the system.

The 557 claimants say the Post Office imposed Horizon on them. The terminals record all over-the-counter transactions.

They say the accounts are held by the Post Office, not the sub-postmasters who have no means of checking errors.

The Post Office denies all the allegations in the case, which is scheduled to run for several months, and maintains its computer system was not at fault. It blames error or dishonesty.

A Post Office spokesman said: "The claimants represent a very small proportion (0.01 per cent) of users of our Horizon computer system."

Mrs Shaheen, who now lives in Brockton, near Shrewsbury, is not part of the group action, but is seeking to have her conviction quashed through the Criminal Cases Review Commission. She is due to hear this month whether she will be given leave to appeal.