Fujitsu role in Britain's Post Office scandal could have severe reputational penalties, analysts say

Post Office has attributed the report quantity for private money withdrawals at its 11,500 branches to extra staycations in the U.Ok. and other people utilizing money to handle their budgets.

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LONDON — Fujitsu‘s role in the U.K. Post Office scandal, dubbed the “most widespread miscarriage of justice” in British historical past, has analysts cautious of what the fallout could appear like for the Japanese IT large.

Between 1999 and 2015, a fault with the corporate’s Horizon laptop software program utilized by the Post Office, a state-owned non-public firm using hundreds of individuals throughout the nation, resulted in greater than 700 sub-postmasters being subjected to false prosecutions. Thousands extra have been pushed to destitution, sickness and in a number of circumstances, suicide.

The U.Ok.’s High Court dominated in 2019 that the Horizon software program was at fault for the misreported losses at Post Office branches all through the nation, and a public inquiry was ordered by the federal government to happen in the next yr.

However, the scandal has been re-ignited following the airing of a TV docudrama earlier this month, which confirmed that regardless of the acknowledgment, the sub-postmasters had by no means acquired enough compensation for the monetary and emotional injury inflicted.

The British authorities has launched laws to exonerate all convicted sub-postmasters and put aside £1 billion ($1.27 billion) in compensation for the victims, saying it should pursue Fujitsu if an ongoing inquiry finds the corporate is responsible.

Despite the furor in the U.Ok., Fujitsu shares are solely down round 2% for the reason that flip of the yr, having suffered an preliminary drop after the corporate’s European co-CEO Paul Patterson mentioned compensating Post Office victims was a “moral obligation,” earlier than recovering over the previous week.

Former subpostmasters have fun exterior the Royal Courts of Justice in London, on April 23, 2021, following a courtroom ruling clearing subpostmasters of convictions for theft and false accounting. – Dozens of former subpostmasters, who have been convicted of theft, fraud and false accounting due to the Post Office’s faulty Horizon accounting system, have lastly had their names cleared by the Court of Appeal. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP by way of Getty Images)

Tolga Akmen | Afp | Getty Images

Patterson later advised U.Ok. lawmakers on the Business and Trade choose committee on Friday that the corporate had “clearly let society down” and that there have been “bugs errors and defects” with the Horizon software program “from the very begin.”

In a press release Thursday, Fujitsu mentioned it regards the matter with the “utmost seriousness and presents its deepest apologies to the sub-postmasters and their households.”

“The U.Ok. statutory public Inquiry, to which our U.Ok. subsidiary is offering full cooperation, is analyzing complicated occasions that have unfolded over a few years, and we stay steadfast in our dedication to this cooperation,” the corporate mentioned.

“Based on the findings of the Inquiry, we may even be working with the UK authorities on the suitable actions, together with contribution to compensation.”

Fallout could have ‘extra unfavourable penalties’ for Fujitsu

Tim Morse, founding companion of Asymmetric Advisors, advised CNBC final week that whereas Fujitsu will not be on the hook for everything of the £1 billion compensation fund, it should have to shoulder a “cheap monetary burden,” and the corporate changing into persona non grata for future authorities contracts is “definitely a risk.”

A spokesperson for Fujitsu wasn’t instantly out there for remark when contacted by CNBC.

Members of Parliament on the Treasury choose committee wrote to the government and other public sector institutions last week to demand that particulars of any contracts awarded to Fujitsu since 2019 be made public.

“The title of Fujitsu has been tainted, however remember that Fujitsu — and beforehand to Fujitsu, ICL, which was very near the U.Ok. authorities and was purchased by Fujitsu in the early nineties — they’re very properly embedded in U.Ok. authorities IT contracts, so really changing Fujitsu could be very costly,” he advised CNBC’s “Squawk Box Asia.”

He prompt the larger worry is that there could be additional frailties recognized in government-contracted applications, with points already recognized in Japan regarding ATM systems and national ID cards, together with an outage on the Tokyo Stock Exchange in 2020.

Mio Kato, founding father of LightStream Research, advised CNBC final week that he was shocked by the comparatively “tepid” response in the inventory value thus far, as a result of though the compensation cost will not be the “finish of the world” for a corporation of Fujitsu’s dimension, the “reputational penalties could be extra severe.”

“You do have these little points cropping up hooked up to Fujitsu and whereas it is unattainable to fully iron out all bugs, the frequency is a little bit of a priority contemplating that Fujitsu tends to produce their shoppers with actually mission-critical software program and techniques,” he mentioned, noting that the corporate may have to extend spending on high quality management.

Replacing Fujitsu in UK government contracts could be 'very expensive,' says equity advisory firm

“So whereas this occasion could also be fairly U.Ok.-specific, what’s actually regarding to us is the size of time over which it continued, and the truth that even after sure proof did appear to emerge suggesting that there have been issues with their Horizon system, it wasn’t addressed in a well timed method.”

Kato prompt potential Fujitsu shoppers would have “vital issues” about this facet of the allegations.

“While this case hasn’t essentially attracted huge consideration exterior of the U.Ok. but, because it drags on, this could have extra unfavourable penalties for Fujitsu, so I’m nonetheless comparatively cautious in regards to the short- to medium-term outlook till we see precisely what the full fallout is,” he added.

If you might be having suicidal ideas, contact the Suicide & Crisis Lifeline in the U.S. at 988 or the Samaritans in the U.Ok. at 116 123.

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