UK Post Office Scandal Wipes $1 Billion Off Fujitsu’s Market Cap

Not since someone shot JR has a TV show caused this much of a stir.

Faulty IT systems provided to the UK Post Office by Japanese software giant Fujitsu resulted in more than 900 innocent postal workers being prosecuted for fraud for nearly two decades, with over 700 cases resulting in convictions and even prison sentences for the wrongly accused. For Fujitsu, the ultimate downside is uncertain, as the question of compensation looms ever greater. The most unusual part of this story? It was all set off by a TV miniseries.

All Thanks to TV

The scandal goes back decades, with wrongful convictions dating from 1999 to 2015. Victims have been speaking out for 20 years, but the fallout jumped to the front of the collective cultural consciousness this month after a TV dramatization called Mr Bates vs the Post Office. Alan Bates, the real-life sub-postmaster whose life is portrayed in the series, was fired in 2003 after Fujitsu’s Horizon software showed enormous deficits in the post office he ran — deficits he had tried to flag as inexplicable.

Fujitsu’s co-CEO of European operations, Paul Patterson, appeared before British lawmakers on Tuesday, and his comments set the company’s stock falling, wiping $1 billion off the IT giant’s market cap:

• Patterson said Fujitsu had a “moral obligation” to compensate victims of Horizon’s buggy accounting abilities. He added that the company “would like to apologize for our part in this appalling miscarriage of justice.”
• It’s not clear how much compensation Fujitsu will contribute. The UK government has said it will set aside £1 billion ($1.3 billion) for victims, and that it has already handed out £153 million ($194 million) to over 2,700 claimants — so it’ll likely be eager to chase down Fujitsu for a sizable chunk.

Next Time, on The Post Office Scandal: This is just the beginning for Fujitsu’s political heat. Timothy Morse, a founding partner at Japanese equity advisory Asymmetric Advisors, told CNBC that Fujitsu had managed to stay out of the limelight until now. “It’s amazing that Fujitsu’s name has rarely been in the press about this scandal over the years, because this is not a new scandal,” Morse said. However, he added that Fujitsu is “heavily embedded” in UK government contracts, and that a replacement “could be very expensive.” Even if Fujitsu’s contracts remain, the ongoing scandal has the potential to severely hurt its future European sales, according to Bloomberg Intelligence analyst Ian Ma.