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Index to British press articles on the Fayeds' purchase of Harrods

This article -- the only one to be by-lined by all three Observer financial staff whose efforts contributed so much to exposing Mohamed Al Fayeds' fraudulent purchase of Harrods -- reports the news that the Serious Fraud Office has begun inquiries into the affair.  The article concludes by warning the Director of Fair Trading that he has only until January to decide whether to refer the Fayed brothers' acquisition to the Monopolies & Mergers Commission (MMC).

The Observer 
Sunday, 2 October 1988

THE Department of Trade and Industry's 750-page report on the House of Fraser affair is reliably understood to allege that the Egyptian Fayed brothers may have committed a number of breaches under the Companies Act. 
    It is also understood that the DTI Inspectors, Henry Brooke QC and Hugh Aldous of accountants Robson Rhodes, recommended that their findings, delivered to the DTI in July, should be considered by Trade and Industry Secretary Lord Young for possible further action.
    It is these findings that are now being studied by the Serious Fraud Office, which was set up earlier this year to handle 'sensitive' investigations as well as major fraud cases such as Guinness and Barlow Clowes. 
    The alleged offences are understood to refer, at least in part, to statements and representations made at the time of Mohamed Fayed's takeover of the Harrods store empire in the spring of 1985 regarding the family's business background and financial resources and the source of the financing for the controversial £615 million bid.
    At the time the Fayeds claimed billionaire status and repeatedly declared that the financing of the takeover stemmed entirely from personal cash balances accumulated from one of Egypt's Pharaonic family fortunes. 
    Such claims were presented by the Fayeds' merchant bank advisers, Kleinwort Benson, to the Stock Exchange, the DTI, and the Office of Fair Trading, in the offer document to House of Fraser shareholders and in correspondence which served to prevent a reference to the Monopolies and Mergers Commission.
    It is understood that the DTI report concludes that many of the Fayeds claims, in particular those regarding their personal wealth and the family fortune, were exaggerated.
     Had the OFT believed that the takeover was being financed by highly leveraged borrowings -- as is suspected to be the case -- director general Sir Gordon Borrie might well have recommended a reference to the MMC -- an action which would have postponed and possibly prevented the takeover.
    The Bank of England was opposed to leveraged takeover bids in principle because such deals could lead to the target company being dismembered in order for borrowings to be repaid.
    Shortly after Mohamed Fayed's takeover of House of Fraser, the £1.8 billion takeover bid by Australian combine Elders for Allied Lyons was referred to the MMC on these grounds. 
    Inquiries by The Observer indicate that although the DTI has been in contact with the SFO regarding the House of Fraser report since it was received in July, senior officers at the SFO, led by John Wood, have yet to decide on their approach to the investigation and which course it will take.
    As yet no decision is understood to have been taken as to whether to call on assistance from either Scotland Yard or the City Fraud Squad.  The SFO employs a small squad of investigators who work with its legal staff. 
    A decision on how to proceed and whether to call in the police is expected to be taken later this week now that the SFO involvement has been disclosed.
    Young's decision to call in the SFO will inevitably delay publication of the House of Fraser report -- an event which Tiny Rowland, chief executive of Lonrho, which originally campaigned for the DTI inquiry, has already described as 'disappointing'. 
    Recent speculation had it that Young was poised to publish an unedited version of the report last week.  News of the delay is unlikely to disappoint Norman Tebbit, who, as Trade Secretary, originally waved through the Fayeds' House of Fraser takeover in the space of 10 days --in stark contrast to the DTI's treatment of Lonrho which had stalked House of Fraser for more than half a decade.
    Speculation is rife that Tebbit will be criticised in the report -- a matter over which Young, who comes under attack in Tebbit's autobiography Upwardly Mobile, is unlikely to lose much sleep over. 
    With the Conservative Party Conference due to open in Brighton on Tuesday week not a few senior Tories will be relieved over the delay in publication -- not least Leon Brittan who, as Tebbit's successor, attempted to sweep the House of Fraser affair under the carpet and saw 'no grounds whatever' for a DTI investigation.
    Tony Blair, Opposition spokesman on the City, declared yesterday: 'We intend to press for a full parliamentary statement when the report on House of Fraser is published so that MPs have the opportunity to question the Government.'
    Meanwhile, Borrie must again decide whether Mohamed Fayed's takeover of the Harrods store empire should be referred to the MMC.  His deadline: January.

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