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The Observer's financial journalist Michael Gillard reports on the aftermath of the publication of the special mid-week edition of the Observer, which carried large extracts from the unpublished DTI Inspectors' report into the Fayed brothers' fraudulent purchase of Harrods stores group House of Fraser.

The Observer 
Sunday, 2 April 1989

The Attorney-General, Sir Patrick Mayhew has ordered the Fraud Squad to step up their investigation of Mohamed Fayed and the manner in which he and his brothers took over the House of Fraser [HoF] stores group.
    Mayhew has made it clear he wants a speedy decision on whether and what criminal charges can be brought.  At a meeting with Serious Fraud Office director John Wood and Det. Supt. Ken Woodward, who heads the Fraud Squad investigation, the Attorney-General made it clear that the investigation was to have top priority.
    This crucial meeting took place in late February well before The Observer obtained and published extracts from the Department of Trade and Industry inspectors' report into the Fayed takeover.  That led last week to criticism of the delays by the SFO in deciding whether to bring a prosecution.
    The Attorney-General called the meeting following the court battle by Lonrho, owners of The Observer, in January to force publication of the report.
    The SFO spent as least three months reviewing the legal issues and difficulties raised by the DTI report before deciding to call in the Fraud Squad.  At that stage it was by no means certain that a full-scale police investigation would be ordered to determine if a prosecution should be brought.
    The Attorney-General's intervention --the SFO reports directly to him -- has changed the complexion of the investigation.  He gave a clear signal that the inquiry was to proceed as fast as possible despite accepted legal problems. 
    The Crown Prosecution Service under Director of Public Prosecutions Allan Green has also been called in.  The CPS is believed to be advising Scotland Yard on allegations of perjury concerning statements made by Mohamed and Ali Fayed in evidence given before the inspectors. 
    The 16-page Observer Special Report [now widely known as the mid-week special edition] is certain to further increase the pressure on the SFO and the DPP to reach a decision even faster, despite the fact that it is accepted that the investigation is complex and the question of what offences may have been committed, breaching what laws is by no means clear.
    Sources close to the SFO investigation believe that publication of the DTI report could well help rather than handicap the police investigation.  Publication would allow the police to be more open when carrying out interviews.  It could also be a possible encouragement for a witness to be more forthcoming. 
    As a result of the Attorney-General's intervention the size of the Fraud Squad team was substantially increased and the police were given the go-ahead to begin collecting evidence and taking witness statements here, in Egypt, Switzerland and the United States regarding the Fayed family and business background and wealth.
    Arrangements had been made for Det. Insp. Graham Gooch, number two on the Fraud Squad team, to go to Egypt this week.  However, this had to be delayed due to the failure of the official request for assistance to yet reach the Egyptian authorities.
    The police may also face difficulties in obtaining crucial evidence from Switzerland relating to the Fayeds' bank accounts and the amounts in those accounts prior to the initial £138 million purchase of the 29 per cent of HoF in November 1984.
    The Swiss authorities have been notoriously uncooperative in a number of SFO investigations.  They are holding up key inquiries relating to the Guinness and De Lorean investigations, and caused delays which ultimately doomed attempts to extradite from the US Lloyd's fraudsters Peter Cameron-Webb and Peter Dixon.
    The DTI inspectors themselves were handicapped by being unable to take evidence under oath there. 
    The police may also seek to interview representatives of the Sultan of Brunei relating to his dealings with Mohamed Fayed.  Fayed acted as an adviser to the Sultan under various powers of attorney granted by one of the world's richest men until April 1985.  He still retains a lesser relationship with the Sultan for whom he bought the Dorchester Hotel.
    The SFO were brought into the case soon after the Trade Secretary Lord Young received the report last July.  The Fraud Squad, however, were not called in until December and then in conditions of secrecy. 
    The focus of the Fraud Squad investigation is whether the Fayeds obtained control of HoF by deception concerning their family and business background and personal wealth.  The deception was contained in the details provided about the Fayeds both to HoF shareholders and to the Office of Fair Trading, which had to advise the then Trade Secretary Norman Tebbit.

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