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Index to Guardian articles on the Fayeds' purchase of Harrods

The Guardian 
Thursday, 8 March 1990

Comment

IF THERE is one thing more damning than yesterday's report on the way the brothers Fayed lied their way to control of the House of Fraser group, it is the thought that the Government is doing nothing about it.  The Fayeds are found to have lied about their origins again and again; they produced birth certificates they knew to be false.  Above all, they lied about their wealth, which was used to back the £615 million bid for Harrods and the House of Fraser in March 1985.
    In a blow-by-blow examination, the DTI inspectors demolish the alleged assets in shipping, hotels, construction, banking and oil, which were nothing near the billions of dollars which the brothers claimed and which their merchant bank, Kleinworts, and lawyers, Herbert Smith, testified to without bothering even to check properly.

    Their word used to be their bond.  Even now, after a 752-page report, we still do not know the ultimate owner of the House of Fraser (although the clues point to the Sultan of Brunei, according to the inspectors). 
    The bleak bottom line is clear.  If the Fayeds are allowed to continue in their present position, it will make a farce of Government surveillance and send tawdry signals to anyone planning something similar.  On the central issue - campaigning tactics aside - Mr Tiny Rowland, the chief executive of Lonrho, has won hands down. 
    How, in these circumstances, Mr Nicholas Ridley, our untowering Secretary for Trade and Industry, could give the down-beat reaction he delivered yesterday (to a Commons waiting to grill John Browne) beggars belief.  He shrugged off responsibility for the Government's failure to institute prosecutions on the grounds that that was the responsibility of the Attorney-General.  Pass the unwholesome parcel.  And as for his own power (under Section 8 of the Disqualification of Company Directors Act), he did not feel it would be in the public interest to remove the Fayed brothers.  The shareholders had not been affected; people, he said, should read the report and make up their own minds. 
    But shareholders have been affected.  If the House of Fraser had not been taken over or taken over by others (like its long-time stalker, Lonrho), then they would now been sitting on top of the large appreciation in the capital value of Harrods and other shops which, ironically, now provide the Fayeds with the £1 billion net worth they claimed at the beginning.  All that Mr Ridley could offer yesterday (amid conspicuous unease from Tory backbenchers) was the prospect that either the Bank of England or the Law Society might do something further about the banks and law firms involved.
    Although the inspectors draw attention to loopholes which are being dealt with (like making the giving of false evidence to company inspectors a sufficient reason for disqualification as a director), Ministers have yet to explain why no action has been taken through existing law, where false testimony to inspectors is an offence.  If the law is not seen to be applied to friends of the rich and powerful as well as to the poor, then it tumbles into disrepute.  Yet the Government is quick enough to pursue social security scroungers over piffling sums.

    There are wider points too.  First: if, as we have long argued, big take-over bids were only permitted if the would-be purchaser could prove that there were likely to be positive benefits, then this one would never have got off the ground in the first place.  Second: this seedy episode illustrates once again that the world-wide deregulation of finance needs international organisations to police it.  The inspectors themselves assuredly need extra resources if they are to check out cock-and-bull stories of the Al-Fayed variety.  But they also need institutionalised access to Swiss and other bank accounts. 
    Third: no company has a right to operate freely in Britain unless its ultimate ownership is on record.  The Fayeds have exploited a loophole in the City Code, where non-corporate owners of shelf companies are not obliged to give the same depth of information as ordinary joint stock companies owned by lots of shareholders.  That must be changed. 
    But, even if the ultimate ownership of the House of Fraser is established, we still face the problem of what to do about the people who acquired a public company under false pretences.  This is not an issue about foreigners taking over British businesses, which many have done to great effect.  It is a question of deceit and its rewards.  Mr Ridley may not regard this as a "heavyweight" stuff, but others, including many Tory MPs, do.  The Government is fighting defensively on enough fronts not to want another one opened.  But that is just what is going to happen if justice is not seen to be done.  Quickly.

In this Leader Preston castigates Fayed as a liar.  Four years later Preston published a story - that London's top lobbyist bribed Tory MPs - which hung entirely on Fayed's word.   (See Section Two of this website).

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