Main Index

Section Six Index:
Mohamed 'Al' Fayed - the facts

As a consequence of the Sunday Observer's sensational articles about the Fayeds' true background and financial manoeuvrings, the Labour Opposition lobbied the Conservative government to investigate the Egyptians' acquisition of House of Fraser, parent of Harrods.  Labour was supported by a few back-bench Tory MPs (such as Jonathan Aitken; Sir Teddy Taylor; and Lonrho's chairman, Sir Edward du Cann).  Lonrho's chief executive Tiny Rowland barracked Trade minister Norman Tebbit unrelentingly to initiate an official investigation into the Fayed brothers' claims about their wealth and background, that had facilitated their purchase of the stores group in March 1985.
    Uppermost in other Conservative MPs' minds was Tiny Rowland's controversial reputation.  Accordingly these MPs supported the government's decision to allow the Egyptians' bid to succeed over long-standing bid from Lonrho.

Harrods of Knightsbridge, London.  The Fayed brothers bought the store with nearly $1 billion which Mohamed 'Al' Fayed had stolen from the Sultan of Brunei. Using Harrods as collateral Fayed later raised massive loans and repaid the Sultan.

On 2 September Tebbit stepped down.  His successor, Leon Brittan, came under immediate pressure from Rowland and Sir Edward du Cann.  Brittan stood firm during the five months he held the post up to 23 January 1986, at which point he was replaced by Paul Channon.  Like his predecessors, Channon too was lobbied unrelentingly.  He stood firm for over a year.  Then, on 9 April 1987 Channon relented.  With the backing of Corporate Affairs minister Michael Howard,  Channon appointed two Department of Trade & Industry (DTI) Inspectors, chartered accountant Hugh Aldous FCA and barrister Philip Heslop QC, to investigate the Fayeds' acquisition of House of Fraser.  Mohamed Al Fayed was incandescent with rage against the Tories.

A month later on 13 May, House of Fraser's parliamentary consultant, Conservative MP Sir Peter Hordern, led a delegation to Paul Channon of backbench Tory MPs who sympathised with the Fayeds' battle against Rowland.  During the meeting Hordern implied that Philip Heslop had links to Lonrho that compromised his impartiality.  Heslop duly resigned that same day.  Two days later Channon appointed Henry Brooke QC to take his place. 

In the general election of 11 June, Margaret Thatcher's Conservative government was swept back to power.  Channon was replaced at the DTI by Lord Young of Graffham - the fourth Trade Minister in little over two years to shoulder responsibility for the Harrods sale.

Over the following months DTI Inspectors Aldous & Brooke investigated Fayed's dealings in Egypt, Dubai, Haiti, Brunei, Liechtenstein, Switzerland, New York, and London.  In two oral sessions during March 1988 they questioned Mohamed and his brother Ali about their claims as to how they acquired the funds with which they purchased Harrods.  The Inspectors' incisive questions showed that they had digested and verified the material Rowland had submitted to their inquiry.  A rattled Fayed responded by stepping up an outrageous campaign of harassment he was conducting against Aldous & Brooke through a woman named Francesca Pollard. 
    The Inspectors were not deflected from their task.  Their investigation had been one of the most thorough ever carried out by the British government, having extended across the world at a cost to the British taxpayer of over £1½ million. 

On Saturday, 23 July 1988, Aldous and Brooke submitted their report to the new Trade Minister, Lord Young.  It could hardly have made worse reading for the minister.  The Inspectors had found that Mohamed Al Fayed and his brother, Ali, had lied in every essential aspect of their representations of their background and acquisition of wealth.  The Fayeds were accused of systematically deceiving Kleinwort Benson (the Fayeds' merchant bankers who prepared their bid for House of Fraser); Herbert Smith (the Fayeds' solicitors); the British Press; and, of course, Trade Minister Norman Tebbit and his Department. 
    Like Tiny Rowland and The Observer's financial journalists before them, the Inspectors concluded that Fayed had indeed bought House of Fraser with funds that had been acquired through his close association with the Sultan of Brunei.  Sensationally, their report detailed how Fayed had also stolen over $100,000 from Haiti's Port au Prince Harbour Authority; had robbed his former brother-in-law, Adnan Khashoggi, and then attempted to bribe him with $2 million to recant the evidence he had given the Inspectors; and had prosecuted unjustified attacks on people who had aroused his ire, in particular journalists Peter Wickman and Michael Gillard.
    Lord Young was horrified at the effect the report would have on the reputations of the Conservative government and the City of London; and on Britain's relations with the Sultan of Brunei.

    The next day of Sunday 24 July, Channel 4's Business Programme broadcast Box Productions' documentary on the Harrods take-over, entitled: 'The Harrods Sale,' featuring an investigation by freelance journalist John Plender.  The programme was another vindication of The Observer's financial journalism.  Plender calculated that the Fayeds were worth £70-100 million at the most, and that they could not, therefore, have used their own funds to finance the £615 million purchase of the stores group.  He concluded: "This has been first and foremost a story about deception.  Mohamed Fayed and his brothers duped the British Press and public about their family background and the origins and scale of their wealth."

Four days later on 28 July 1988 Lord Young forwarded copies of the report to the Serious Fraud Office (SFO) in an attempt to buy time prior to burying it forever.  For good measure, a few weeks later on 19 August he sent copies to the Office of Fair Trading (OFT) for their consideration too.  Thereafter, with the SFO and OFT embroiled, Young would parry all calls to publish the report by claiming that such action would prejudice any legal proceedings that the SFO or OFT might care to initiate against the Fayeds.

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