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THE OBSERVER,
Thursday, 30 March 1989
'The lies of Mohamed Fayed and his success in 'gagging' the Press created a new fact: that lies were the truth and that the truth was a lie.'
EXPOSED: THE
PHONEY PHARAOH
THE EGYPTIAN Fayed brothers obtained Harrods and the House of Fraser, the biggest stores group in Europe, by fraud and deceit, according to the official report by Department of Trade Inspectors which the Government has sat on since last July.
A copy seen by The Observer exposes a catalogue of lies and errors of judgement unparalleled in Department of Trade inquiries. The Inspectors show that the Fayeds made a series of false representations about their wealth and their origins that were backed up by their professional advisers, who come in for heavy criticism in the report.
It fully vindicates claims made for the past four years by Lonrho and its chief executive Mr R.W. ('Tiny') Rowland that the Fayeds did not have the personal fortune to bid over £600 million for Britain's most prestigious chain of department stores. It accuses the Fayeds of lying to the Government and to the
DTI inquiry.
The professional advisers involved, bankers Kleinwort Benson and solicitors Herbert Smith, are shown to have supported the Fayeds' bid without making adequate checks about their clients. 'The lies which the Fayeds were telling about themselves and their resources were given a credibility they would not have otherwise attained when they were repeated by their very reputable advisers', the report says.
The DTI and the Office of Fair Trading 'were left with a seriously misleading impression of the Fayeds' business interests and wealth'. The report spares the Director-General of the OFT, Sir Gordon Borrie, from criticism on the grounds that 'that it is rare, we hope, for deception of regulatory bodies to be practised on such a grand scale'. The Inspectors propose a number of reforms to the City Takeover Code and to the Companies Act to avoid such abuses in the future.
The report is bound to fuel demands from MPs for the Fayeds to be forced to disinvest from House of Fraser and to face criminal charges. The report has been with the Serious Fraud Office for nine months.
There is also likely to be criticism of the Secretary for Trade and Industry, Lord Young, for failing to publish the report or to ask the Monopolies and Mergers Commission to determine whether the Fayeds' ownership operates in the public interest. The Inspectors are critical of much of the Press reporting of the takeover, showing that the Fayeds brought heavy pressure to bear on newspapers that dared to question their claims and used skilful public relations to persuade some journalists, including the deputy editors of the Sunday Times and Sunday Telegraph to perpetuate myths about their background. The Observer is exempted from this charge. The Inspectors conclude: 'Two processes were at work concurrently. On the one hand, Mohammed Fayed was telling lies about himself and his family to representatives of the Press, and once those stories were on a cuttings file or in a press cuttings library they grew and multiplied without much further inquiry into their accuracy. On the other hand, he gave instructions to his very able lawyers to take legal action against any who sought to challenge his claim that he and his brother beneficially owned the money...
'To a great extent he succeeded in his aims. Most newspapers and magazines considered that discretion was the better part of valour and preferred to write about other things than get involved in an expensive libel action with a rich man.
'As a result of what happened, the lies of Mohamed Fayed and his success in 'gagging' the Press created… a new fact: that lies were the truth and that the truth was a lie'.
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