The man who paid for politicians

The tale has everything: MPs taking backhanders, undeclared interests, political donations, shenanigans in high places, the Establishment up to no good ...

There was delight all round in Farringdon Road, headquarters of The Guardian, last Monday, when Neil Hamilton and Ian Greer ended their libel action. The paper had emerged victorious from what promised to be a bloody libel battle, its reputation for being the scourge of the Tories enhanced. A mountain of material gathered in the course of the case, and not subject to any legal order, could now be used as the basis for some sensational news stories. An expensive trial had been avoided.

At the Scott Trust, the owner of The Guardian, there was also jubilation. But here, it was slightly tinged. As one senior member of the trust was overheard saying, it could not have worked out better. He then went on to say he had never been happy with the paper's relationship with Mohamed Al Fayed, the owner of Harrods and the man, who, by his own free admission, bribed MPs.

For the last two years, ever since the original story broke, there had been unease at the marriage of a left-leaning newspaper which prides itself on exposing corruption in high places with a multi-millionaire who stuffed cash into envelopes to give to MPs.

That awkwardness had grown with the disclosure that Peter Preston, The Guardian's then editor, had entered into a deception with Mr Fayed to obtain a copy of a bill from the Ritz Hotel in Paris, which he also owned.

All Mr Fayed needed to do was hand over the bill, and hang the consequences of breaking confidentiality laws - he could, after all, afford to - but the chosen route was for Mr Preston to use House of Commons notepaper to pose as a guest.

Eyebrows, both inside and outside Farringdon Road, were raised. It was not a proper way for a newspaper editor to behave. It was a breach of Commons rules. For The Guardian to be involved in subterfuge with a man whose store possesses numerous Royal Warrants and espouses exclusivity based on wealth, was bizarre.

Those eyebrows arched further when it was revealed that Mr Preston had allowed representatives of Mr Fayed to go through records left behind when The Guardian had bought The Observer. Unannounced, they were installed in a corner of The Guardian offices and permitted to search for ammunition to throw at Tiny Rowland, head of Lonrho, The Observer's former owner and Mr Fayed's long-time arch-enemy. The fact that Mr Preston was prepared to allow Mr Fayed access to papers potentially damaging to The Observer if they ever came to light spoke volumes for the close relationship between the two men.

It was a measure of just how far Mr Fayed had travelled in his quest for revenge that he was prepared to deal with The Guardian. Once - although it's hard to imagine now - he had the Tory Party and Mrs Thatcher eating out of his hand. Two acts had earned him the effusive thanks of the Tory great and good. First, he used his Middle East contacts to swing a helicopter order Westland's way, and received their gratitude. Then, when the Sultan of Brunei threatened to switch billions of pounds of reserves into dollars at a time when sterling was under pressure, he persuaded him to think again. A large donation - pounds 4m, according to Tory whispers - from the Sultan to the party was also brokered by Mr Fayed.

Even when he bought Harrods, the Tories still loved him. With hindsight, he made two mistakes: he claimed to be something he was not, namely the scion of an old trading family from Alexandria; and he was caught in the crossfire between Mr Rowland and Mrs Thatcher.

Mr Rowland wanted Harrods, badly. He sold his shares to Mr Fayed but always believed he would get them back - either by Mr Fayed selling them to him or by the Government declaring the Egyptian not to be a fit and proper person to run Britain's top store. When neither happened, Tiny went berserk. His newspaper, The Observer, launched a brilliant expose of Mark Thatcher, the Prime Minister's son and the weakest link in her formidable armour.

Mr Rowland got what he wanted. Ministers at Trade and Industry - one of them the present Home Secretary, Michael Howard - launched an inquiry into Mr Fayed's takeover. From Mr Fayed's point of view, worse was to follow: he objected to one of the DTI inspectors because of his links with Lonrho, only to see him replaced by the brother of the then Tory Party chairman, Peter Brooke.

Charles Wardle, a Tory MP, later immigration minister, asked a question hostile to Mr Fayed in the Commons. In the Register of MPs' Interests, Mr Wardle listed Peat Marwick, Tiny Rowland's accountants.

The DTI report was leaked - no prosecution for the leak resulted - The Observer published it, and the Government replied by formally releasing the whole document, which savaged Mr Fayed.

Sore and wounded, his reputation in tatters, Mr Fayed existed on a diet of suspicion and paranoia. The final straw - and only the final straw, say his supporters - was the refusal of his citizenship application by the Home Office. Mr Howard was Home Secretary, Mr Wardle the minister who took the decision.

For Mr Fayed this was too much. His normal machine-gun style of speaking now contained abuse fired at those he felt had let, or done, him down. In the former category came those MPs and the lobbyist he had paid to fight his corner with the authorities and had failed so miserably: Tim Smith, Neil Hamilton and Ian Greer. In the latter came Mrs Thatcher, Mr Wardle and Mr Howard. The Home Secretary was a special target since Mr Fayed discovered that an old family friend of Mr Howard's ran a Lonrho subsidiary.

Mr Preston came to meet the owner of Harrods after Mr Fayed had let it be known via a Liberal Democrat friend that he could help The Guardian with a story it had run about Tory Party funding. Hearing Mr Fayed's accusations, Mr Preston must have thought he had hit the jackpot.The tale has everything: MPs taking backhanders, undeclared interests, political donations, shenanigans in high places, the Establishment up to no good.

What it also has is an individual who lied about the origin of his wealth, who bribed MPs to try and get his own way, donated money to attempt to buy influence and sanctioned the release of the private bill of one of his hotel guests to a newspaper. As the member of the Scott Trust was heard to joke last week: "Would you want to stay in the Ritz Hotel in Paris?"

For all his claims to have been the victim of a high-level conspiracy, Mr Fayed remains the owner of Harrods, with a lifestyle to match. For all his huffing and puffing, he has been allowed to own a magazine and a radio station and he may, eventually, own a newspaper - he has bid for The Observer. In some countries, funnily enough those where bribery is commonplace, such public outlets would long since have been denied him.

He still has his Royal Warrants and he plans to sell shares in Harrods to the public to raise pounds 2bn. And to date, he is one fat cat The Guardian has been slow to criticise. Yet, having admitted his own questionable dealings with MPs in order to avenge himself, Mr Fayed may find to his cost that he has finally gone one step too far. It is one thing to bribe an MP; it is another to tell the world about it.