Fayed moves in for 'Observer' paper chase

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INVESTIGATORS working for Mohamed al-Fayed, the owner of Harrods, have been sifting through boxes of documents left behind by Lonrho when it sold the Observer newspaper to the Guardian Media Group in 1993.

Three senior Harrods executives, including a lawyer, were invited by Peter Preston, editor-in-chief of the Guardian and Observer, to examine the files at the group's Farringdon Road headquarters in London.

They have been looking at 106 boxes left over from when Lonrho owned the Observer at the Marco Polo building in Battersea, South London.

They are trying to discover whether inducements may have been offered to journalists and others by Lonrho and its former boss, Tiny Rowland, to spread stories attacking Mr al-Fayed.

The Fayed camp is also understood to be seeking what are known among senior Guardian and Observer staff as "the midnight papers", documents found at the time of the Observer takeover by the Guardian which are believed to relate to deals conducted through the Observer by Lonrho.

Despite having reached a public accord with Mr Rowland - after a bitter, marathon struggle for control of Harrods and its former House of Fraser parent - Mr al-Fayed is determined to prove he was the victim of a concerted campaign.

In particular, he aims to discredit the Department of Trade and Industry inspectors' report critical of his takeover of House of Fraser by showing that information was supplied by witnesses receiving inducements from Lonrho.

The al-Fayed team asked to see the Observer papers because they know that in at least one case a former Harrods executive was paid by Lonrho.

This is not the first time Mr Preston has co-operated with Mr al-Fayed. Tomorrow, a powerful committee of MPs meets to consider a possible breach of Parliamentary privilege by Mr Preston over a "cod fax" sent on House of Commons notepaper to the Ritz Hotel in Paris, also owned by Mr al-Fayed, to obtain details of the bill for a weekend stay by Jonathan Aitken MP.

The fax, which purported to come from Mr Aitken, was a device to enable the hotel to reveal a client's bill.

At its meeting tomorrow, the Privileges Committee will consider a draft report on the affair.

In October last year Graham Jones, a former Harrods director, admitted in court he had been paid by Lonrho to disclose confidential financial information about Mr al-Fayed. He was employed by Harrods from 1987 to January 1990.

Between April 1990 and June 1990, Mr Jones received pounds 555,000 from Lonrho. As well as supplying Lonrho, he also met the Bank of England and encouraged it to withdraw Mr al-Fayed's licence to run Harrods Bank.

Mr Jones's activities did not stop there. He also met the Commons Trade and Industry Select Committee and gave it evidence harmful to his ex-boss. The committee's report was highly critical of Mr al-Fayed and of the Government for not acting after the damning DTI inspectors' inquiry. Subsequently, the Bank of England revoked Mr al-Fayed's licence to run the Knightsbridge store's private bank.

It was only when Mr Rowland and Mr al-Fayed agreed to cease hostilities that the Harrods owner discovered what Mr Jones had been doing.

He sued Mr Jones, who last October made a full apology and paid Mr al- Fayed substantial damages.

On another occasion, Mr Rowland offered an indemnity to Business magazine to write an article attacking Mr al-Fayed. The Lonrho boss would supply the material and offered to cover the magazine's legal costs and damages in the event of being sued. The offer was declined and the article did not appear.

A spokesman for Mr al-Fayed said they were determined to uncover any other payments and indemnities. "We know of at least one person who has confessed to being paid by Lonrho," he said. "This is a legitimate inquiry which is in the public interest."

Mr Preston said last night that he believed no confidential papers were left behind by Lonrho.