The curse of Al-Fayed

For want of a passport an election was lost. A corporate war of unparalleled ferocity continues to claim victims - will Michael Howard be next? victim of a ferocious corporate war?

Every week, since the beginning of this year, when Parliament has been sitting, Charles Wardle, the Conservative MP, has sought a debate on the subject of Department of Trade and Industry inquiries.

And every week, his application has been refused. Parliamentary time is precious and MPs want to speak on all manner of subjects. Since the general election, though, and the diminution in his party's representation, his chances of securing one of the Tory slots, have increased dramatically - which means that the likelihood of Mr Wardle having a dramatic impact on the current Tory leadership contest has also soared.

If he gets the nod, Mr Wardle, a former minister, promises to strike another blow to the already grievously wounded campaign of Michael Howard, his old boss at the Home Office.

On the face of it, his topic has little to do with Mr Howard. He will tell the House of Commons that he believes the system of DTI inquiries into suspected commercial malpractice to be flawed and in need of an overhaul. Departmental inspectors, he will argue, have too much power and act both as judge and jury.

But Mr Wardle intends to go further. DTI inquiries, he will claim, are open to political corruption, and can cause enormous harm to the people being investigated. On at least two occasions in the past, he will charge, their use has been at best questionable, at worst, highly improper. Two episodes will be cited by Mr Wardle: Guinness and House of Fraser. If he is listening, Mr Howard's ears might prick up at this point. On each occasion, he was the junior DTI minister involved in appointing the inquiry inspectors.

Behind this foray into what, on the surface is unfamiliar territory for Mr Wardle (he has not served in the DTI) is a tale of intrigue and strange behaviour. Not surprisingly, considering the shape of British politics these past few years, it has its roots in the longest-running and most savage of business feuds, that between Tiny Rowland, once of Lonrho, and Mohamed Al-Fayed, very much in situ at Harrods.

Michael Howard may yet find himself joining the list of politicians caught, in varying degrees, by the fall-out from their ferocious conflict: Neil Hamilton, Tim Smith, Jonathan Aitken, David Tredinnick, Graham Riddick, Sir Michael Grylls, Michael Brown, Lady Olga Maitland, Baroness Turner. To their number can be added Ian Greer, the lobbyist brought down by "cash for questions".

In fact, it can be argued, John Major, too, and the rest of his government were also destroyed by the reverberating shock-waves from Rowland versus Fayed. While Tory MPs cluck that the party's differences over Europe cost them the general election, Labour MPs maintain a large factor in the defeat was the refusal of Mr Hamilton to stand down in Tatton, with the result that the sleaze issue never left the doorstep.

Now, the Tory leadership race is threatening to go the same way.

For want of a passport for Mr Fayed and his brother, Ali, it can be argued, Mr Major might, even now, still be clinging to power.

It was this refusal to grant the Harrods owner citizenship that caused him to go on the offensive with devastating effect. And it is this passport application that has led to Mr Wardle dogging Mr Howard.

In 1994, the Fayeds had owned Harrods for almost 10 years. It was only fair, they thought, considering how much they had given to charity over that time, their residency here for 20 years and their children being born here, that they be granted British passports. Ali applied first and his elder brother, shortly afterwards.

Ali's request reached B4, the Home Office immigration section. Officials there decided in no uncertain terms that Ali, and by implication, Mohamed, did not qualify for citizenship. Under the British Nationality Act of 1981, applicants were required to "be of good character". Four years before their application, in 1990, the brothers had been ripped apart in a DTI report into their takeover of Harrods.

According to the report, the brothers had "dishonestly misrepresented their origins, their wealth, their business interests". The Fayeds' account, said the DTI inspectors, was "untrue" and "bogus". On the basis of this criticism, the officials recommended, the brothers were not fit to hold British passports.

As the minister in charge of immigration, Mr Wardle concurred. He too could see no reason why they should be given citizenship. His boss thought different. In a meeting between the two ministers, Mr Howard told Mr Wardle that in his view, the Fayeds should receive British passports.

Mr Wardle was stunned. There was a huge official report into them, which had been first leaked, then formally published, saying they were a bunch of liars. How could they now be welcomed with open arms?

The Home Secretary stood his ground. He wanted them to be made citizens. He asked Mr Wardle to go back to the officials and find a way of by-passing the DTI report.

In the course of his conversation, Mr Wardle has since told friends, he suspected he was being dragged into a much bigger game, something that went far beyond a mere application for a passport.

In Mr Wardle's experience, it was virtually unheard of for the Home Secretary to intervene in this way. Mr Howard, it was plain, wanted shot of the Fayeds. "He wanted them to have it for peace and quiet," Mr Wardle told his friends. For years, it is claimed the Home Secretary had let slip, they had been attacking him, constantly sniping at him behind the scenes. Mr Howard's offence in the eyes of the Fayeds was to have been the minister involved in the fateful decision to send in the DTI inspectors back in April 1987. Paul Channon was Secretary of State for Trade and Industry, Michael Howard was Corporate Affairs Minister. But it was Mr Howard who incurred the Fayeds' hatred. Now, here was Mr Howard again, ruling on their passport application.

Mohamed Fayed is a brooder - dark thoughts gnaw away at him. If he feels wronged, he can never let it rest.

Twice, Tiny Rowland had pressed the government to launch an inquiry into his pounds 700m takeover of House of Fraser, which included Harrods. Twice, the steely Lonrho tycoon had been rebuffed. Yet, third time he was lucky. Why?

It is difficult looking back now to imagine the sheer intensity of the Rowland-Fayed argument. For years, from the moment in 1985 when the Fayeds acquired control of House of Fraser from under Lonrho's nose, law firms, accountants, lobbyists, MPs, the media and private detectives were enmeshed in endless struggle.

Theirs was a corporate war of unparalleled ferocity. Rowland, charismatic, suave and fiercely determined, against Fayed, rash and impetuous, but no less redoubtable.

On either side, money was not an object. It was head to head, brutal and for all those involved, totally absorbing.

The more they thought and dug, the more the Fayed camp became convinced the decision to send in the inspectors was politically and personally motivated.

The 1987 general election was looming and the Observer newspaper, then owned by Lonrho, had mounted a sustained campaign against Mark Thatcher, the Prime Minister's son, over his business dealings. Giving Lonrho what it wanted in the form of a DTI inquiry was an effective way for the Tories to buy the Observer's silence during the election, the Fayeds reasoned. Their formidable network of Westminster contacts suggested that was the case. Convinced that they were not being dealt with straightforwardly, the Fayeds dug further into the connections, and possible motivations, of leading Tories.

Michael Howard was not born Howard but Hecht. He was brought up in the small Jewish community in Swansea, south Wales. His mother's cousin was Harold Landy, a businessman, later to become head of the Israel-British Bank in London, and after that, chairman of London City and Westcliff Properties, a wholly owned subsidiary of Lonrho.

The Fayeds found out about this connection from Francesca Pollard, a housewife who believed firmly that she had been wronged by Mr Landy and Mr Rowland. Ms Pollard's family owned the Israel-British Bank; she was related to Mr Landy.

In 1974, the bank crashed. Three years before that disaster, Ms Pollard's grandfather had died, leaving it in the hands of Mr Landy. The crash put paid to her inheritance. Mr Landy was arrested, charged and convicted of fraud. Mr Rowland, who had met Mr Landy while securing a deal to develop the Wankel engine, stood bail for Mr Landy's appeal, which was successful. Mr Rowland subsequently made him one of his most senior executives.

Ms Pollard could not let her loss rest. She produced pamphlets condemning Mr Rowland's employment of her uncle and she wrote letters to Mr Fayed. In the letters, one of which was sent days after the DTI appointed the House of Fraser inspectors, she invited him to look at Mr Howard's role in the decision, accusing him of failing to declare a family involvement. As a relative of a senior Lonrho employee, Mr Howard had a conflict of interest, she claimed.

Michael Howard Howard became the focus of the Fayed brothers' deep sense of grievance. They saw him, through Harold Landy, as Tiny Rowland's man in the government.

During Mr Wardle's and Mr Howard's discussions over the Fayeds' citizenship, the then Home Secretary made it clear that their persistence had become intolerable and that he wanted them off his back.

Mr Wardle was told to look again, to try the Bank of England to see if it would give the Fayeds a positive reference. Nobody rushed: officials were as baffled as Mr Wardle by the need to secure a second opinion from the Bank of England.

Rendered increasingly impatient, not just by his lack of a passport, but by the slow progress of his case complaining about the DTI report at the European Court of Human Rights, Mr Fayed could contain his anger no longer. The Harrods' chairman began to tell journalists, notably Andrew Neil at the Sunday Times and Peter Preston at the Guardian, about the supposed alacrity with which certain MPs were prepared to receive hospitality or cash. In his war with Mr Rowland, he had been advised to throw cash at MPs, to get them to ask awkward questions on his behalf. The sleaze bubble started to burst.

Last year, following a series of allegations against MPs alleged to have accepted "cash for questions", Mr Fayed submitted a complaint to Sir Gordon Downey, the new Parliamentary Commissioner for Standards, about Mr Howard.

The Harrods' owner accused the Home Secretary of having been paid pounds 1m- pounds 1.5m by Mr Rowland via Mr Landy to influence the appointment of DTI inspectors.

It was an astonishing allegation, which Sir Gordon investigated and rejected.

Tucked away in Sir Gordon's 118-page report, which mostly concentrates on the lack of proof of a bribe being paid, are details of Mr Howard's relationship with Mr Landy. The Home Secretary told Sir Gordon his contacts with Mr Landy "had been infrequent and intermittent". He had not discussed the appointment of the inspectors with his relative but he did admit to one phone call from Mr Landy, writes Sir Gordon, probably after he was appointed a DTI minister in September 1985, "in which Mr Landy questioned the suitability of Mr Al-Fayed as a company director".

Mr Howard did not declare his relationship with Mr Landy at the DTI. As to seeking advice about whether he should have done so, Mr Howard says it "had never crossed my mind". Sir Gordon concludes that Mr Howard did not play a "significant role in the decision to appoint inspectors" and "the decision itself was reached rationally and on its merits".

But puzzled by Mr Howard's response to the Fayeds' citizenship application, Mr Wardle did some research of his own. He read Tom Bower's book on Mr Rowland and he revisited the DTI report. He became convinced that the decision to send in the inspectors was flawed and that the inquiry had been biased.

"I have no brief for the Fayeds," Mr Wardle has told his friends, "but I believe the report into them was a stitch-up." There was little public interest issue at stake in the House of Fraser takeover and the inspectors, he also argues, were allowed to go beyond their brief, into the backgrounds of the Fayeds. Their lies about their origins - they claimed they were members of a wealthy shipping dynasty when in fact they were from a poor family - Mr Wardle believes, were irrelevant to their ownership of House of Fraser and Harrods.

Lonrho started to pressure the government. The Observer started to run stories about Mark Thatcher. Mr Wardle remains convinced that the Government "wanted it [the Lonrho/Fayed issue] kicked into touch ahead of the 1987 general election".

Observers might like to ask, those close to Mr Wardle say, whether Mr Howard should have declared his relationship with Mr Landy before the inspectors were sent in.

On one aspect, Mr Wardle is clear. Like Ann Widdecombe, another minister to have served under Mr Howard, he will not be voting for him in the leadership election. The former Home Office minister is understood to believe his ex-boss is not a suitable person to lead his party.

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