The Hamilton Affair: Thr Rowland factor - Poisoned feud of the tycoons claims new casualty

IT WAS a long war between two vengeful tycoons. It corroded politics, destroyed careers, tainted the Tories with the mark of sleaze and helped to bring down John Major. And what happened at Court 13 of the High Court in London over the past five weeks was just its latest, surreal chapter.

Tiny Rowland was Banquo's ghost during the libel trial between Mohamed Al Fayed and the former minister Neil Hamilton. Mr Rowland and Mr Fayed were business buccaneers, outsiders from less than privileged backgrounds who were never quite accepted in Britain, their adopted country. It was this that made them covet the House of Fraser stores and its jewel, Harrods.

Their relationship was warm at first. The half-German Mr Rowland, real name Furhop, had a fond nickname - "Tootsie" - for the Egyptian-born Mr Fayed. Mr Rowland, a former member of the Hitler Youth in Hamburg, headed Lonrho, a multi-national that sought to control governments in thestates of black Africa and whose business practices led Ted Heath, when he was Prime Minister, to label him the "unacceptable face of capitalism".

Mr Rowland, halted by the Monopolies and Mergers Commission from acquiring the House of Fraser, sought help from "Tootsie". He sold him pounds 120m of shares on, he thought, a temporary, redeemable basis. But Mr Fayed used them as a Trojan horse and, with the acquiescence of Norman Tebbit, Trade Secretary at the time, carried out a coup for the Knightsbridge emporium.

Mr Rowland launched a campaign to expose his now bitter rival who, he believed, had lied to the Department of Trade and Industry over the takeover. He investigated his enemy's finances and background, allying with Mr Fayed's estranged former brother-in-law, Adnan Khashoggi. Sir Edward Du Cann, who held the post of chairman of the 1922 Committee of Tory backbench MPs, was on the board of Lonrho and he soon secured the support of a bunch of crossbench, but mainly Conservative MPs to ask questions and table early day motions in the Commons. The Observer, bought by Mr Rowland, became a conduit for anti-Fayed propaganda.

Mr Fayed was urged by his advisers to defend himself and, at the suggestion of Lord King of Wartnaby, head of British Airways, appointed Ian Greer, a political lobbyist who had links with the Conservative Party, to mount a counter-offensive.

He also arranged elaborate security, including bodyguards and electronic surveillance. "Ian," Mr Fayed told the lobbyist, "that gangster Rowland is shitting on me from a great height; he has got so many MPs on his pay." In some ways the Tories and Mr Fayed made natural allies.

Mr Rowland was using The Observer not just against Mr Fayed but also to harry the Government for blocking his own Harrods bid, taking particular interest in the murky financial affairs of Margaret Thatcher's son, Mark.

Mr Fayed at this time was a Tory supporter, giving generously to party funds. During a period of crisis, he answered Margaret Thatcher's call by helping to stabilise the pound with the aid of the Sultan of Brunei. Mr Hamilton also told the court it was his antipathy to Mr Rowland that made him take up the Fayed cause.

Within two days of being introduced to Mr Fayed by Mr Greer, Mr Hamilton was asking a parliamentary question on his behalf. That was the beginning of four years of work for which, Mr Fayed was to claim, the former MP received huge amounts of cash in brown envelopes, Harrods vouchers, gifts and free holidays with his wife, Christine. Mr Hamilton denies receiving cash. He admitted the gifts and free holidays but denied they were for parliamentary services.

Three other MPs who also undertook parliamentary action on behalf of the Harrods owner received money from Mr Fayed or Mr Greer. Tim Smith was given pounds 18,000; Sir Peter Hordern received pounds 25,000 a year as a paid consultant to Harrods, which he put down in the Commons register of members' interests and Sir Michael Grylls received a consultancy fee from Mr Greer, although it was not proved it was directly related to his Harrods work.

In 1989 The Observer published a report of the DTI inquiry into Mr Fayed's acquisition of Harrods, leaked to Mr Rowland, under the headline "Exposed: the Phoney Pharaoh". Mr Fayed ordered Mr Greer to counter the bad publicity and Mr Hamilton was eager to oblige, attacking Mr Rowland and The Observer in the Commons. Mr Fayed rewarded the MP by offering him a holiday at his castle at Balnagown in Scotland, and, he claims, more cash.

All that changed when Mr Hamilton was appointed minister for corporate affairs by John Major. In his new role he defended the DTI inquiry on Mr Fayed's takeover of Harrods, which he had previously described as "a modern-day version of the Spanish Inquisition".

To Mr Hamilton this was simply abiding by collective cabinet responsibility; to Mr Fayed it was gross betrayal. The MP was "a homosexual prostitute", he told Mr Rowland, with whom he had arranged a temporary truce.

To rub salt into the wound, the Government next turned down Mr Fayed and his brother Ali's applications for British passports. An enraged Mr Fayed tried to find out from Mr Rowland whether he had bribed any MPs or ministers.

It was now Mr Fayed who turned on the Tories as an amused Mr Rowland looked on and whipped up controversy with his own leaks to the media.

The sleaze stories multiplied. Jonathan Aitken's visit to the Paris Ritz was revealed by Mr Fayed, leading to a trail of legal actions that saw the former cabinet minister end up in prison for perjury. Unfounded allegations were made that Michael Howard, then home secretary, had taken a pounds 1m bribe from Mr Rowland. The media hunted out examples of Tory sleaze week after week, reducing Mr Major's "back to basics" policy to farce.

Mr Fayed shopped his former helpers to the press. Mr Smith resigned after admitting to Sir Robin Butler, Cabinet Secretary at the time, that he had received money from Mr Fayed. After more investigations Sir Michael Grylls' financial relationship with Mr Greer was exposed. Mr Hamilton quit his ministerial post after a meeting with the Deputy Prime Minister, Michael Heseltine.

The Hamiltons decided to sue Mr Fayed over allegations he had made on a Channel 4 programme. A legal amendment was won in the House of Lords against the solicitor general and Mr Fayed's lawyers - who had argued that the 1689 Bill of Rights made it impossible for him to sue - and the action against Mr Fayed began. A lot of right-wing Tory hopes rested on Mr Hamilton destroying the Egyptian who had humiliated their party.

What followed was one of the most riveting libel trials seen, with Tory linen washed in public. Mr Fayed's evidence, his first appearance in a British court, topped the bill. In his excitable answers in broken English he repeated his allegations and saw the hand of the dead Mr Rowland behind his troubles. For good measure he added that Margaret Thatcher had "thrown him to the dogs", despite all he had done for her and Britain, and that the Duke of Edinburgh had masterminded the deaths of Dodi Fayed, his son, and Diana, Princess of Wales in Paris.