Act of revenge

The latest round in the cash-for-questions affair has shaken the Government. Behind it lies the anger of just one man.

ON 25 January 1985, Mohamed al-Fayed took tea with Margaret Thatcher at 10 Downing Street. Between him and the Prime Minister sat the Sultan of Brunei. It was one of those times when sterling was tumbling, indeed there was a serious danger that for the first time in history a pound would be worth less than a dollar. Since oil-rich Brunei had a good portion of its $25bn foreign reserves on deposit in London, the Sultan was in a position to influence the foreign exchange markets.

Downing Street insisted at the time that the three of them simply did not discuss the pound. But Brian Basham, the powerful PR man then acting for Mr Fayed, says that after the meeting the Sultan decided against exchanging billions of pounds into dollars, thus easing the pressure on sterling, and Mr Fayed was given part of the credit for this.

"Mohamed received a personal thanks from Mrs Thatcher, I believe, for his services to the country in intervening with the Sultan to help with the pound," says Mr Basham. A City source confirms this: "Mohamed claimed to have been responsible for the Sultan's support of the pound."

Today, almost 12 years later, Mr Fayed is in a very different position. The valued contact of the Tory Prime Minister and the instrument by which the pound was secretly saved has become a whistle-blower for a crusading left-of-centre newspaper. The bulk of the evidence of corruption that was thrown at the Government last week was supplied by him, willingly and deliberately. As a result, and for the second time in three years, he is casting a cloud over the Tory party conference and he may yet contribute to their defeat in a general election.

Last week the headlines focused on the two men he has fingered in the cash-for-questions affair: the Conservative MP Neil Hamilton, who allegedly received money, gifts and favours for asking questions in Parliament on behalf of Mr Fayed; and Ian Greer, the political lobbyist who allegedly acted as an intermediary between the politician and the businessman.

But, as the dust settles on last week's dramas, the focus of attention will shift from the recipients of the suspect gifts to the giver. More questions will be asked about the reason for Mr Fayed's remarkable transformation from trusted Tory courtier to scourge of corruption and champion of political morality. One answer will overshadow all others: revenge.

BY ALL accounts Mr Fayed - who with his two younger brothers owns the Ritz Hotel in Paris, a castle in Scotland, and substantial other assets in addition to Harrods - is a charming man and a sincere admirer of Britain and British culture. In a statement last week he said: "Although as an Egyptian I cannot vote in British elections, I pay more than pounds 3m a year in personal income tax ... With four British children I have a major stake in this country and will continue to do so."

In the same statement Mr Fayed added what, so far, is the clearest explanation he has so far given for providing the Guardian newspaper with the evidence it is now using against the Government. "I believe," he said, "in good governance." Friends, however, add something else. "He has been sorely tried. He has been tricked by the system," says Mr Basham. Another friend points out: "You work with him and you become his friend, part of his extended family. You betray him and you suffer his vengeance. Neil Hamilton proved himself not to be Mohamed's friend. So Mohamed thought, `well, fuck him'."

Mr Fayed also feels betrayed by the Conservative government. Mr Basham explains: "Mrs Thatcher corrupted a whole generation of Conservative Party politicians and John Major is reaping the whirlwind."

The origin of all this, as is well known, is the war over the ownership of Harrods in the mid-1980s, a war between Mr Fayed and "Tiny" Rowland which, like most wars, continues to claim victims long after the shooting has stopped. In 1984 Mr Fayed bid pounds 615m for the London department store and Mr Rowland did everything in his power to prevent him. Even when the takeover went through Mr Rowland did not give up, struggling on for years in an effort to have the takeover reversed.

Mr Rowland alleged, among other things, that Mr Fayed's money was not really his money at all, but the Sultan of Brunei's, and that the Egyptian businessman had misrepresented himself when seeking the approval of the government for the takeover. He employed 30 people to delve into his rival's past in Egypt and undermine his claims to come from a wealthy and established family. He used the newspaper he then owned, the Observer, in his campaign and he pressed a succession of Trade and Industry ministers to order an inquiry into the affair.

Mr Fayed fought back. For example, to improve his press image he offered reporters free trips to the Paris Ritz. He kept documentation of these trips, and of purchases made by journalists in the hotel gift shop on their room accounts. One reporter recalls: "Fayed believed those receipts were valuable. He believed they gave him power over the reporters concerned."

Mr Rowland, however, managed to inflict a deep wound. In 1987, for reasons still not fully understood, the government changed its mind and ordered a DTI inquiry into Mr Fayed's activities. The resulting report, 752 pages long and written by a leading QC and a leading accountant, was completed in 1988 and made public two years later.

For a government document it is astonishingly blunt. On the Harrods takeover it declares: "The Fayeds dishonestly misrepresented their origins, their wealth, their business interests and their resources to the Secretary of State, the OFT, the Press, the HOF [House of Fraser] board and HOF shareholders, and their own advisers." And it concludes: "We are both satisfied that the image they created between November 1984 and March 1985 of their wealthy Egyptian ancestry was completely bogus."

Mr Fayed presented himself at that time as a member of a distinguished Egyptian family that had exported cotton to Lancashire for over a century. In fact his father was a teacher at the El Bousery School in the Gomrock district of Alexandria, and then a school inspector. Mr Fayed started out as a salesman. An acquaintance from those days, Ibrahim Arabi Abou Hammad, told Channel 4: "I saw him with my eyes in ... as a Coca-Cola seller. I saw him. About 1948."

He did not sell Coca-Cola for long. First in Saudi Arabia, then in Haiti and finally in London he worked his way up, developing a shipping business and acting as a go-between for British construction companies seeking work in the Middle East and particularly in Dubai.

In 1984, according to the DTI report, Mr Fayed paid $500,000 to an Indian swami for an introduction to the Sultan of Brunei. A friendship resulted, and a business relationship. Soon Mr Fayed was exercising a power of attorney over part of the Sultan's assets in Britain, a matter which lay behind some of the suspicions about the true source of the money used to buy Harrods. Mr Fayed always maintained that his friendship with the Sultan and his bid for Harrods had nothing to do with each other, but he has also refused to open the books of his Liechtenstein-registered master company to prove that the money he used to buy Harrods was his own.

Although no criminal action followed, and although he remains in charge of Harrods to this day, the DTI report was extremely damaging for Mr Fayed. He has said: "The report was a scandal. They could not accept that an Egyptian could own Harrods so they threw mud at me and my family."

This is the root of Mr Fayed's feeling of betrayal. He had been a friend to Mrs Thatcher and a friend to Britain, as he saw it. He had even given pounds 250,000 to Conservative Party funds. And now a government report, which any newspaper could quote at any time, had branded him a shady fake. He has done everything in his power to have the report overturned, but in vain. The words "completely bogus" continue to haunt him. Desperation, and - as he sees it - further betrayals eventually pushed him over the edge and into open confrontation with the Conservatives.

PETER Preston, then editor of the Guardian, was an unlikely confidant for the owner of Harrods. It was the barrister and Liberal Democrat peer, Lord Lester, who brought them together in June 1993. Lord Lester, who was acting for Al-Fayed in his campaign against the DTI report, encouraged Mr Preston to visit the Egyptian in his fifth-floor office at the store.

The Guardian had recently run a story which claimed that the Conservatives had accepted pounds 7m from Saudi sources, provoking a libel action by a Saudi prince. Mr Fayed had been impressed by the story and offered help with the Guardian's defence in the libel case.

In the event, the newspaper was forced to settle the libel case and the extent of Mr Fayed's assistance is not known, but what passed between the businessman and the editor that day was enough to persuade Mr Preston to go back to Harrods on nine further occasions to hear more.

The Egyptian revealed that he had been paying thousands of pounds to Conservative MPs to ask questions on his behalf in Parliament. Mr Preston was shocked. "I knew individual MPs had sometimes got into funding scrapes. But this was different: this seemed to be organised and orchestrated beyond previous imagining. It stank."

One of those implicated was Neil Hamilton, to whom Mr Fayed said he had paid no less than pounds 34,000 to ask 17 parliamentary questions between 1987 and 1989. When in 1992 Mr Hamilton was promoted to be junior minister in the Department of Trade and Industry, the proprietor of Harrods thought the ideal opportunity had come to clear his name. He wrote to the MP to congratulate him and invite him for tea.

Mr Hamilton did not reply. Mr Fayed learned that the young minister had told civil servants at the DTI he wanted nothing to do with any matters relating to Harrods. Again, he felt betrayed.

Also implicated were several other MPs and a parliamentary lobbyist, Ian Greer (see below), who had been employed by Mr Fayed in his campaign against the DTI report. According to Mr Fayed, when he and Mr Greer first met, the lobbyist "explained that an MP could be hired in the same way as you hail a taxi". Mr Fayed told Mr Preston he had taken full advantage of these services, but to no avail. The DTI report stood and he had been rejected as a British subject. He had been cheated.

It was a story to die for, but there was a hitch. Mr Fayed was still not prepared to go "on the record". Without that, the Guardian could not print the story.

Two events changed things. One was the rejection of Mr Fayed's application for British citizenship, a blow he again took personally. "At a time when the Government is advertising to the world that anyone with a million pounds to invest can have British citizenship, we are being treated as pariahs," he said. "I played by the rules and played it their way. But now I've been dumped."

Then Mr Fayed's last chance of overturning that report, in a plea to the European Court of Human Rights in Strasbourg, failed. Furious and desperate, he made an indirect approach to the Prime Minister, John Major, with his grievances, but was rebuffed.

It seemed there was nowhere for Mr Fayed to turn; the report would stand as a blot on his reputation for ever. In the autumn of 1994 he opted for revenge, and finally went on the record for the Guardian.

The story Mr Preston had waited so long to print caused a sensation, leading to the speedy resignation of a junior minister, Tim Smith. Mr Hamilton, too, stepped down eventually, but he began proceedings for libel and was soon joined by Mr Greer.

The fuse was lit which burned slowly and quietly until last week, when the two plaintiffs suddenly dropped their case, pleading lack of money. The Guardian, triumphant, rushed into print with a series of stories which would have formed part of its defence in court, many of them underpinned by Mr Fayed's evidence and some by other evidence gathered over the past two years. Mr Hamilton has been branded a liar and a cheat in a front- page headline and the Guardian's new editor, Alan Rusbridger, has been quoted on his own pages day after day denouncing corruption at the heart of the Government.

THESE events have cast new light on sleaze in Parliament and will undoubtedly help to clean up British politics. They have also gravely embarrassed the Government and caused a little discomfort to the Labour party.

It is not over. Yesterday, the Guardian demanded action on evidence it alleged it had seen of a government attempt at a cover-up. And Mr Fayed is hinting (as he did in 1994) that he has evidence of a leading Tory MP taking a bribe of pounds 500,000.

Quite a tally of consequences to flow from a newspaper scoop, and one of which any editor would be proud. But there is another story behind the story which cannot be forgotten. The timing and substance of the Guardian's original revelations in October 1994, after all, were the work, not only of a crusading newspaper, but also of that classic ingredient of most investigative stories: the disaffected source.

Such sources do not come richer and more disaffected than Mr Fayed. But he is different in another way, for he was by his own admission the instigator of many of the wrongs being exposed. By any standards, this is an awkward bedfellow for a liberal newspaper that is critical of secrecy, hypocrisy and sleaze.

Another libel trial looms against the Guardian, involving once again a matter in which Mr Fayed acted as chief source. That is the trial that flows from the charge by Jonathan Aitken, the former minister, that the paper and Mr Fayed defamed him when they contended he stayed free at the Paris Ritz. That trial, along with the various other inquiries now under way, will put a sharp spotlight on Mr Fayed.

For now, though, the proprietor of Harrods may be content with the drift of events. Neil Hamilton is under pressure to resign. Ian Greer's business looks shaky after an avalanche of unfavourable publicity. The Government is badly wounded.

Mr Fayed, by contrast, looks like a winner. He may not have won the acceptance of the British establishment he apparently craves. But he is changing the shape of that establishment, and he is having his revenge.

Leading article, page 20 in the Middle East and particularly in Dubai.

In 1984, according to the DTI report, Mr Fayed paid $500,000 to an Indian swami for an introduction to the Sultan of Brunei. A friendship resulted, and a business relationship. Soon Mr Fayed was exercising a power of attorney over part of the Sultan's assets in Britain, a matter which lay behind some of the suspicions about the true source of the money used to buy Harrods. Mr Fayed always maintained that his friendship with the Sultan and his bid for Harrods had nothing to do with each other, but he has also refused to open the books of his Liechtenstein-registered master company to prove that the money he used to buy Harrods was his own.

Although no criminal action followed, and although he remains in charge of Harrods to this day, the DTI report was extremely damaging for Mr Fayed. He has said: "The report was a scandal. They could not accept that an Egyptian could own Harrods so they threw mud at me and my family."

This is the root of Mr Fayed's feeling of betrayal. He had been a friend to Mrs Thatcher and a friend to Britain, as he saw it. He had even given pounds 250,000 to Conservative Party funds. And now a government report, which any newspaper could quote at any time, had branded him a shady fake. He has done everything in his power to have the report overturned, but in vain. The words "completely bogus" continue to haunt him. Desperation, and - as he sees it - further betrayals eventually pushed him over the edge and into open confrontation with the Conservatives.

PETER Preston, then editor of the Guardian, was an unlikely confidant for the owner of Harrods. It was the barrister and Liberal Democrat peer, Lord Lester, who brought them together in June 1993. Lord Lester, who was acting for Mr Fayed in his campaign against the DTI report, encouraged Mr Preston to visit the Egyptian in his fifth-floor office at the store.

The Guardian had recently run a story which claimed that the Conservatives had accepted pounds 7m from Saudi sources, provoking a libel action by a Saudi prince. Mr Fayed had been impressed by the story and offered help with the Guardian's defence in the libel case.

In the event, the newspaper was forced to settle the libel case and the extent of Mr Fayed's assistance is not known, but what passed between the businessman and the editor that day was enough to persuade Mr Preston to go back to Harrods on nine further occasions to hear more.

The Egyptian revealed that he had been paying thousands of pounds to Conservative MPs to ask questions on his behalf in Parliament. Mr Preston was shocked. "I knew individual MPs had sometimes got into funding scrapes. But this was different: this seemed to be organised and orchestrated beyond previous imagining. It stank."

One of those implicated was Neil Hamilton, to whom Mr Fayed said he had paid no less than pounds 34,000 to ask 17 parliamentary questions between 1987 and 1989. When in 1992 Mr Hamilton was promoted to be junior minister in the Department of Trade and Industry, the proprietor of Harrods thought the ideal opportunity had come to clear his name. He wrote to the MP to congratulate him and invite him for tea.

Mr Hamilton did not reply. Mr Fayed learnt that the young minister had told civil servants at the DTI he wanted nothing to do with any matters relating to Harrods. Again, he felt betrayed.

Also implicated were several other MPs and a parliamentary lobbyist, Ian Greer (see below), who had been employed by Mr Fayed in his campaign against the DTI report. According to Mr Fayed, when he and Mr Greer first met, the lobbyist "explained that an MP could be hired in the same way as you hail a taxi". Mr Fayed told Mr Preston he had taken full advantage of these services, but to no avail. The DTI report stood and he had been rejected as a British subject. He had been cheated.

It was a story to die for, but there was a hitch. Mr Fayed was still not prepared to go "on the record". Without that, the Guardian could not print the story.

Two events changed things. One was the rejection of Mr Fayed's application for British citizenship, a blow he again took personally. "At a time when the Government is advertising to the world that anyone with a million pounds to invest can have British citizenship, we are being treated as pariahs," he said. "I played by the rules and played it their way. But now I've been dumped."

Then Mr Fayed's last chance of overturning that report, in a plea to the European Court of Human Rights in Strasbourg, failed. Furious and desperate, he made an indirect approach to the Prime Minister, John Major, with his grievances, but was rebuffed.

It seemed there was nowhere for Mr Fayed to turn; the report would stand as a blot on his reputation for ever. In the autumn of 1994 he opted for revenge, and finally went on the record for the Guardian.

The story Mr Preston had waited so long to print caused a sensation, leading to the speedy resignation of a junior minister, Tim Smith. Mr Hamilton, too, stepped down eventually, but he began proceedings for libel and was soon joined by Mr Greer.

The fuse was lit which burnt slowly and quietly until last week, when the two plaintiffs suddenly dropped their case, pleading lack of money. The Guardian, triumphant, rushed into print with a series of stories which would have formed part of its defence in court, many of them underpinned by Mr Fayed's evidence and some by other evidence gathered over the past two years. Mr Hamilton has been branded a liar and a cheat in a front- page headline and the Guardian's new editor, Alan Rusbridger, has been quoted on his own pages day after day denouncing corruption at the heart of the Government.

THESE events have cast new light on sleaze in Parliament and will undoubtedly help to clean up British politics. They have also gravely embarrassed the Government and caused a little discomfort to the Labour Party.

It is not over. Yesterday, the Guardian demanded action on evidence it alleged it had seen of a government attempt at a cover-up. And Mr Fayed is hinting (as he did in 1994) that he has evidence of a leading Tory MP taking a bribe of pounds 500,000.

Quite a tally of consequences to flow from a newspaper scoop, and one of which any editor would be proud. But there is another story behind the story which cannot be forgotten. The timing and substance of the Guardian's original revelations in October 1994, after all, were the work, not only of a crusading newspaper, but also of that classic ingredient of most investigative stories: the disaffected source.

Such sources do not come richer and more disaffected than Mr Fayed. But he is different in another way, for he was by his own admission the instigator of many of the wrongs being exposed. By any standards, this is an awkward bedfellow for a liberal news-paper that is critical of secrecy, hypocrisy and sleaze.

Another libel trial looms against the Guardian, involving once again a matter in which Mr Fayed acted as chief source. That is the trial that flows from the charge by Jonathan Aitken, the former minister, that the paper and Mr Fayed defamed him when they contended he stayed free at the Paris Ritz. That trial, along with the various other inquiries now under way, will put a sharp spotlight on Mr Fayed.

For now, though, the proprietor of Harrods may be content with the drift of events. Neil Hamilton is under pressure to resign. Ian Greer's business looks shaky after an avalanche of unfavourable publicity. The Government is badly wounded.

Mr Fayed, by contrast, looks like a winner. He may not have won the acceptance of the British establishment he apparently craves. But he is changing the shape of that establishment, and he is having his revenge.

Leading article, page 20

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