Forged letter was 'April Fool joke': Former Liberal leader says case underlines need for inquiry into fraud office. Anthony Bevins reports

THE FORGERY of a letter, purporting to come from Sir David Steel and shown to a defence lawyer during a bail hearing last year, was 'a thoroughly misguided April Fool joke', the Attorney General told the former Liberal Party leader in October.

But Sir David last night cited the forgery as further evidence of the need for an independent inquiry into the Serious Fraud Office. Sir David said the case followed a familiar pattern of SFO behaviour, involving a company called Control Securities, which was being investigated in connection with the collapse of the Bank of Credit and Commerce International.

In October 1991, Sir David passed on to the authorities a complaint that had been made to him by Nazmu Virani, an acquaintance who was chairman and chief executive of Control Securities, after the SFO had carried out a raid on his company 'with damaging attendant publicity'.

Protracted SFO inquiries into the case resulted in the closure of a hotel in Sir David's Scottish Borders constituency and difficulties for a company that employed 5,000 people.

Sir David said: 'At the end of March 1992, Control Securities plc was about to be relisted by the Stock Exchange when on the very same day, Mr Virani was arrested early in the morning and charged that evening with one offence of conspiracy to defraud.'

Bail was opposed by the SFO and was refused. Mr Virani was committed to Wormwood Scrubs. However, when he was released a week later, after the SFO had withdrawn its objection to bail, Mr Virani complained to Sir David about the 'bogus' grounds for the initial opposition to bail - and the fact that David Freeman, his solicitor, had been shown a letter by a senior SFO official shortly before the first bail hearing.

That letter, on House of Commons notepaper, was purportedly signed by Sir David and said that he would be attending the hearing. As he had not written the letter, he had no plans to attend the hearing.

Sir David sought the advice of Alex Carlile QC, another Liberal Democrat MP, and together they met Sir Nicholas in July and delivered their complaints about the SFO.

'In August, he wrote to me at length, having had discussions with the director of the SFO. He claimed that the timing of Mr Virani's arrest 'was dictated solely by operational considerations'; defended the opposing of bail based on groundless information from an anonymous informant; and described the forged letter from me as a 'thoroughly misguided April Fool joke' within the SFO,' Sir David said.

'I responded in September, saying that his explanation of events 'did nothing to calm my fears about the handling of the case'. The Attorney replied in October 1992 saying that at his request the director of the SFO had conducted an inquiry into the circumstances surrounding the arrest of Mr Virani and saying that the director was 'satisfied that based on the evidence available at the time, the staff of the SFO acted properly'.'