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House of Commons

Wednesday 4 June 1997

The House met at half-past Nine o'clock


[Madam Speaker in the Chair]

DTI Inquiries

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Betts.]

9.34 am

Mr. Charles Wardle (Bexhill and Battle): I am grateful for the opportunity to draw the attention of the House to Department of Trade and Industry inspectors' inquiries. I have applied for this debate every week since the new year because I think that it is high time that something was done to ensure that DTI inquiries are conducted in a way that allows those being investigated the same protection they would be given in a court of law. That is not the situation now.

Inspectors appointed under the Companies Act 1985 can ignore the presumption of innocence. They are able to pursue their inquiries by means that are manifestly unfair, as successive Law Lords, learned review bodies and distinguished commentators have repeatedly warned. Changes are long overdue. I hope that the House will today press the Minister, whom I congratulate on his arrival at the Dispatch Box, to revise DTI inquiry procedures so that the potential for abuse and unfairness is eliminated. Too often in the past, Parliament has been left uninformed about the progress of such inquiries and, too often, the progress has been wayward.

Nobody would dispute the importance of tackling and prosecuting commercial fraud. Regrettably, business crime is a fact of life. In multinational operations with increasingly complex technology, the need for sophisticated monitoring and effective regulation has never been more important. Small investors and major institutional shareholders alike need safeguards against corrupt or careless practitioners. In a competitive world, confidence in the City of London depends on a reputation for straight dealing and vigilant control. It is equally necessary that every part of the regulatory framework, including the conduct of DTI inquiries, should be handled with complete integrity.

I should make it clear that I am not deterred from delving into the performance of the past Administration. Nobody could be prouder than I am of the Conservative record over the past 18 years, but I am aware that mistakes occur in the best-run organisations and they must be sorted out if progress is to be made. If I were content with fudge and self-deception, I would not have made a stand over the threat to our border controls in the previous Parliament.

For the avoidance of doubt, Mr. Deputy Speaker--I take this opportunity to congratulate you on your arrival in the Chair and I am delighted to see you there--I hope

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that the House will accept that nothing in what I say today about former Ministers should be construed as an attack on any colleague. In the context of this debate, I am not in the slightest interested in the present ambitions of some colleagues. My concern, first and last, is with unsatisfactory procedures in DTI inquiries. I shall not flinch from telling the facts as I know them. My object is to put right what I consider to be some obvious wrongs.

I wish to make my position clear because persistent press inquiries in the past few days about this debate have related to the Conservative leadership contest. I have repeated time and again to journalists that I was seeking the debate months before the leadership contest was even contemplated, but the speculation has intensified to the point where it is in danger of trivialising the serious issue of DTI inquiries I wish to raise.

I have also told those journalists loud and clear that there is something far more controversial in what I shall have to say than mere gossip about colleagues' leadership chances. That is because having looked back at the vitriolic and unscrupulous warfare between Tiny Rowland and Mohamed Al Fayed, I have come to the fairly dramatic conclusion that the Al Fayeds were stitched up by a DTI inquiry.

I am only too well aware that the Al Fayeds fight with no holds barred and resort to mud-slinging at the drop of a hat. For two years, they made in the press totally false allegations about me concerning a nationality application. I do not doubt that they have often embellished the truth and made an art form of exaggeration. I can understand the general distaste for their unprincipled and unsavoury use of brown envelopes and other inducements as bait for greedy and corrupt minor public figures and hangers-on.

Yet injustice is injustice, no matter how controversial the characters on the receiving end may be. I like to think that the House would agree that an abuse of DTI inquiry procedures cannot be condoned simply because the subject of the inquiry has behaved reprehensibly in other ways.

Two inquiries launched a decade ago--Guinness and House of Fraser--involved people who still seek redress for the damage inflicted on them by the inquiries. When the House of Fraser report was published in 1990, in positively bizarre circumstances, my first reaction, like that of former right hon. and hon. Members on both sides of the House, including Peter Shore, Sir David Steel, Sir Kenneth Warren and my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell), whom I see in his place, was to criticise the subjects of the inquiry and question the takeover.

When further information came to my attention some time later, I was prompted to revisit the report and question my earlier assumptions. I felt that the Trade and Industry Select Committee's deliberations in 1990 had not reached the heart of the matter and, as I dug deeper into the events of 1985 to 1987, I changed my mind about the earlier presumption of guilt. I was struck by numerous inconsistencies in the report and the reasons for launching the inquiry in the first place--all of which, in my opinion, amounted to an abuse of proper procedures.

I wish to declare relevant past employment and acquaintance with people to whom I shall refer in the debate. Concerning the Guinness inquiry, I met Lord Spens in 1969--28 years ago--when we both worked in the corporate finance department of Morgan Grenfell.

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During the 1970s, when I ran a manufacturing group, Lord Spens advised me on a number of takeovers. He has recently briefed me on his claim against the Bank of England in the High Court.

With regard to the House of Fraser inquiry, I worked from 1988 to 1992 as a consultant to KPMG, the accountants, one of whose corporate clients I had been for several years previously. KPMG accountants were auditors to both Lonrho and House of Fraser, as well as personal accountants to advisers to the Al Fayeds and the Sultan of Brunei. At no stage did KPMG divulge anything to me about Lonrho, House of Fraser or, for that matter, any other client.

I have met Mohamed Al Fayed on one occasion, in the office of his solicitors last year, when I gave him the unedited version of a letter of mine that was published in The Daily Telegraph. He gave me a letter retracting a number of unfounded accusations that he had levelled against me in the press over the previous two years. There has been absolutely no input from Mohamed Al Fayed and his advisers in what I have to say and they have had no prior knowledge whatever of the content of this speech.

I have been a Minister in the Home Office and the DTI. One sequence of events in the Home Office is relevant to the debate. In January 1994, while I was the Minister responsible for immigration and nationality, I was asked to find a way of reversing a decision by nationality division officials to reject the British citizenship application by Ali Fayed. I had already accepted the decision of officials. I explained that the provisions of the British Nationality Act 1981 require officials to carry out character checks on applicants. In doing so, they could not disregard highly adverse criticism in a report published by another Department.

When I was instructed to pursue further references that might be favourable to Ali Fayed, I explained that, short of striking out the DTI report, it would still remain an insuperable obstacle for officials in the course of their statutory duties. Nevertheless, I conveyed the instructions to my private office and further inquiries were made. By the time they were completed, I had moved to another Department, but my successor, the late Sir Nicholas Baker, was left with no alternative but the one that I had originally accepted from officials.

Subsequently, there was intensive briefing of the press about the incident, and I am indebted to officials from two Departments for keeping me informed about it. On one occasion, I had to summon the permanent secretary from the Home Office to correct factual inaccuracies in a press statement that was about to be released. There is nothing further that I wish to add about that chapter of events. Perhaps the intervention was due to an incomplete knowledge of British nationality legislation.

I should like to make some general comments about the role of DTI inspectors--I hope that they will be of interest to the Minister--before I turn to two specific case study examples. In the debate on 16 February 1994 in another place, their lordships accepted that DTI guidelines for inspectors tried to strike a balance between public advantage and private rights, but expressed concern that,

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in practice, the inquiries were inquisitorial. What Lord Denning had said 30 years ago in the Profumo inquiry, when he described his own role as

    "detective, inquisitor, advocate and judge . . . which must give rise to a serious risk of much unfairness"

applies equally to DTI inquiries today.

The Solomon commission stated in 1966 that the inquisitorial procedure is alien to the concept of justice in the United Kingdom, but that has not deterred successive DTI inspectors. In September 1974, Lord Fletcher said that inquiries are

In 1980, the law reform committee of the Senate of the Inns of Court of England and Wales said that inspectors were

    "unable to resist passing judgements which they are not really qualified to make".

All too often, inspectors, whose duty is ostensibly to establish facts, attack individuals who have no means of answering back.

The DTI's guidelines for inspectors quote Lord Justice Sachs, who said:

That advice has been disregarded.

In DTI inquiries, the British presumption that a person is innocent until proven guilty goes out the window. Inquiries are conducted in secret, without defence counsel, without one witness knowing which other witnesses have been called, without hearing what one has said of another and without the right to cross-examine other witnesses or question their motives. There is, as Lord Lester said to general acclaim in another place in February 1994, no safeguard of open justice, no presumed procedures, no rules on inadmissible evidence. Powers are vested in the Secretary of State to decide whether to publish reports, no matter how damaging they may be to individuals, who have no right of appeal or access to the courts to change inspectors' opinions and recover their reputation. That is another feature of concern.

To illustrate that, I turn first to the Guinness inquiry, which was launched on 1 December 1986 following a hostile takeover bid for Distillers by Guinness and by Argyll between January and April that year and which gave rise to numerous media stories and allegations about concert parties, warehousing and other share dealings that contravened the City takeover code and the Companies Act. Inspectors were asked

The inspectors' final report has never been published, but in 1989, an unpublished interim report was extensively circulated to defendants in the Guinness trials and, more importantly, to the regulatory bodies. The inspectors' inquiries led to a number of prosecutions and two trials.

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In 1990, Guinness trial one resulted in four convictions. The trial has since been declared to be unfair in the European Court of Human Rights as a result of the use of DTI interviews in the trial.

Guinness trial two collapsed, ostensibly because of the breakdown of one defendant's health, but more probably because another defendant, Lord Spens, was about to show the court that the inspectors had quickly departed from the terms of the inquiry and had concentrated instead on a highly selective assault on a limited number of City individuals named in the media. In doing so, the inspectors completely ignored a large number of highly suspect share sales by supporters of the Argyll bid.

Lord Spens was about to claim, with supporting evidence, that the inspectors' early departure from a comprehensive inquiry into all the share dealings to a highly selective examination of certain individuals had been prompted by ministerial interference. The inspectors had been told to pursue selected City individuals rather than investigate all the share transactions, as their terms of reference implied. It was a political decision to go for named individuals from the outset, but no Minister was ever accountable to the House for that decision.

The police were quite deliberately kept out of the investigation for at least four months in order to allow inspectors to take evidence from witnesses for later use in a criminal trial without the constraints of the Police and Criminal Evidence Act 1984 coming into play on the witnesses' behalf. Parliament was not told of those tactics either, but, in the preliminary hearing ahead of Guinness trial one, prosecuting counsel admitted as much when he said:

Lord Denning's good advice 30 years earlier had been totally ignored and nobody told Parliament.

It is on Guinness two and Lord Spens that I shall concentrate here. In his response to the inspectors' interim report, Lord Spens showed that the inspectors failed to carry out anything like a full analysis of the 5,719 transactions in Guinness shares between the opening and closing of bids from January to April 1986. Discovered evidence from the police revealed that only those transactions relating to a few named and well-known City individuals, discussed and identified by Ministers, officials and the Director of Public Prosecutions early in the inspectors' inquiries, were analysed and considered.

Minutes of a meeting between John Wood and Rosalind Wright, of the Crown Prosecution Service, and solicitors acting for Morgan Grenfell reveal that Mr. Wood said:

So much for the official public version that the inspectors would examine the whole Guinness episode as their terms of reference implied. The hidden agenda was to nail the major offenders as understood by the media. An inquisition, prefaced by ministerial claims to the press ahead of the general election that handcuffs must be put on Guinness offenders, had picked out its prey. The inquiry was a sham of ill-informed questions about little-understood market dealings put to only some of the participants about only some of the share transactions.

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On 8 January 1987, the Bank of England's Board of Banking Supervision, which included among its members the Governor and the Deputy Governor, concluded that "at this stage" it was not appropriate for Lord Spens to be dismissed from his job. Within less than three weeks, however, the Governor and the Deputy Governor swung to the opposite point of view. Suddenly, they felt it was not merely appropriate but urgently necessary to dismiss Lord Spens. Why? Not, as his trial subsequently showed, because the inspectors had uncovered fresh evidence against him, but because the DTI let the Bank of England know that there was a political imperative that City heads should roll--and soon--at the merchant banks identified by the media as embroiled in the Guinness affair.

There are records of a meeting in the second week of January 1987 between the inspectors and the DTI to discuss a letter from Gerald Ronson offering to repay some fees. At that meeting, other matters were discussed. At the beginning of the following week, a note from a senior DTI official was dispatched to the Governor of the Bank of England complaining about the Bank's failure to force the dismissal of any merchant bank directors. The next day, two of the most senior directors of Morgan Grenfell were dismissed on Bank of England instructions and, two days later, Lord Spens was sacked from his job at Ansbacher. Barely a few weeks into the inquiry and long before the inspectors had been able to conduct a full inquiry designed to discover all the facts as DTI guidelines required, it seems that the inspectors and the DTI were pressing on the Bank of England the need to collect some well-known scalps.

The political pressure for scalps did not come just from the DTI. The Chancellor said publicly that the Government wanted decisive action over the Guinness affair. On 20 January, he told the House that the two resignations at Morgan Grenfell were consistent with the Government's call for positive steps. Between 21 and 24 January, the press reported that the Government were exerting pressure to obtain resignations. Thereafter, the inspectors occupied much of their time not fulfilling the terms of their inquiry, but seeking to justify the scalps for which Ministers had pressed. In Guinness two, it all came unstuck in court.

No attempt was made by the inspectors to look through the rest of the transactions. During the DTI investigation, it came to the notice of the inspectors, as a result of powerful evidence supplied by the chief executive of Montagu Investment Management--an associate of Argyll and a major fund investment company--that it had sold 4.5 million Guinness shares short in the market in the last 10 days of the bid, driving down the Guinness share price. That was more than double the size of the Ansbacher purchase for which Lord Spens was arrested, charged, prosecuted and then acquitted, but the Montagu Investment Management short sale was dismissed by the inspectors in an eight-line footnote to their interim report, completely ignoring the fact that they had been made aware of allegations of an unlawful indemnity on that short sale. Montagu Investment Management even shared a computer with Samuel Montagu and must, by any definition that the City has ever entertained, have been acting in concert.

Why was that short sale ignored? Lord Spens argues that it was because Montagu Investment Management was not on the hit list, whereas he was. The inspectors spoke to no other employee of Ansbacher besides Lord Spens,

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not even the securities clerk whom the inspectors had been told had been responsible for faxing a crucial letter from Lord Spens at a time when he was out of the bank.

In summary, the inspectors failed to analyse all the Guinness share transactions; failed to include any mention of the Montagu Investment Management indemnity allegations in their interim report; failed to interview anyone else from Ansbacher, any market marker or jobber in the City or any representative of the City Takeover Panel; failed to analyse the problems caused by the stock exchange's own definition of a false market compiled by a jobber practising in the marketplace at the time of the bid; failed to take account of differing views on the disclosure provisions of the City takeover code; and failed to appreciate that core underwriters to the offer, such as Scottish Widows, were also in receipt of success fees and, by the inspectors' own definition, should have disclosed share sales. They also failed to involve the police and thus allow witnesses the protection of the Police and Criminal Evidence Act 1984 at a sufficiently early stage in their inquiries.

If, as Lord Spens claims, the interim report was discussed extensively with Ministers, officials and the DPP, its shortcomings are all the more disturbing. The suspicion must remain that Lord Spens, a highly successful if, at times, unorthodox and aggressive City player, was to be made an example of during the run-up to a general election, but the case against him collapsed and he was acquitted.

The loose ends of the Guinness inquiry should now be subjected to a rigorous examination by the Minister and a report should be made to Parliament. The Bank of England, or perhaps the regulatory arm that is to be hived off to the Securities and Investments Board, should now offer to settle Lord Spens's court action for wrongful dismissal from Ansbacher and his exclusion for more than a decade from his rightful employment as a merchant banker.

I now turn to the House of Fraser inquiry which was astonishing for the manner in which it was commissioned in 1987; for the line of inquiry that the inspectors subsequently chose to pursue, which bore little relationship to the basis on which the bid had originally been cleared by the Secretary of State in 1985; and, not least, for the way in which the inspectors' report came to be published. New light has been thrown on the events leading to the appointment of the inspectors and the conduct of the inquiry by the publication of a biography of Tiny Rowland by Tom Bower, the investigative journalist. Bower contends that Rowland

The conspiracy was that Mohamed Al Fayed, lying about his past, had used the Sultan of Brunei's fortune to buy the House of Fraser, with the collusion of senior Government Ministers. Bower also contends that Rowland's efforts led directly to the appointment of inspectors and provided much of the evidence, directly or indirectly, that they subsequently considered.

On 11 March 1985, Mohamed Al Fayed and his two brothers had acquired a controlling interest in House of Fraser in the stock market and prepared to bid for the balance of the shares. On the same day, Mohamed Al

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Fayed had been interviewed at the Office of Fair Trading, and Sir Gordon Borrie had advised the Secretary of State for Trade and Industry that there were no grounds for a referral of the bid to the Monopolies and Mergers Commission.

Sir Gordon's deputy at the OFT had listened to the Al Fayeds and their City advisers telling of their wealth and background, but Sir Gordon had advised the Secretary of State that their background was irrelevant. He said:

Nevertheless, the Secretary of State wished to speak to the Al Fayeds himself and he received similar assurances of substantial wealth at a meeting on 12 March, which he sought to verify by telephoning the chairman of Kleinwort Benson. Later, the Secretary of State was to respond exactly as the Director General of Fair Trading had done:

    "I didn't care who owned Harrods or House of Fraser. I was only interested in takeovers on competition grounds and there was no competition element involved".

He also said:

    "What does it matter who brings in the money providing it's brought in?"

The Al Fayeds were already known to the Government because they had made helpful representations that persuaded the Sultan of Brunei to retain large currency deposits in sterling that helped the strength of the pound. In January 1985, Mohamed Al Fayed had visited 10 Downing street with the Sultan and, just after he acquired control of House of Fraser, he lunched at No. 10 with the President of Egypt.

The fact that, between March 1985 and the appointment of DTI inspectors in April 1987, the Al Fayeds' relationship with the Government slid from that of favoured investors to wanted suspects was due to just one man and his company--Tiny Rowland and Lonrho. It was Rowland who aspired to own House of Fraser and its star subsidiary, Harrods. It was Rowland who had warehoused his House of Fraser shares with the Al Fayeds, confident that they did not have the money to make a full bid. It was Rowland who was wrong-footed when the Al Fayeds did precisely what he never imagined was possible. It was Rowland, tainted permanently himself by an adverse DTI inspectors' report in the 1970s, who now sought to wreak the same vengeance on the Al Fayeds. Rumours in the media prompted by Rowland and his associates that the Al Fayeds were using the Sultan's money to buy assets in the UK have never been substantiated. Having falsely claimed that he had been prevented from making a counter-bid until it was too late--in fact, Lonrho had been cleared to bid the previous Friday--Rowland and various of his associates kept up a relentless barrage, to which the Al Fayeds replied in kind. The general view of the public--a view to which I subscribe--was that Rowland and the Al Fayeds deserved each other.

I shall not detain the House with a blow-by-blow account of the unprincipled and vicious propaganda war that followed. Three examples will do. A story linking Mark Thatcher, Al Fayed and the Sultan of Brunei was exposed as baseless. A self-styled holy man, the Swami, was paid $5 million by Rowland to give the appearance of authenticating accusations against the Fayeds that also proved false. An allegation of anti-semitism against the Fayeds came to nothing when it became clear that it had been planted in an American newspaper by an associate of Rowland's, without a shred of evidence in support.

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That allegation was repeated to a Department of Trade and Industry Minister in a telephone call from the Minister's cousin, Harry Landy--a man who had embezzled millions from the Israel British bank, and had then been employed by Rowland. The Minister has said that he dismissed his cousin's remarks as irrelevant. That is entirely understandable. It is not clear whether officials considered the telephone call a declarable conflict of interest.

What is clear is that nobody, other than the Rowland faction, objected to the bid. There was no obvious reason for doing so. A cash bid had been cleared by the Secretary of State on advice from Sir Gordon Borrie that the sole basis for refusal would have been on competition grounds, and no such grounds existed. The cash to pay the selling shareholders materialised and more cash followed to fund the acquired company's requirements.

Neither that Secretary of State nor his two successors in the job found reason to launch an inquiry. But Tom Bower argues in his book that, as a general election grew closer and Rowland's noisy vendetta against the Government intensified, the next Secretary of State gave way to Lonrho pressure.

In April 1987, inspectors were appointed to

No matter that the Al Fayeds had answered questions at the Office of Fair Trading on the very day in 1985 that they had acquired a controlling interest in the shares; no matter that the then Secretary of State had given the bid an unqualified clearance; no matter that nobody other than the discredited Rowland had objected. The Secretary of State now put the full force of the Government's authority behind an inquiry that quickly degenerated into a farcical and damaging witch hunt.

There is speculation in chapter 12 of Tom Bower's book that the DTI succumbed to an inquiry only after Rowland had taken up Ernest Saunders, the sacked head of Guinness, in April 1987. Bower claims that Rowland then renewed pressure on the Secretary of State, who was a member of the Guinness family.

Other sources suggest that the contingency of appointing inspectors in order to prevent Rowland from becoming a loose cannon in the run-up to the general election had been mooted earlier that year, and was nothing to do with Bower's theories. The whole truth may never be revealed, but the inspectors seem to have been appointed out of sheer expediency.

I have never believed the defamatory stories that surfaced in the press about a Minister and a million pounds in a suitcase. There is no proof of any such wrongdoing, as Sir Gordon Downey confirmed in the fourth report of the Select Committee on Standards and Privileges for 1996-97.

A more plausible explanation is that Ministers and officials, confronted with Rowland's persistent pressure, were anxious to find a legitimate way of sidelining him. The appointment of inspectors was seen by those on the inside as satisfying ministerial ambitions to keep Rowland quiet for a while, at the same time as protecting civil servants from Rowland's threat of an awkward judicial review.

Two things were patently wrong with that proposition. First, Rowland's application for leave to apply for judicial review had already been dismissed three weeks before the

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inspectors were appointed. Secondly, a reference to the Monopolies and Mergers Commission, as Rowland wanted, on the ground that Kleinwort Benson had changed its mind about the Fayeds' financial and business pedigree, was entirely spurious.

When the bid was cleared in 1985, the then Secretary of State, advised by the Director General of Fair Trading, had acted on competition grounds. The Al Fayeds' financial status mattered only to the extent that they could pay the vendor shareholders, and that they had done.

In April 1987, Ministers and officials should have told Rowland unequivocally to get lost. The fact that they did not do so has fuelled accusations of political expediency that bring discredit on a distinguished Administration. The inquiry and report that followed were a downright abuse of the very kind that the DTI's own guidelines for inspectors warn should be avoided.

Because I do not accept that the shift in Kleinwort Benson's assessment of the Fayeds was germane to the principles on which the bid was cleared in the first place, I am not convinced that paragraphs 30 to 37 and 224 to 225, and part of paragraph 259, on the appointment of inspectors, in Sir Gordon Downey's otherwise excellently thorough report, paint the whole picture.

Kleinwort Benson's belated diligence concerning the Al Fayeds' background--which, by the way, appeared only after it had charged its clients a £3 million advisory fee--was due, like so much else in this murky saga, to Rowland's unrelenting hostility towards anyone who had sided with the Fayeds. Kleinwort Benson's second thoughts did not constitute grounds for a reference to the MMC, as Sir Gordon Borrie made clear in 1987; nor were they sufficient to trigger a section 423 inspection.

Sir Gordon Downey's report does not clarify the genesis of the memorandum dated 27 March 1987 from a named official, Mr. Allen, which discussed options for responding to the Lonrho pressure. In my experience, officials tend to put up submissions in response to ministerial requests. Which Ministers prompted Mr. Allen, and to which Minister did he report within the DTI organisation?

In all other respects, I accept Sir Gordon's findings, especially the rest of his conclusions, and I am grateful for the time that he spared me after the publication of his report to discuss the views that I am conveying to the House today.

Once launched, the House of Fraser inquiry became a travesty. The inspectors openly admitted that Rowland's pressure led to their appointment: it was, as they put it,

However, they promptly contradicted themselves by saying that

    "the direct part which Lonrho and Mr. Rowland played was a comparatively small one".

Pull the other one. For the duration of the inquiry, the inspectors were led by the nose by Rowland and his stooges, and no one at the DTI shouted stop.

Inexplicably, the inspectors chose not to interview Lord Tebbit, the Secretary of State who had cleared the bid in 1985. They said:

But they blatantly disputed Lord Tebbit's reasons for clearance on competition grounds, wrongly asserting that

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    "representations made by the Fayeds . . . had led the then Secretary of State to allow them to acquire control unimpeded by any inquiry".

Can we square that with the then Secretary of State's own words:

    "I didn't care who owned House of Fraser. I was only interested in takeovers on competition grounds"--

or with those of Sir Gordon Borrie:

    "The Commission does not exist to punish people for lying. The shareholders got cash"?

It was not the Fayeds' grossly exaggerated claims about their wealth and background that had won them the day in 1985 when the bid was cleared. It was the absence of any objection on competition grounds and the availability of some £615 million of their money.

The inspectors, having set off like bloodhounds to find what clearly they, like Rowland, hoped would be incontrovertible proof that the takeover cash did not belong to the Fayeds, later had to admit grudgingly:

So the inspectors never proved that the money did not belong to the Fayeds, but that did not deter them from taking a swipe in chapter 2 of their report:

    "The Fayeds dishonestly represented . . . their wealth . . . and their resources".

Undismayed by those discrepancies, the inspectors ploughed on. They said that at the time of their appointment they had been told

    "that an area of particular concern was the validity of the assurances given by the Fayeds in 1985".

That was clearly a departure from the published terms of reference of their inquiry, but the inspectors failed to disclose who gave them that additional steer. We do not know whether it was a Minister or an official, but it enabled the inspectors, as in the Guinness inquiry, to leap clear of their original terms of reference in one bound, without disclosing their intentions to Parliament.

Having failed to throw further light on the provenance of the takeover cash, the inspectors said:

That was not what the then Secretary of State or Sir Gordon Borrie had said at the time of the bid.

The inspectors embraced with uncritical enthusiasm an offer of help from an Egyptian--the late President Nasser's son-in-law, Dr. Ashraf Marwan, who, at the age of 27, had been Nasser's public relations chief. They approved of him because he had

The inspectors cast aside doubts arising from the fact that Dr. Marwan had a high regard for Rowland, had done business with him ever since 1971 in places such as Libya, and was in dispute with the Fayeds over an aircraft supplied to the Sultan of Brunei. They even disregarded the published report of an earlier DTI inspector, John Griffiths, dated March 1984, which plainly accused Marwan of lying. Mr. Griffiths said in 1984:

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    "Dr. Marwan's evidence did not carry to me the ring of truth. I certainly felt I cannot rely upon it as the whole truth . . . he was not frank . . . I found two matters in Dr. Marwan's evidence impossible to believe . . . Dr. Marwan had a closer liaison with Mr. Rowland than he sought to convey to me."

Yet the inspectors conducting the inquiry in question blithely asserted:

    "Mr. Marwan played an important role in uncovering the Fayeds".

It seems that much of Dr. Marwan's so-called evidence against the Al Fayeds came in fact from Adnan Kashoggi, the Al Fayeds' disaffected brother-in-law.

What the inspectors undoubtedly did show was that the Al Fayeds had talked up their past business activities and their family background to the point of fantasy or, if one prefers it--and sometimes I do--deceit. But for all their unsavoury faults, they will not have been the first people in public life to have dressed up their origins. Hon. Members need look no further than Parliament itself for examples of politicians who employ a slightly cosmetic touch to their CV. There are many other examples of people in high places who feel sensitive about their beginnings.

The Al Fayeds had at first been welcomed with open arms into the highest strata of British society, but had then been dumped unceremoniously purely because of pressure from Rowland. What should be remembered, however, is that they did come up with the cash for the takeover bid, and nobody--not even the inspectors--has proved that the money was not theirs to spend.

If Lord Young, yet another Secretary of State at the DTI, had had his way, none of this confused and largely irrelevant report--wrongly conceived and clumsily produced--would have seen the light of day. But Rowland's men stole the report from the DTI, and Rowland published it. This meant, by a further irony, that the statutory requirements for character checks in the British Nationality Act 1981 would prevent civil servants from being able to process the Al Fayeds' citizenship applications without taking the report into account. Rowland's skulduggery, having already compromised the DTI in 1987, was therefore going to throw a road block in front of the nationality division of the Home Office when the Al Fayeds applied for British citizenship.

There is only one solution. It is not the one recommended to me in 1994 at the Home Office--that officials might simply turn a blind eye to the report if more favourable references were to be found. Not only would that have been unlawful and have offended the high standards of civil servants at the nationality division of the Home Office, but it would have left the law open for all manner of future abuses of the British Nationality Act. It simply would not have done.

The only way now is for the DTI to re-examine this flawed report, recognise that it was conceived from Rowland's malice out of short-term expedience and conclude that it ought to be struck off the record in the interests of natural justice and the DTI's good name.

As to any future application by the Al Fayeds for British nationality, that is not my concern. I have no idea whether they would make such an application. I have no idea--the House may have its own view--whether their other actions, including offering inducements to individuals, would be regarded as sufficient objection by nationality officials. That is for the Home Office to decide if the case ever comes up.

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Throughout this murky saga, a string of mistakes have been made and the best thing to do is to get to the bottom of it and sort out the mistakes. In the best-run organisations, such mistakes occur. It is better to deal with them, rather than allow a string of further abuses to continue and for the truth never to surface.

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