Select Committee on Standards and Privileges First Report



Alleged Inconsistencies in the Evidence concerning the Allegations

  468. So far as Mr Hamilton's charge of inconsistency against Mr Al Fayed was concerned, The Guardian made the point that, on the essential aspect of cash payments, the allegations against Mr Hamilton had remained constant since he first made them to The Guardian in 1993 (as evidenced by the journalists' contemporaneous notes) - even if some of the details of method and dates had changed over time.

  469. A similar argument applied to the supposed discrepancies between the individual accounts of the three corroborative witnesses and between their evidence as a whole and Mr Al Fayed's. The basic thrust of the allegations was common to all four witnesses and any variations of detail or emphasis were only such as might be anticipated after ten years. Moreover, The Guardian argued, the very fact that these inconsistencies existed was proof that no attempt had been made to orchestrate the evidence - as would have been expected if Mr Al Fayed had been true to the extremely unfavourable portrayal of his character by Mr Hamilton.

  470. The Guardian also drew attention in this context to the fact that Mr Al Fayed had been proved right over Mr Smith, even though the allegations that he had received cash payments had been strenuously denied by him when interviewed by Mr Hencke and Mr Mullin in July 1993. The fact that Mr Al Fayed had underestimated the amount paid to Mr Smith (he put the figure at about £10,000, whereas Mr Smith has admitted to taking £18,000) showed that he could be wrong on the detail but right about the broader picture.

Other Cash Payments

  471. In oral evidence, Ms Bozek and Ms Bond were reluctant to answer questions about which other people, if any, had been in receipt of payments in cash from Mr Al Fayed during the period covered by the allegations against Mr Hamilton and the other Members.[206]

  472. In a letter dated 17 February 1997 Mr Al Fayed's solicitors stated that both Ms Bozek and Ms Bond had confirmed that they were not aware of any other large cash payments to any Member other than those covered by the existing allegations. This carefully worded reply left open the question whether such payments had been made to persons other than Members.

The Comparison between Mr Hamilton and Mr Smith

  473. Mr Hamilton had attempted in his evidence to refute any comparison between himself and Mr Smith which would tend to show that their similar lobbying roles might have earned similar rewards from Mr Al Fayed. In particular, Mr Hamilton pointed to what he saw as an important difference - the fact that he, unlike Mr Smith, had not been offered the possibility of becoming a Parliamentary consultant to House of Fraser. In advancing this argument, Mr Hamilton had relied on a letter from Mr Greer to Mr Al Fayed of 4 February 1987 in which he had said he thought it unlikely that Mr Smith would accept the position of paid adviser to House of Fraser before the general election.

  474. Mr Smith's evidence on this aspect of his relationship with Mr Al Fayed was somewhat different. He explained in his statement to the inquiry[207] that the subject of his becoming a consultant to House of Fraser had indeed come up, at about the time of the election, and at his own instigation. Mr Al Fayed had not responded to this proposal, implying that he did not see such a position as either necessary or appropriate for Mr Smith. In his oral evidence[208] Mr Smith indicated that he had no recollection of any earlier discussions of the kind implied in Mr Greer's letter of 4 February about his possible future role with House of Fraser.

  475. In his written statement for the libel action, Mr Hamilton emphasised the gravity of the allegations against him, referring to them as tantamount to a charge of criminal corruption. Subsequently, however, after Mr Smith's oral evidence to the inquiry had been provided to him, Mr Hamilton played down the seriousness of Mr Smith's admitted misconduct, which, he argued - given that consultancies were not prohibited - amounted to no more than a failure to register a relevant financial interest.

Mr Hamilton's Financial Affairs

  476. In testing the allegations against him, I thought it right to examine Mr Hamilton's financial affairs, even though - given the comparatively modest nature of the total sums supposed to have been paid to him over a period of some 2½ years - I was not necessarily expecting to find evidence which would significantly advance the inquiry.

  477. The difficulty for the inquiry was that whilst, if cash payments had been received and banked it was probable that there would be some record of credits to one or more of Mr Hamilton's bank accounts, the absence of such indications could not be conclusive. This is because, if cash had been received, it could either have been paid into some other account or accounts to which I did not have access, or into no account at all.

  478. During the course of the inquiry I have had access to the following bank or savings account statements:

    -    a National Westminster deposit account, in the same joint names, for the period 29 May 1987 to 15 February 1989;

    -    a National Westminster special reserve account (the successor to the Deposit Account) for the period 14 February 1989 to 3 February 1992;

    -    a dormant account with Hoare & Co for the period 20 May 1987 to 21 February 1992;

    -    a Midland Bank current account in the name of Mr Hamilton for the period 27 May 1987 to 30 July 1987 (when it was closed);

    -    a Midland Bank Number 2 current account in the sole name of Mrs Hamilton (under her maiden name) for the period 27 May 1987 to 27 June 1991;

    -    a Robert Fleming/Save & Prosper high interest account in the sole name of Mrs Hamilton for the period 3 August 1987 to 24 February 1989 (when the account was probably closed).

  479. In addition, I have seen the statements of the mortgage account with the Yorkshire Building Society which relates to the purchase by Mr and Mrs Hamilton of their homes, Laburnum Cottage in Davenham, followed by The Old Rectory in Macclesfield (together with an apartment in London).

  480. I have also inspected Mr Hamilton's tax returns (with supporting consultancy accounts) for the financial years ending 5 April 1986 to 5 April 1991.

  481. Finally, I have examined Mr Hamilton's credit card statements of account for the period said to cover the alleged payments made to him by Mr Al Fayed.

  482. Mr Hamilton has assured me that he has never had any bank accounts abroad and that I have seen every account in his or his wife's name, or their joint names - current, deposit, and savings - for the relevant period.

  483. The main bank accounts listed above have been the subject of a large number of transactions - deposits, transfers and payments - over the period in question. A considerable amount of time has been spent by me, by my assistants, and by a member of the Government Accountancy Service in examining these accounts and in attempting to identify and establish the reasons for the more substantial transactions. Mr Hamilton has provided explanations for various transactions which I identified as requiring further elucidation. In addition, and with the express authorisation of Mr and Mrs Hamilton, the NatWest Group has supplied me with details of deposits and credits in respect of the relevant accounts.

  484. In particular, in a letter dated 10 March 1997 the NatWest Group informed me:

    -    that no credits paid in at the bank where the NatWest accounts were held (rather than at another branch or by post) comprised any cash (as opposed to cheques);

    -    that of these 313 credits it could be stated with certainty that 295 consisted of cheques only, with no cash element;

    -    that of the remaining 18 it was impossible to say what the nature of the transaction was (ie. whether it was cash, cheque, or a mixture of both).

  485. Additionally, however, the various statements which I examined threw up a number of matters which appeared to require further explanation. For example, although Mr and Mrs Hamilton made foreign trips during this period - in particular those to France in September 1987 (which included the stay at the Ritz hotel in Paris) and to America in August 1988 (which included a trip to New Orleans using airline tickets provided by Mr Greer or IGA),[210] there is very little evidence of payments during these trips using the credit cards, or of the purchase of French francs, or US dollars.

  486. In a supplementary statement,[211] Mr Hamilton told me that he and his wife had incurred very little expenditure on the trip to France in 1987 since they had stayed either with friends or at the Ritz in Paris. It was their practice not to reconvert currencies they frequently used so that it was quite possible that they had "a reasonable quantity of francs remaining from a previous visit to France". In relation to the trip to the USA in 1988, Mr Hamilton made a similar point, namely that as all expenses had been paid by the Republican Party there would have been very little need to purchase a large quantity of dollars.

  487. A second point was that there did not seem to be any correlation between the payments into Mr Hamilton's credit card account and debits from any of the bank statements. This suggested at first sight the existence of an undisclosed bank account. However, Mr Hamilton has explained (with supporting examples from cheque book stubs) that it was the practice for him to write one composite cheque to cover the total amounts outstanding on both credit card accounts.[212]

  488. A third matter of interest to the inquiry was that Mr Hamilton's bank and business accounts revealed that in the spring and early summer of 1987 - when it is alleged that Mr Al Fayed first made cash payments to him - he had only very modest financial assets. (Mr Hamilton stated in his written submission: "We have tended to spend what we earn").[213] I noticed in this context that although Mr Hamilton's earnings from consultancies had reached over £20,000 a year by April 1990, his total fees from that source for the year ending 5 April 1987 were only £4,000.

  489. In the process of examining Mr Hamilton's financial records, it became clear that money and payments in kind received from IGA for introducing two new clients, the National Nuclear Corporation (NNC) and US Tobacco (UST),[214] had not been declared to the Inland Revenue in Mr Hamilton's tax returns for the relevant financial years (1988-89 and 1989-90).

  490. Mr Hamilton claimed that this non-declaration was based on the advice of his accountant, Mr Walmsley of King & Co[215], and was supported by case law according to which introduction fees were, in certain circumstances, treated as unexpected or ex gratia payments.

  491. However, Mr Hamilton informed the inquiry that in October 1996 he had made a voluntary disclosure of the payments to the Inland Revenue. The reason for this change of mind was that the publicity attracted by the libel action had caused him to review the position and seek further advice.

  492. It seemed to me important - not least because The Guardian thought it relevant to Mr Hamilton's standing and credibility - to seek to establish the exact circumstances surrounding the original non-declaration for tax of the commission payments received by Mr Hamilton from Mr Greer.

  493. The two payments totalled £10,000 in value (£4,000 in respect of NNC and £6,000 in respect of UST), but Mr Hamilton did not receive the full amount by cheque. Instead goods (antiques, paintings and air tickets) were purchased for him by Mr Greer, on behalf of IGA, to a total value of £3,253.95. The residue of £6,746.05 was then paid to Mr Hamilton by cheque in July 1989. (A detailed breakdown of the dates and values of the various payments in kind is set out in the later section of the report dealing with registration issues).[216]

  494. In his submission to the inquiry[217] and again in oral evidence,[218] Mr Hamilton explained the advantage to him of receiving payment in kind rather than in money, namely that goods taken in payment achieved a lower taxable[219] value.

  495. Mr Hamilton was asked by Counsel to the inquiry why, in that case, instead of taking the full £10,000 in kind, he opted to accept a cheque for the remaining £6,746.05, which was paid on 13 July 1989. Mr Hamilton's initial explanation was that by that date he had received advice from his accountant that the commission payments were not taxable and that there was therefore no remaining point in continuing to receive goods rather than a cheque.

  496. Counsel to the inquiry then put it to Mr Hamilton that this explanation could not be reconciled with the fact that the advice to which he had referred from his accountant was not given until 24 July, eleven days after he received the cheque for £6,746.05. This fact was evidenced by a note, bearing that date, made by Mr Hamilton's accountant of a telephone conversation with Mr Hamilton in which the tax status of the payments was discussed and the possibility of their being treated by the Inland Revenue as ex gratia was mentioned.

  497. The relevant part of the accountant's note read as follows:

    "Case for saying £4,000 is ex gratia from Ian Greer (who gives 10 per cent of 1st yr charges)

    `worth a try' KW[220] said not at all hopeful. MNH[221] said no expectation of commission, just good fortune.

    Declare as ex gratia payment".

  498. Mr Hamilton's response[222] to the point raised by Counsel was that he must have had a preliminary discussion with his accountant earlier in the summer, the substance of which was then confirmed in the telephone conversation of 24 July. In his final written submission,[223] however, Mr Hamilton said he thought the real explanation for the timing of the cheque was that Mr Greer had wanted to "clear his books" at about the end of the first year's contract with UST.

  499. Counsel also pursued with Mr Hamilton the meaning of the word "declare" which appeared in his accountant's note of 24 July. Asked whether this indicated that it was his accountant's advice to him to declare the commission fees as ex gratia payments, Mr Hamilton said that the reverse was the case - the note recorded his own instructions to his accountant.

  500. Mr Hamilton added that, having disclosed the payments to his accountant, he was entitled to rely on his expertise and experience in dealing with the Inland Revenue. As Mr Hamilton put it: "I pay him to prepare my tax returns. I rely upon his advice, he is a professional man, and I sign the form and he sends it off."

  501. I also wrote to Mr Hamilton's accountant seeking his recollection of the significance of the word "declare" in his note of 24 July 1989. By the time this report was completed I had received no reply.

  502. Mr Hamilton was questioned about a further aspect of the tax treatment of the commission payments from Mr Greer. Mr Hamilton's tax return for the year ending 5 April 1989 showed that he had claimed as a tax offset against consultancy fees the sum of £1,430 as "travel and subsistence - travel overseas to New Orleans to develop business contacts." (The cost of the Hamiltons' air tickets, £1,594, had been paid by IGA as part of the commission owed to Mr Hamilton for introducing new clients. Hence, according to Mr Hamilton, he was in the same position as if he had purchased the tickets himself from money paid to him by Mr Greer).

  503. The sole purpose of the Hamiltons' visit to New Orleans in August 1988 was to attend the Republican Party convention. Mr Hamilton supplied me with a detailed programme of events and hospitality for the visit,[224] which appeared to leave very little spare time.

  504. Asked why he was setting off as a business expense against tax almost the entire cost of his attendance at a political conference, Mr Hamilton said the justification was that given to the Inland Revenue, namely that the purpose of the trip was "to develop business contacts". He accepted that this had "nothing whatever" to do with the consultancy fees. It was for his accountant to present his tax return to the Revenue and conduct negotiations on his behalf.[225]

The Diaries for 1987, 1988 and 1989

  505. I would have been assisted in assessing the evidential value of the entries in Mr Al Fayed's diaries and message books if I had been able to obtain access to the personal diaries of Mr Hamilton and Mr Greer for the relevant years. Unfortunately, both have mislaid their diaries for 1987, 1988 and 1989.[226] (Although Mr Greer's diaries for these years had been available to The Guardian when they compiled their chronology of events for use in the libel case, it would have been helpful if the inquiry could also have had a sight of them).

206  See paras 370 and 377. Back

207  See Appendix 42. Back

208  Q 1027-8. Back

209  ie. cash or cheque. Back

210  See paras 502-4, and 602. Back

211  See Appendix 36. Back

212  See Appendix 33, para 753 and Q 2202. Back

213  See Appendix 33, para 693. Back

214  These payments are examined in more detail later in the report (see paras 594-612). Back

215  Q 2188-94 and Appendix 39. Back

216  See para 602. Back

217  See Appendix 33. Back

218  Q 2120. Back

219  Emphasis added. Back

220  Mr Walmsley. Back

221  Mr Hamilton. Back

222  Q 2183. Back

223  See Appendix 33, para 759. Back

224  See Appendix 33. Back

225  Q 2152-55. Back

226  Q 1919 and 1401. Mr Greer told the inquiry that he had lost his diaries for 1987 and "two or three" other years. Back

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