Select Committee on Standards and Privileges First Report


Alleged Cash Payments by Mr Al Fayed directly to Members

Sir Andrew Bowden

  773. In oral evidence to the Privileges Committee in 1995, Mr Al Fayed alleged that Sir Andrew had received £5,000 and had requested £50,000 a year in return for assisting in the campaign against Lonrho: the request was refused as excessive.

  774. In evidence to this inquiry Mr Al Fayed said that Sir Andrew's demand was for "£50,000 and £5,000 every month" - but this aggregation of the two sums was probably a mistake on Mr Al Fayed's part. Mr Webb's understanding (from Mr Al Fayed) was that the relevant amounts were as set out in paragraph 773 above and that these would have covered any payments to Mr Michael Land, a former employee of Lonrho, whom Sir Andrew had introduced to Mr Al Fayed's legal team. (In fact, Mr Land acknowledged collecting £2,000 in cash from Harrods).

  775. The supporting evidence for this allegation is circumstantial. Sir Andrew asked for a meeting with the Al Fayed brothers and Mr Greer, with "no lawyers present". It is suggested that this may have been to arrange for remuneration, but it could have been for other reasons. Sir Andrew offered more than one possible explanation, including his intended discussion of sensitive matters relating either to Mr Land or to Mr Al Fayed.

  776. It is also claimed that Sir Andrew's abrupt departure from the Greer lobbying operation lent plausibility to the charge that his request for a retainer had been refused. Sir Andrew, however, believed he was asked to step down because of disagreements between Mr Land and Mr Al Fayed's advisers.

  777. In evidence to the inquiry, Sir Andrew denied receiving or demanding cash for providing services to Mr Al Fayed or Mr Greer and, in the absence of further corroboration, it would be unsafe to conclude that he did. On the other hand, I was struck by certain expressions used in evidence which suggested some form of obligation or commitment on Sir Andrew's part. For example, Sir Andrew acknowledged that he was "phased out" of the operation and Mr Greer said he had been "sacked". This may have implications for a second allegation discussed below.

  778. There is no dispute about the fact that, in July 1987, Sir Andrew received from IGA a cheque for £5,319 towards his general election campaign fighting fund. This was by far the largest donation towards election expenses from contributions made by Mr Al Fayed; indeed, it exceeded by a substantial margin Sir Andrew's total election expenditure, as declared in his statutory return.

  779. The Guardian claims that this was a payment for services rendered - a claim denied by Sir Andrew, who maintains that he was not aware that the money came from Mr Al Fayed. However, it emerged in evidence that the offer of around £5,000 had certainly been made by Mr Greer by the end of March 1987; that it was the subject of a letter from his agent which Sir Andrew found amongst "a large pile of papers ... in relation to Mr Al Fayed"; that there had been no other financial contribution of any significance by Mr Greer to Sir Andrew in respect of any other Parliamentary election campaign; and that Sir Andrew was extremely active at that time on Mr Al Fayed's behalf (but not on behalf of any other client of Mr Greer's).

  780. These factors, coupled with the expressions of commitment referred to above,[344] lead me to conclude that the election donation was intended as a reward, and that Sir Andrew either knew of its source, or closed his eyes to the probable source (there was, after all, no reason for Mr Greer or IGA to give away £5,000 of their own money to Sir Andrew). It is possible that Mr Al Fayed confused the two alleged payments of around £5,000 and that his recollection of a cash payment referred, in fact, to the election contribution.

Mr Smith

  781. Mr Smith first acknowledged that he had received cash payments from Mr Al Fayed in response to an inquiry by the Cabinet Secretary in October 1994. At that time he accepted that the figure could have been as much as £25,000, stating that all of the money had been declared to the tax authorities. This figure was apparently unknown to The Guardian and forgotten by Mr Al Fayed: their allegations in the libel proceedings and to this inquiry referred to £6,000 and "nearer £10,000" respectively. The range of figures was put to Mr Smith and, in his written statement to this inquiry, he placed the amount at "probably about £18,000".

  782. Mr Smith claims that Mr Al Fayed initiated the arrangement, but Mr Al Fayed says he had the impression that payment was expected. The first instalment of £5,000 was handed over in an envelope in May 1987. Further instalments (probably of £2,000 to £2,500) were passed to Mr Smith in person, collected by him, or sent by courier to his home address in the period up to early 1989 during which he was very active on Mr Al Fayed's behalf.

  783. Given the likely date of the first payment to Mr Smith, the allegation in Sleaze that he accepted cash from Mr Al Fayed for initiating an Adjournment debate in June 1986 is not sustained.

  784. It was only in January 1989 that Mr Smith, prompted by an open letter from Mr Tiny Rowland, acknowledged an interest in the Register in relation to House of Fraser, and then only briefly. This aspect is dealt with further below. And as late as the summer of 1993 Mr Smith denied receiving cash payments for Parliamentary services when asked by journalists from The Guardian.

  785. This lack of candour by Mr Smith, and the uncertainty over the total sums he received from Mr Al Fayed, are matters of great concern. Mr Smith is a chartered accountant and I should have expected him to have more accurate records. Since he and his wife were acting as a partnership, I therefore asked a number of specific questions in relation to the VAT treatment of the monies received from Mr Al Fayed, and for the partnership VAT returns for the trading years covered by the payments from Mr Al Fayed. To date, although there has been an indication that the information is being obtained from HM Customs and Excise, the returns have not been provided, and the questions have not been answered.

  786. Clearly, the main allegation that Mr Smith received cash payments and that these were concealed, is not in dispute. But I cannot be sure of the amounts involved, nor whether they were properly accounted for as income in Mr Smith's tax returns, or included in the partnership income upon which VAT should have been charged.

  787. Equally disturbingly, Mr Smith appeared quite unconcerned about the implications of receiving money, purportedly on behalf of a company - House of Fraser - in the form of cash payments directly from one of its officers.

Mr Hamilton

  788. The main allegation concerning Mr Hamilton is broadly the same as that admitted by Mr Smith, namely that for a period of 18 months to two years beginning around June 1987, he accepted cash payments from Mr Al Fayed in return for lobbying services on behalf of House of Fraser. It is also claimed that he received Harrods vouchers. Mr Hamilton strongly denies the allegations.

  789. The principal evidence in support of the allegations can be summarised as follows:

      (i)    Mr Al Fayed's own first-hand account is that he made payments to Mr Hamilton, totalling £28,000 in cash or vouchers. The detail of this allegation has not always been consistent. For example:

      -    at first he claimed that he had paid Mr Hamilton £2,500 or vouchers "on each occasion when he and I were alone" and he provided a schedule of dates for such payments. He later accepted, perhaps when faced with the witness statement of Mr O'Sullivan, that there could have been one or two such occasions when payments were not made;

      (ii)  However, the main thrust of Mr Al Fayed's allegations - namely that Mr Hamilton accepted cash from him - has remained constant (even in private conversations)[345] from the time when it was first put to the former editor of The Guardian in June 1993. Since then, he has repeated the central allegation of cash payments to the Members' Interests Committee, the Privileges Committee and now to this inquiry.

      (iii)  Moreover, as Mr Smith's case demonstrates, it is possible for an allegation to vary considerably in its detail over time and between witnesses, and yet to be true; similarly, after the letter from D J Freeman in December 1994, there was no further mention in any of Mr Al Fayed's written statements of the gift of hampers to Mr Hamilton - but he does not deny receiving them.

      (iv)  Although second-hand, Mr Royston Webb's evidence is that he knew from Mr Al Fayed of payments by him to Mr Hamilton.

      (v)  Corroborative evidence that payments were made (or, at any rate, prepared) was provided by Ms Bozek and Ms Bond. Ms Bozek recalled many occasions on which Mr Hamilton had inquired "whether Mr Al Fayed had an envelope ready for him". She stated that she had also, on numerous occasions, either placed money in an envelope to Mr Al Fayed's instructions or watched as he did so; and that these envelopes were for collection from 60 Park Lane or for delivery to Mr Hamilton's home. Any face to face payments by Mr Al Fayed would have been additional to those which she knew about. Ms Bond similarly confirmed that, to her knowledge, payments were made to Mr Hamilton and she thought that these might, on average, have taken place once a month, spread over a period of about a year. The fact that, on several occasions, Mr Hamilton collected envelopes from the front desk at 60 Park Lane was confirmed by Mr Bromfield, although he had no knowledge of their contents.

      (vi)  Several entries from contemporaneous diaries and message books indicate private one-to-one meetings between Mr Al Fayed and Mr Hamilton, apparently at Mr Hamilton's request. (These include one falling nine days before the 1987 general election when it would not be expected that Mr Hamilton would either be in London, or, if in London, spending his time visiting Mr Al Fayed; and another entry, in December 1988, which suggests that Mr Hamilton was visiting Mr Al Fayed privately at about the same time when a meeting was already due to take place between the lobbying group, including Mr Hamilton, and Mr Al Fayed). There was also a message from Ms Bond to Mr Al Fayed apparently asking whether an envelope should be sent by courier to Mr Hamilton's house in Cheshire, at a time when there was no obvious reason for documentation to be delivered to Mr Hamilton. Mr Hamilton points to the fact that the doorman's security records for 60 Park Lane, which might have assisted his case, are not available - but, by the same token, his own diaries for the period cannot be traced. Mr Hamilton has attempted to provide innocent explanations for the message book entries but I do not find them convincing. In particular, his claim that the message relating to the meeting on 2 June 1987 was intended to cancel, rather than confirm, the meeting is fanciful.

      (vii)  The pattern and tone of Mr Hamilton's lobbying activity on behalf of Mr Al Fayed were not dissimilar to that engaged in by Mr Smith and (for a shorter period) by Sir Andrew Bowden. In all three cases Mr Al Fayed alleges that cash payments were made. Mr Smith has not only admitted the charge, but his account mirrors much of the detail of Mr Al Fayed's allegations against Mr Hamilton - the approximate date when cash payments initially arose; the amounts of each payment (broadly, bundles of £50 notes totalling - after the first payment - £2,000 to £2,500); the mechanics of the payments (in envelopes, handed over personally by Mr Al Fayed, or sent by courier to Mr Smith's house); the frequency of the payments; and the fact that the payments were not linked to any particular Parliamentary activity on Mr Smith's part. The last point is important since Mr Hamilton has framed much of his response to the allegation as if it involved a direct relationship between the pattern of the alleged payments and, for example, the number of questions tabled by him. Apart from a reference to that effect by Mr Al Fayed in his earliest conversations with The Guardian, this has never been the case.

      (viii)  The letters written by Mr Hamilton to Mr Al Fayed over this period show a commitment to Mr Al Fayed which strongly suggests a financial relationship. Particular examples are the letter to Mr Al Fayed dated 23 July 1987 (accompanied by a letter to the Chairman of the Stock Exchange),[346] and the letter to Mr Al Fayed dated 28 January 1988 which was apparently written at the request of Mr Al Fayed.[347]

  790. Mr Hamilton vigorously denies receiving cash from Mr Al Fayed. He has given me access to his bank, credit card and building society statements for the relevant periods, and to his accounting records and tax returns. There is no indication in the documents I have seen of the receipt of any substantial cash payments. Mr Hamilton believes The Guardian is acting out of political hostility and spite and that the evidence of Mr Al Fayed, Mr Webb, Ms Bozek, Ms Bond and Mr Bromfield is dishonest and cannot be trusted.

  791. Mr Hamilton also disputes the comparison between his own and Mr Smith's lobbying activities and maintains that, unlike Mr Smith, he was not offered a Parliamentary consultancy by Mr Al Fayed. Mr Smith denies that he was offered such a consultancy (though he himself did raise the matter, unsuccessfully, with Mr Al Fayed) and he says that he was unaware that this possibility had been mooted by Mr Greer in the letter to Mr Al Fayed of 5 February 1987.[348]

  792. My conclusion is that whatever the differences between the perceived roles of Mr Smith and Mr Hamilton, the similarities are far more striking. In both the timing and method of payment Mr Smith's case provides strong support for Mr Al Fayed's allegation against Mr Hamilton. Further, I have not received any convincing explanation as to why Mr Al Fayed should make truthful allegations of cash payments to Mr Smith - but similar, untruthful allegations in relation to Mr Hamilton. I am not persuaded, as repeatedly suggested by Mr Hamilton, that Mr Al Fayed chose to single out Mr Hamilton because he was part of the government department which could have reversed the DTI Inspectors' report, or that Mr Al Fayed was motivated by pique because Mr Hamilton had failed, in April 1992, to reply to a letter of congratulation on his appointment as a Minister.

  793. Mr Hamilton has also sought to rely upon what he saw as the late arrival on the scene of the telephone message pads, as evidence that dishonest attempts were being made to bring other witnesses forward in order to shore up Mr Al Fayed's account.

  794. On the basis of forensic analysis of these documents, the irresistible conclusions are as follows:

      (i)    the entries in the message books are genuine and contemporaneous;

      (ii)  the entries tend to corroborate the evidence of Mr Al Fayed, Ms Bond and Ms Bozek, and to undermine the evidence of Mr Hamilton and Mr Greer;

      (iii)  the message pads had been disclosed to The Guardian by the Al Fayed "camp" in June 1995 (if not earlier), over a year before the connection was made by Mr Douglas Marvin (one of Mr Al Fayed's lawyers) between the message pad entries and "Iris" (Iris Bond).

  795. Accordingly, Mr Hamilton's analysis at paragraph 522 of his written submission, set out below, is wrong:

    "I do not suggest that Marvin is party to a conspiracy to give false evidence. However, the convenience of the trail from the last-minute appearance of a telephone message, to the appearance of Marvin, to the appearance of Bond and thence to Bozek and Bromfield is so neat as to stretch credulity to the limit".

  796. On the contrary, the route from the message pads to the witness statements of Ms Bond, Ms Bozek and Mr Bromfield has been explained to my satisfaction. I have seen no evidence to support any suggestion that there was, as alleged by Mr Hamilton, an "elaborate charade".

The Credibility of the Principal Witnesses

  797. Given the conflict of evidence which has arisen during the inquiry, it is clearly essential to assess the reliability of the witnesses concerned. I have already considered, earlier in these conclusions, the question of Mr Al Fayed's credibility and how I should approach his evidence: if it stood alone, I would be unable to accept his uncorroborated account. However, there is corroborating evidence and it is therefore necessary to say a few words about the other, main witnesses who support the allegations of cash payments.

i) Ms Bozek, Ms Bond and Mr Bromfield

  798. Mr Hamilton maintains that Ms Bozek is not to be trusted because she could still owe a duty of loyalty to Mr Al Fayed; indeed he goes further and suggests that she has been bribed to give dishonest evidence to my inquiry. He and Mr Betterman also claim that Ms Bozek lied to the immigration authorities in 1989-90 - this allegation was put to Ms Bozek and firmly rejected. I have made enquiries of the Home Office, but I have found no evidence to support the allegation against Ms Bozek.

  799. Ms Bozek is now employed as a trainee solicitor with Allen & Overy, having applied for a training contract in 1992. She left her employment with Mr Al Fayed some time before the commencement of the libel proceedings. In receiving oral evidence from Ms Bozek, I formed a favourable impression of her reliability as a witness and this view is shared by her current employers - a recent character reference to me from a partner in Allen & Overy concludes: "She is mature, sensible and reliable. I do not believe she would lie in order to support her former employer's contentions".

  800. Ms Bond and Mr Bromfield also impressed me as reliable witnesses and I found no discrepancies in their evidence which could not be accounted for by uncertainties of recollection after a period of 10 years. I do not accept that they have been persuaded or induced by The Guardian or by Mr Al Fayed to give dishonest evidence to this inquiry.

  801. As indicated, Mr Hamilton cast doubt on the means by which these corroborative statements were obtained, the process by which they were drawn up, and the lateness of their appearance. On this point, I found the statement by Mr Marvin persuasive,[349] particularly given the long period during which the libel case was in abeyance.

ii) Mr Webb

  802. Mr Hamilton proposed Mr Webb as a witness to the inquiry but he has since challenged his credibility. Although Mr Webb gave his evidence in an apparently straightforward manner, I found it unnecessary to reach a conclusion on this matter since he was not sufficiently close to the alleged events to affect my judgement one way or the other.

Mr Hamilton's own Credibility

  803. It has been argued during the course of the inquiry that Mr Hamilton's own credibility has been seriously undermined by various statements and actions on his part, of which the following are examples:

      (i)    In a letter to The Guardian in October 1993, and again in responding to the Cabinet Secretary a year later, Mr Hamilton claimed that he had been introduced to Mr Al Fayed by Sir Peter Hordern. Sir Peter says this was not so and Mr Hamilton now accepts this.

      (ii)  In the same letter Mr Hamilton claimed: (a) that he had been invited to use Mr Al Fayed's "private rooms" at the Ritz in 1987 (this statement was repeated a year later when he gave his explanation to Sir Robin Butler); (b) that no bill had been tendered to him at the end of his stay; (c) that he had ceased House of Fraser-related activities in the summer of 1988; and (d) that he had removed himself from any decisions relating to Mr Al Fayed almost as soon as he became a DTI Minister. Although these, like the preceding example, are on their own comparatively small points, there appears to be validity in the allegation that the relevant statements by Mr Hamilton were, in varying degrees, untruthful.

      (iii)  Mr Hamilton misled the President of the Board of Trade, Mr Michael Heseltine, by providing "an absolute assurance that he had no financial relationship with Mr Greer", when he had in fact received two commission payments from him totalling £10,000 in 1988 and 1989. Mr Hamilton has claimed that he misunderstood the question: but its thrust appears to have been straightforward and Mr Heseltine has confirmed that the answer he received was unqualified. Moreover, Mr Heseltine, in his letter to the inquiry, has made clear that the purpose of his telephone call to Mr Hamilton was to establish whether the latter had ever had such a relationship with Mr Greer, not merely whether this was still the case.[350] Mr Hamilton has given a lengthy account in his written submission, explaining and seeking to justify the remarks he made to Mr Heseltine. However, from his oral evidence it is clear that he knew that he had had a financial relationship with Mr Greer, and deliberately decided not to disclose the existence of that relationship to Mr Heseltine. Mr Hamilton's comparison between his relationship with Mr Greer and that of a reader of The Guardian with its editor is untenable.

      (iv)  In his submission Mr Hamilton denied that two journalists from The Guardian (Mr Hencke and Mr Mullin) had asked him about cash payments in 1993. The journalists contradicted this denial and produced near-contemporaneous notes clearly indicating that the question had indeed been put. The newspaper's former editor, Mr Preston, confirmed that, by this time, The Guardian were inquiring into cash payments both in relation to Mr Smith and Mr Hamilton.

      (v)  Although Mr Hamilton sought to convey the impression that he had severed his links with Mr Al Fayed following publication of the DTI Inspectors' report, it is clear that in the summer of 1990 - three months after that event - he was still soliciting favours from Mr Al Fayed in the form of a second stay in Paris at Mr Al Fayed's expense.

      (vi)  It is claimed that Mr Hamilton's last minute withdrawal from the libel action strongly implied that he no longer believed he could win it. This is denied by Mr Hamilton. On this point I have concluded, on the basis of the information which I have received from the legal team acting for Mr Hamilton and for Mr Greer, that Mr Hamilton's decision to withdraw from or settle the libel proceedings on the best available terms was largely, if not entirely, based on the problems relating to Mr Greer's position, and the need to instruct a replacement legal team.

      (vii)  Mr Hamilton made no declaration of the two commission payments to the Inland Revenue, despite some evidence suggesting that he was advised to do so by his accountant. (An explanation from his accountant had been asked for, but not received, in time for this report). The matter has now been put to the Inland Revenue for adjudication. However, I note that when Mr Hamilton still considered that the sums were taxable, he agreed with Mr Greer that payment would be made in kind rather than by cheque. The claimed purpose of this device was to reduce Mr Hamilton's tax liability.

      (viii)  Most of the cost of a trip to New Orleans in 1988 was set off against Mr Hamilton's tax liabilities, on the grounds that this was a business expense - although, on his own admission, the purpose of the visit was political and had nothing to do with his consultancies.

  804. I have not found it necessary to form a view on the tax issues referred to above. Those are questions to be determined by the Inland Revenue. However, I remain concerned about these matters and, in particular, I should record that I was not persuaded by Mr Hamilton's explanation for seeking and receiving payments in kind from Mr Greer. I have seen no other examples of this practice in relation to any of Mr Hamilton's other consultancies or employments.

  805. It is difficult to escape the conclusion that, as the inquiry has progressed and more and more has been discovered, Mr Hamilton's credibility has suffered increasingly serious damage, particularly as a result of his unwarranted attack on the honesty of The Guardian's journalists and the circumstances surrounding his denial to Mr Heseltine of any financial relationship with Mr Greer.

  806. In his evidence Mr Hamilton has raised a number of substantive points which I have taken fully into account. However, much of his submission is taken up with a minute analysis of alleged inconsistencies or inaccuracies in the case against him. These are, for the most part, of a relatively trivial nature. Neither individually nor collectively do they undermine the main thrust of the evidence, which points compellingly to the conclusion that Mr Hamilton accepted cash payments from Mr Al Fayed in return for lobbying services. The total amount received by Mr Hamilton is unclear, but it is unlikely to have been less than that taken by Mr Smith (between £18,000 and £25,000).

  807. I am unable to shed any light on what became of this money. The only inference which can be drawn from the personal financial papers supplied to the inquiry by Mr Hamilton is that the cash does not appear to have been paid into any of his or his wife's building society, bank or credit card accounts. Given the relatively modest sums involved, and the fact that the payments were spread over a period of more than two years, the absence of such documentary confirmation of their receipt is perhaps not surprising.[351]

344  See para 777. Back

345  See footnote to para 415(iv). Back

346  See para 142. Back

347  See para 151. Back

348  See para 324. Back

349  See para 453. Back

350  See para 515. Back

351  See para 477. Back

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