Select Committee on Standards and Privileges First Report


APPENDIX 33 - Continued

APPENDIX 2

DTI INSPECTORS' REPORT ON HOUSE OF FRASER HOLDINGS PLC

  This is the obvious starting-point for an analysis of Fayed's character and his methods of operating. The Inspectors delivered a litany of criticism, virtually all the features of which can be seen in and applied to my own experiences at his hands.

  Inspectors were appointed by the DTI on 9 April 1987 to consider the circumstances surrounding the acquisition by the Fayeds of House of Fraser plc in 1984-85.

  The Inspectors were Henry Brooke QC (now Lord Justice Brooke) and Hugh Aldous FCA. They reported in March 1990.

  Their Report illustrates the many traits of Fayed's dishonest character and methods of operating which are all too evident in his scheme to destroy me.


  The Inspectors' main conclusion was that:

  "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 Board and HOF shareholders, and their own advisers."(paragraph 2.1.1.).

1. FAYED LIED

  Fayed lied to the Inquiry in this oral and written evidence. In particular, he lied in evidence he had solemnly affirmed:

  "During the course of our investigations we received evidence from the Fayeds, under solemn affirmation and in written memoranda, which was false and which the Fayeds knew to be false. In addition, the Fayeds produced a set of documents they knew to be false."(paragraph 2.1.2.)."

  "The Fayeds produced to us birth certificates which were false and which they knew to be false. They repeatedly lied to us about their family background, their early business life and their wealth." (paragraph 2.4.3.).

  In The Observer of 15 June 1986 Peter Wickman published an article about Fayed's family history and place of birth. On 3 July 1986, Fayed affirmed an affidavit denying the truth of Wickman's revelations, whilst knowing perfectly well that they were true. (see paragraph 7.1.3.).

  The Inspectors concluded:

  "We are satisfied that Mr Wickman is a meticulously thorough journalist who carried out his own completely independent research." (paragraph 7.6.2) and

  "What Mr Wickman had written about the Fayeds was in substance true . . . " (paragraph 7.6.3).


  Hence Fayed lied in his affidavit.

  Lying to official Inquiries was nothing new to Fayed.

  The Inspectors found that Fayed had lied to the earlier DTI Inquiry chaired by John Griffiths QC - see various references in chapter 4. (Griffiths had been appointed in August 1983 to investigate the membership of HOF and determine whether there had been an illegal concert party in connection with Lonrho's proposal to demerge Harrods from HOF).

I reject Fayed's allegations against me as a pack of lies

  Fayed has invented a variety of outrageous lies against me. I have dealt in detail in the course of this submission with each allegation Fayed has made.

Evidence to the Inquiry should be given on oath

  I fully anticipate that in giving oral evidence Fayed will lie through his teeth - which is why I am very anxious that he should be required to give his evidence on oath so that he stands in peril of a criminal charge of perjury.

  Unfortunately it was not a criminal offence to give false evidence to DTI Inspectors in 1987-88. It now is, as the law has since been changed. Fayed has made grave charges of corruption against me. Natural justice and the public interest both require that he ought to be severely punished for giving false evidence.

Examples of Fayed lies to advisers

  Some details illustrating the breadth of Fayed's capacity for telling lies are found in Appendix 1 Part 2 of the Report:

  (i)   "The three brothers are members of an old-established Egyptian family."

     Incorrect, in so far as this statement conveys the image of the Fayeds' family having wealth and status. (paragraph 1.7.2).


  (ii)   "Their family fortunes were founded a century ago by their great-grandfather, Ali Al Fayed, who grew cotton in the Nile delta and exported it . . . to the mills in Lancashire." (paragraph 1.7.3).

  Incorrect. This statement was dishonest. (paragraph 1.7.5).


  (iii)   Their family were shipowners, landowners and industrialists in Egypt for more than 100 years (paragraph 1.7.4).


     Their family business built up its wealth over several generations. (paragraph 1.7.5).


     Their old-established family has been doing business with Britain for over a century. (paragraph 1.7.6).


     The Fayed brothers were educated in British schools and had British nannies. (paragraph 1.7.7).

  Incorrect. These statements were dishonest.

  (iv)   The Fayed brothers' grandfather began investing in property in Paris and Switzerland 80 years ago. (paragraph 1.7.8).


     The Fayeds denied that they said this; the Inspectors found that they did and that this statement was incorrect and dishonest.


  (v)   The family owned a major fleet of ships (of which President Nasser only nationalised two) carrying pilgrims and cargo around the Gulf and the Al Fayed brothers were already wealthy when their link with Egypt was abruptly ended on nationalisation and the family moved from Egypt. (paragraph 1.7.9).

  Incorrect. This statement was dishonest.

  (vi)   Mohamed's father had a relationship with the father of the present Sultan of Brunei. (paragraph 1.7.10).


     Mohamed has long-standing connections with Brunei and knows the present Sultan and his father very well. (paragraph 1.7.11).

  Incorrect. These statements were dishonest.

  (vii)   The net asset value of the Fayeds' worldwide interests exceeds $1,000 million and there are further funds in excess of $150 million available at Banque Gonet. The Fayeds accepted they made this statement but said it was only an estimate and on reflection said $750 million was nearer the figure (paragraph 1.8.2).

  Incorrect - both as to $1,000 million and $750 million. These figures were exaggerated and misleading. The figure of $150 million was wrong; the correct figure was closer to $60 million.


  (viii)   The Fayeds' interests as summarised in their November 1984 submission to the OFT included:

(a)   leading shipowners in the liner trade;

(b)   major shareholders in National Bancshares Corp. in Texas;

(c)   membership of Middle East oil exploration consortia with major oil companies (11 March 1985 submission).

  Incorrect. "Leading shipowners" is a gross overstatement.

  The reference to the liner trade was confusing.

  The "major shareholding" was less than 5 per cent.

  The reference to the oil exploration consortia was misleading.

  (ix)   The Fayed family has interests in the USA, Europe and the Middle East which includes in particular shipping, construction, oil, banking and property (23 March 1985 Offer Document) (paragraph 1.9.5).

  Incorrect. The main statement was misleading.

  (x)   The Fayeds alone are the beneficial owners of the 29.9 per cent holding in HOF, which they financed out of their own funds.


     The Fayeds provided approximately £100 million themselves and did not borrow this money from any third party. (paragraph 1.10.1).

  Incorrect. These statements were dishonest.

  (xi)   The Fayeds have made funds available to implement the Offer (to buy the HOF shares) from their accounts at Banque Gonet on an interest free basis and no third party is involved.


     The Fayeds have utilised their own resources and have not had to borrow funds or charge assets.

  Incorrect. These statements were dishonest.

2. FAYED PRODUCED FORGED DOCUMENTS AND DENOUNCED GENUINE DOCUMENTS AS FORGERIES

  Fayed was also found to have:

  (a)   forged official documents and falsely represented them as genuine;

  (b)   under solemn affirmation denounced genuine documents as forgeries; whilst knowing that their contents were true:

     "The Fayeds produced birth certificates which were false and which they knew to be false" (paragraph 2.4.3).


     "In an affidavit made in July 1986 Mohamed asserted that the "alternative version" birth certificates (produced by reliable witnesses in the summer of 1985 and by Mr Wickman in March 1986) were not genuine documents." (paragraph 3.6.10).

  The inspectors concluded as follows:

  "During the course of our investigations . . . Mr Jenkins (a member of the Bar on the staff of the Inquiry who visited Egypt for the purpose) verified on our behalf" the authenticity of the `alternative version' birth certificates. (paragraphs 3.14.1 and 2).


  "Mohammed Fayed has said on affidavit that it (the family identity card) is a forgery . . . The identity card has now been verified and Mr Jenkins has told us he observed that the original has a tear, which is reproduced on the photocopy . . . " (paragraph 3.6.13).

3. FAYED LIED TO HIS PROFESSIONAL ADVISERS AND OFFICIAL AGENCIES

  Fayed was found to have deliberately misled his professional advisers and official agencies -

(a) Lawyers:

  " . . . in the course of giving their own English solicitor (Mr Fleck, a partner in Herbert Smith & Co.) a tour of properties and people during a visit to Egypt in September 1987, the Fayeds either caused him to obtain an incorrect impression of their past or allowed him to develop that impression unchecked. He returned to England and gave his account of what he had seen and heard to us in good faith. Very little of it stood up to independent inquiry." (paragraph 2.4.3.).

(b) Merchant Bankers:   House of Fraser Holdings made many public statements between November 1984 and March 1985 which were false. Their merchant bankers, Kleinwort Benson, and the Press were duped into repeating the lies Fayed had told them.

  In particular and initially Fayed misled John MacArthur, a director of Kleinwort Benson. Subsequently, he misled his solicitors Herbert Smith.

  Neither Kleinworts nor Smiths took adequate steps to verify the nature of the information which Fayed supplied. Hence Warburgs and the HOF Board were in turn misled also.

(c) Official Agencies:   Finally, the OFT and the DTI were themselves seriously misled. The Fayeds, thus, gained control of HOF.

  Thereafter, they attempted to frustrate the DTI Inspectors in their investigation.

  Throughout this period, as stories about them multiplied and became `fact', the Fayeds had no hesitation in instructing their legal advisers to threaten legal action to gag anyone challenging their claims.

4. FAYED LIED TO HIS PUBLIC RELATIONS ADVISERS AND THE PRESS

(a) Public relations advisers

  A leading PR firm, Broad Street Associates, also unwittingly helped to maintain the false impression generated by the Fayeds. Press releases issued in November 1984 and March 1985 by BSA and Kleinworts were vital in misleading the media as a whole (with the exception of Tiny Rowland, Lonrho and The Observer).

(b) The Press

  The Inspectors concluded:

  "In the present case it appears to us that two processes were at work concurrently. On the one hand Mohamed Fayed was telling lies about himself and his family to representatives of the Press, and once those stories were on a cuttings file or in a press cuttings library they grew and multiplied without much further inquiry into their accuracy.

  On the other hand he gave instructions to his very able lawyers to take legal action against anyone who sought to challenge his claims that he and his brothers beneficially owned the money with which they bought HOF.

  To a great extent he succeeded in his aims. Most newspapers and magazines considered that discretion was the better part of valour and preferred to write about other things than get involved in an expensive libel action with a rich man. As a result of what happened the lies of Mohamed Fayed and his success in `gagging' the Press created new fact: that lies were the truth and that the truth was a lie." (paragraph 8.6.6).

5. FAYED PRONE TO EXAGGERATE AS WELL AS LIE

  In addition to telling outright lies Fayed was also prone to exaggeration to twist the truth:

  " . . . his actual influence with the Ruler of Dubai was very different from what he claimed: the stories he told in 1984-85 about his role in the affairs of Dubai were either quite untrue or were exaggerated versions of the truth." (paragraph 11.5.11).


  "Mohamed's skill in exaggerating the truth before an audience whom he believes to be ignorant of the true facts was clearly apparent to us during our two-day questioning session . . . " (paragraph 11.8.4).

  This section shows also his cavalier approach with figures:

  "His accountants and solicitors had earlier told us of the $8.4 million sale consideration . . . During that session the following exchanges occurred:

  Mr Brooke: Nothing came from the oil exploration and the concession in Abu Dhabi.


  Ali: A lot of money came from that.


  Mohamed: Money came from the oil concessions, did it not?

  Ali: Yes. We farmed out a percentage of the concession.


  Mohamed: It was $80 million.

  A little later Mohamed said:

  In oil exploration we have income of over $30 million.

  The following morning when we drew attention to these discrepancies their solicitor said he thought the figure was $18 million.


  Ali Fayed then said categorically:

  It was $18 million. (paragraph. 11.8.5.).

  Despite this assertion we received no evidence to suggest that the figure of $8.4 million in the relevant company's accounts was wrong." (paragraph 11.8.6).


  "In our opinion Mohamed Fayed's claim to be the most trusted agent of the Ruler in Dubai in the late 1960s and throughout the 1970s in connection with the construction work does not stand up to serious scrutiny." (paragraph 5.9.3.).


  "Mohamed Fayed has greatly exaggerated the importance of his role in Dubai and in doing so has given a misleading and untruthful account of the services he was able to render." (paragraph 5.9.5.).

6. FAYED'S LIES MUTATE AS CIRCUMSTANCES CHANGE

  Fayed was found to change his story as his lies were discovered:

  "One of the difficulties confronting anyone seeking to test the truth of the Fayeds' account of the generation of their wealth is that the story changes as different parts of it are demolished or discredited." (paragraph 11.1.7).


  "We drew the conclusion that the story (of secret oil deals) had been changed once the timing difficulties of the original story had become apparent to its authors". (paragraph 13.27).

7. FAYED - AN EVIDENCE-FREE ZONE

  Fayed was also prone to make dishonest assertions without any supporting evidence:   (a) The Fayeds claimed they had made $400 million from secret oil trading:

  "This story was not the story they had told in 1984-85 and the Fayeds have not put any supporting evidence of any kind to us to confirm the truth of what they are saying. In the total absence of any such evidence, and in the light of the unreliability of the Fayeds as witnesses of truth in other areas of our investigations, we reject this story more or less completely." (paragraph 11.12.8).


  "Their story (of secret oil trading) was untrue and in the end they did not even try to answer the many points we put to them which demonstrated vividly how it could not possibly have been true." (paragraph 13.28).


  "In the absence of any credible account of the way in which their funds were generated and in the presence of explanations by them which are patently untrue we have no hesitation in rejecting their assertions." (paragraph 14.1.2).

  (b) "The starting figure of US $220 million was totally unsupported except by assertions which we are satisfied were quite untrue, to the effect that the original source of this sum was inherited wealth and profits derived from the Fayeds' activities in Dubai during the 1970s. The assertion as to inherited wealth was examined and rejected in Chapter 10." (paragraph 14.2.1).

  (c) "No bank statements or other such documents were provided to support the Fayeds' suggestion that such funds existed . . . at any date until 25 June 1984, when £50.5 million was transferred from an undisclosed account at Citicorp, Zurich to an account in the Fayeds' name at RBS. In Chapter 13 we have given our reasons for rejecting the Fayeds' story that this £50.5 million together with $330 million transferred from the same source on 22 August 1984 arose from the dissolution of a secret oil trading partnership." (paragraph 14.2.2).


  " . . . the Fayeds have given us positive explanations of the source of their 1984 wealth which are patently untrue . . . We left it to them to adduce their evidence as they wished and the evidence they adduced was, as we have said, obviously untrue." (paragraph 14.2.3).

  (d) "On issues relating to the sources of the $620 million . . . They declined to produce any documents, their answers to our questions were shifty and evasive . . ." (paragraph 16.6.4).

  (e) "We reject the evidence of Mohamed Fayed (relating to his fraud on the Haiti harbour authority), where it conflicted with the evidence of the other witnesses. It was unsupported and at total variance with much oral evidence and contemporaneous documentary evidence of a high quality." (paragraph 4.6.5).

8. FAYED PROCURED FALSE WITNESSES

  The Fayeds procured false witnesses to lie to their solicitor and, through him, the Inspectors:   Appendix 3 sets out the nature of their evidence:

  (a)   See paragraph 3.3.1 for false evidence relating to the Fayeds' alleged interests in cotton.


  (b)   See paragraph 3.5.1 for false evidence of the Fayeds' alleged position in Alexandrian Society.


  (c)   See paragraph 3.10.1 and 3.10.2 for false evidence of the Fayeds' businesses in Egypt.


  (d)   See paragraph 3.11.3 for false evidence of the Fayeds' home in Alexandria.

  The conclusion of the Inspectors was as follows:

  "The evidence given by the Fayed witnesses was wholly inconsistent with the overwhelming evidence set out in this Appendix and we reject it." (paragraph 3.5.4).


  ". . . they completely deceived their own solicitor with the intention that he should, in all innocence, give us evidence which they knew to be false." (paragraph 3.14.4).

9. FAYED THE CHARACTER ASSASSIN

  Fayed was found to have engaged in deliberate and dishonest character assassinations:   (a) Peter Wickman:

  "During the course of our investigations the Fayeds made serious accusations of lack of professional integrity against a responsible freelance journalist (Peter Wickman) who had discovered the true story of their Egyptian past. We inquired into these allegations at great length and we reject them." (paragraph 2.5.2).


  "The attack on his journalistic integrity was deplorable and ought never to have been made. What Mr Wickman has written about the Fayeds was in substance true, but they did not hesitate to attack his integrity on the pretence that he had invented the stories he wrote about them or to produce false evidence and a set of false documents in support of this attack on him." (paragraph 7.6.3).

  (b) "Adnan Khashoggi . . . was subjected to a serious personal attack to the effect that he had been bribed by Lonrho to provide evidence which he knew to be false." (paragraph 26.25).

  (c) Dr Ashraf Marwan:

  "When the Fayeds perceived that Dr Marwan was no longer of any value to them they had no scruples in attacking his character and accusing him of dishonesty and forgery." (paragraph 2.3.36).

  Fayed's accusations against Marwan can be found in paragraph 2.5.10. The Inspectors concluded "Mohamed's accusations were false and he knew they were." (paragraph 2.5.12).

10. FAYED A FRAUDSTER

  Fayed was a fraudster:

  "We have no doubt at all that Mohamed Fayed perpetrated a substantial deceit on the Government and people of Haiti in 1964. In particular he deprived the harbour authority of over $100,000 of money it could ill afford to lose." (paragraph 4.6.6).

11. FAYED THE FANTASIST

  Fayed is a fantasist at once capable of believing he is the victim of grand conspiracies and yet inventing fantastic false stories of conspiracy on the part of others:

  "In our judgment, this submission (on how to approach evidence of his family background) reveals the Fayeds' character very vividly. The evidence that they were telling lies to us was quite overwhelming. But they were still determined to counter-attack and try to pretend that they were the innocent victims of some gigantic conspiracy against them." (paragraph 10.2.16).


  ". . . we found this submission (on how to approach the evidence given by Dr Marwan) to be both sad and ludicrous. Sad because it showed how blinkered the Fayeds now are in trying to hold up an entirely untenable and false story about their Egyptian past. Ludicrous, because the sheer scale of the dishonest conspiracy allegedly organised by Dr Marwan, which the Fayeds suggested to us, is utterly preposterous. The evidence that they were telling lies about their past is overwhelming."(paragraph 26.82).


INSPECTORS' OVERALL CONCLUSION -

FAYED'S WORD NOT TO BE BELIEVED WITHOUT VERY STRONG INDEPENDENT CORROBORATION:

  The overall verdict of the Inspectors about Fayed's credit as a witness was as follows:

  "As month after month of our investigation went by we uncovered more and more cases where the Fayeds were plainly telling us lies. These discoveries culminated in a two-day questioning session in March 1988 when it became obvious to us, from the manner and demeanour of both Mohamed and Ali Fayed, that they were witnesses who were only prepared to assist our inquiry when it suited them to do so. In consequence of watching them give evidence we became reluctant to believe anything they told us unless it was reliably corroborated by independent evidence of a dependable nature." (paragraph 1.19).

  ". . . after watching and hearing them give evidence for two days we considered that Mohamed and Ali Fayed were witnesses on whose word it would be unsafe to rely on any issue of any importance, unless their evidence was confirmed by some dependable independent source." (paragraph 16.6.5).

  Their representations to the Inspectors were variously described as follows (see paragraph 26.48):

  (a)   did not stand up to serious examination -

     representations about their alleged business empire and the implication that their wealth was derived from it;

  (b)   grossly exaggerated -

     representations about their total net worth outside the funds they were using to buy HOF;

  (c)   rejected -

     explanation of how they generated $400 million;

  (d)   preposterous -

     their story about secret oil trading;

  (e)   wholly untrue -

     stories about their wealthy Egyptian background.

  Positive representations were made which were "intrinsically incredible" and "plainly false".

  The Inspectors' conclusions alone may seem devastating enough as an indictment of the inveterate dishonesty in Fayed's character. But corroboration of their analysis is amply provided by the more recent case of Christoph Bettermann, which is a mirror of my own.


 
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