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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