Select Committee on Standards and Privileges First Report


APPENDIX 42

Letter from the Parliamentary Commissioner for Standards to Mr Tim Smith MP

  I am now in a position to set out in formal terms the complaint made against you by The Guardian. The allegations of misconduct are as set out in the draft Amended Defence of The Guardian in the High Court action 1994 H No. 1654, dated September 1996 which you may or may not have already seen (for your assistance I enclose a copy of that Draft Amended Defence). Where there are references in the list of allegations to Mr Ian Greer, the reference should be read as if it included Ian Greer Associates Limited, or any similar company or entity by which Mr Ian Greer carried on the business of public affairs consultant and Parliamentary lobbyist.

ALLEGATIONS OF MISCONDUCT MADE AGAINST MR TIMOTHY SMITH MP

  1. From 1986 to 1990 you were a member of a group of 5 Members of Parliament (Mr Neil Hamilton, Sir Michael Grylls, Sir Peter Hordern, Sir Andrew Bowden - between February and July 1987 - and yourself), who comprised the parliamentary lobbying operation for Mr Mohamed Al Fayed and the House of Fraser. As a member of this group you, together with the other Members of Parliament in the group, received material benefits for work undertaken by you, from Mr Al Fayed and/or Mr Ian Greer.

  2. On 17 June 1986, as part of that lobbying operation in an adjournment debate in the House of Commons, you raised the issue of the independent directors of The Observer newspaper, and interference by Mr "Tiny" Rowland. You accused Mr Rowland of running a series of false stories amounting to a personal vendetta against the Fayed brothers.

  3. On various dates in 1987, 1988 and 1989 you tabled Parliamentary Questions and Early Day Motions on behalf of Mr Al-Fayed - full particulars are as set out in Paragraphs (5A), (6), (29) of the Particulars of Justification in the Draft Amended Defence referred to above.

  4. Between 18 May 1987 and 27 July 1987 £18,000 was paid by Mr Al-Fayed to Ian Greer for the stated purpose of making payments to MPs - part of that sum was paid by Ian Greer to you.

  5. Between approximately 1 June 1987 and 31 December 1989 you received from Mr Al-Fayed approximately £6,000 in cash, representing payment for your services in tabling parliamentary questions and motions and other parliamentary services as set out in these numbered paragraphs.

  6. On 1 February 1990, Ian Greer rendered to House of Fraser a special invoice for £13,333 plus VAT, specifically to cover disbursements to Members of Parliament including you.

  7. In 1987, 1988 and 1989 you went as a delegate to Ministers, and wrote to Ministers, to advance the cause of Mr Al-Fayed and/or House of Fraser, as part of the services which you were supplying to Mr Ian Greer and/or Mr Al-Fayed, and without disclosing the fact that you were being paid by Mr Ian Greer and/or Mr Al-Fayed for performing those services.

  8. You deliberately omitted to declare or register any of the payments and benefits received as set out above, by making appropriate entries in the Register of Members' Interests and (as alleged in paragraph 7 above) or by making an appropriate declaration in all correspondence and meetings with Ministers or Parliamentary colleagues.

  (I attach copies of your Register entries and relevant correspondence from your Registry file. Please note that these documents are supplied for your information and assistance, and they are not to be taken as intended to corroborate or otherwise the above allegation.)

  I would welcome a detailed, written response to these allegations setting out which are accepted, which are disputed, and in so far as actions or omissions are accepted by you as correctly described, providing any explanations which may assist me in my inquiry. As part of that written response I would be assisted by details of all benefits (monetary or otherwise, direct or indirect) received by you or by your family from Ian Greer (of course including Ian Greer Associates Limited, etc.) and/or Mr Al-Fayed (or Harrods, House of Fraser or any related company). If payments were received in cash, I would appreciate details of how such payments were made, when they were made, and by whom and to whom they were made. I have put this request for information in this somewhat open form because, although paragraph 5 above refers to £6,000 having been received from Mr Al-Fayed, I am aware that at the time of your resignation it was suggested that you had received a larger sum, in the region of £25,000.

  I do not seek to place any limit on the length of any written statement which you may wish to submit, but so that the inquiry can proceed I would appreciate your written statement as soon as possible, and in any event by 30 January 1997. If you propose to submit written statements from others who may assist me in considering your responses to these allegations, I would also hope that they could be provided to me by the same date. If there are potential witnesses from whom you have not been able to obtain written statements, please identify them (with details as to how they can be contacted) and explain why their evidence will assist my investigation of the allegations set out earlier in this letter.

DOCUMENTS

  I would welcome copies of any documents upon which you may wish to rely, which may show the limit of payments received by you, and/or evidencing payments in money or benefits in kind, including hospitality, from Mr Al-Fayed, Harrods, House of Fraser, Mr Ian Greer (and/or Ian Greer Associates), whether conferred directly or indirectly, including commission payments (if any) for the introduction of new clients to Ian Greer and/or Ian Greer Associates. In particular, I would want to see any records kept by you of payments received.

PROCEDURE

  I enclose a copy of the procedure note which will form the basis for the conduct of my inquiry.

16 January 1997

Letter from Mr Tim Smith MP to the Parliamentary Commissioner for Standards

  Thank you for your letter of 16 January which sets out the complaint made against me by The Guardian.

  Before dealing with the specific allegations numbered 1 to 8 in your letter, it may be helpful if I provide a general explanation of my involvement with Mr. Mohamed Al-Fayed and the House of Fraser.

  I am sorry that I have no documents relating to this period apart from my diaries which constitute no more than a list of engagements. These events occurred between eight and eleven years ago and I am afraid that I have disposed of all my other records relating to the House of Fraser.

  My interest in the affairs of House of Fraser stemmed from my long-standing professional interest in the affairs of Lonrho.

  As a chartered accountant I first encountered Lonrho in November 1971 when employed by Peat Marwick Mitchell in the capacity of audit senior. In October 1971, PMM had been invited by the board of Lonrho to investigate the group's current position and future prospects. I was a junior member of a large investigation team operating both in London and Africa. I was sent to Lonrho's head office, Cheapside House, to assist in the investigation work. I remember being struck by the Byzantine complexity of Lonrho's group structure.

  In May 1971, the Department of Trade and Industry appointed Allan Heyman QC and Sir William Slimmings to investigate the affairs of Lonrho. Their report was published in March 1976. They reached a number of conclusions which were highly critical and indeed damning of Lonrho's activities. The Government was advised by counsel that it had good grounds for launching a criminal prosecution but chose not to do so following strong advice from the Foreign Office that the evidence likely to emerge at a criminal trial could be highly damaging to Britain's relations with certain African countries.

  In the early 1980s, Lonrho made repeated attempts to acquire House of Fraser but was thwarted by a Monopolies and Mergers Commission report which recommended against the acquisition and which was accepted by the Government.

  Following allegations that Lonrho had organised a so-called concert party of House of Fraser shareholders, in August 1983, the DTI appointed John Griffiths QC to investigate the membership of House of Fraser. His report was published in July 1984. On the conflicting evidence of Mr Tiny Rowland and another witness, he concluded: "(The other witness) gave to me a compelling feeling that he was telling the truth. Mr Rowland did not." On the evidence of Mr Ali Al Fayed he said; "I do not disbelieve Mr Ali Al Fayed's evidence. He struck me as a respectable and responsible man responding naturally to what he was asked".

  I first met Mr Mohamed Al-Fayed some 16 months after reading the Griffiths report. This was on 10 March 1986 at a lunch at Harrods arranged by Mr Ian Greer. At the lunch, Mr Al-Fayed explained that, since he and his brothers had acquired House of Fraser a year earlier, he had come under increasing attack by Lonrho. I was sympathetic to Mr Al-Fayed both because of my long-standing concerns about Lonrho's activities and also because I took the view that since all the shareholders in House of Fraser had been paid in full for their shares there could be little cause for concern about the takeover. I was reassured by the fact that the takeover had been approved by the Office of Fair Trading and the DTI on the basis of information supplied by Mr Al-Fayed's merchant bankers, Kleinwort Benson and his solicitors, Herbert Smith. Leading financial journalists such as Mr Ivan Fallon had written favourably about Mr Al-Fayed and, as time passed, it was clear that, contrary to Mr Rowland's assertions, he was quite capable of running Harrods and the other House of Fraser stores.

  According to my diaries, I met Mr Al-Fayed again on 26 March. Subsequent to this, on 17 June 1986 I initiated an adjournment debate on Lonrho's ownership of The Observer.

  Between March 1987 and January 1989 I asked 27 parliamentary questions dealing with either House of Fraser or Lonrho or both. One of these was an oral question, the rest were written. I can confirm that I drafted them all myself although in some cases the material on which the questions were based was supplied to me by Mr Al-Fayed.

  Of these questions, two dealt with the inspectors' report on Lonrho, three dealt with alleged defects in Lonrho's accounts, five with Lonrho subsidiaries called Blorg and Contango, one with Lonrho subsidiaries called Northchart and Coronation, four with Lonrho's dealings in the shares of House of Fraser before that company was acquired by Mr Al-Fayed, one with unsolicited communications from Lonrho, one with Lonrho's acquisition from Guinness of 10 whisky brands, and nine with the inspectors' report on the House of Fraser. The information relating to Lonrho's accounts and the Lonrho subsidiaries was supplied to me by Mr Al-Fayed. The other questions were entirely my own; for example, on 16 November 1988 I asked the DTI for the cost and other details of three investigations, House of Fraser (cost £1.5 million), Milbury (cost £1.1 million) and Guinness (cost to date £1.6 million).

  The oral question which I asked on 23 January 1989 suggested that Lonrho's most recent unsolicited communication, A Hero from Zero, might be recommended for the Booker prize for fiction.

  For the reasons that I have set out earlier, I believed what the Al-Fayeds had been telling everybody from the Secretary of State downwards about their origins, wealth, business interests and resources. However in the latter part of 1988, I began to have concerns about the Al-Fayeds and whether or not they had been telling the truth about all of these matters. I knew that they had had considerable difficulties with the DTI inspectors appointed in April 1987. I was aware that the inspectors had had on more than one occasion to give the Al-Fayeds a deadline for the provision of information or the answers to questions. It appeared to me that the Al-Fayeds had not been co-operating with the inspectors in the way that might have been expected. I started to feel uncomfortable about the uncritical support that I had given them. By the middle of February, 1989, I confirm that I decided not to undertake any further matters for them.

  Between May 1987 and January 1989 I was paid fees by Mr Al-Fayed. These payments which were in cash were made to me personally by Mr Al-Fayed. I am afraid that I do not have a record of when these payments were made or how much they amounted to. The sum was, however, substantially larger than £6,000, probably about £18,000. Mr Ian Greer was not an agent for these payments. Indeed, he had absolutely nothing to do with them and was wholly unaware of them. Furthermore, I was not paid a fixed sum to ask specific questions.

  According to my diaries, I had 14 meetings with Mr Al-Fayed in the 21-month period from May 1987 to January 1989. I advised him on how he should advance his case, as often counselling against a particular course of action as in favour of it.

  When Mr Al-Fayed paid me fees in May 1987, I should then have registered an interest in the Register of Members' Interests. I explained to Mr Al-Fayed that I had other consultancies each of which was the subject of a written agreement, each of which involved the payment of fees on a regular basis and each of which was registered in the Register of Members' Interests. I told him that I would like to agree similar arrangements with House of Fraser so that I could register the agreement in the Register. He did not respond to this proposal and, naively, I allowed the matter to drift. I repeat the apology which I made in October 1994 in my letter of resignation to the Prime Minister for my failure to register a declarable interest over 21 months from May 1987 to January 1989.

  As previously set out, in February 1989, I decided that I would terminate my relationship with Mr Al-Fayed and the House of Fraser. At the same time, I wrote on 6 February to the Registrar to declare an interest as a consultant to House of Fraser plc. The Register is a register of current interests and it is not possible to make a retrospective entry. As my relationship had now ended, I wrote to the Registrar shortly afterwards enclosing a revised list of my interests which omitted House of Fraser. At the same time, I informed the Government Chief Whip that I had done this and he confirmed that this was the appropriate action to take to put matters right.

  In April 1987, the DTI appointed Henry Brooke QC and Hugh Aldous to investigate the affairs of House of Fraser (Holdings) plc. They were particularly referred to the circumstances surrounding the acquisition of shares in House of Fraser plc in 1984 and 1985. The inspectors' report was published in March 1990.

  The inspectors said that, although Ministers and officials were unsure what to make of the Al-Fayeds about whom they knew little, they saw little alternative to reach a decision in their favour and they took comfort - rightly or wrongly - from the assurances which were given to the OFT and the DTI by the Al-Fayeds and, more importantly, from an impression which had been created that Kleinworts, the Board of House of Fraser and the Al-Fayeds' solicitors, Herbert Smith, had aligned their reputations with the representations of the Al-Fayeds.

  The inspectors concluded that the Al-Fayeds dishonestly misrepresented their origins, their wealth, their business interests and their resources to the Secretary of State, the OFT, the House of Fraser board and shareholders and their own advisers. The inspectors received evidence from the Al-Fayeds which was false and which the Al-Fayeds knew to be false. In addition, the Al-Fayeds produced a set of documents which they knew to be false.

  The inspectors devoted two appendices to the role of the press. They said that "In the present case it appears to us that two processes were at work concurrently. On the one hand, Mr Mohammed Al-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 any who sought to challenge his claim that he and his brothers beneficially owned the money with which they bought House of Fraser. 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 Mr Al-Fayed and his success in "gagging" the Press created new fact: that lies were the truth and that the truth was a lie".

  I now turn to the specific allegations numbered one to eight in your letter.

  1. I was not a member of a group of five Members of Parliament who comprised the parliamentary lobbying operation for Mr Mohammed Al-Fayed and the House of Fraser. There was no such group. I had no meetings with Members of Parliament at which the parliamentary lobbying operation for House of Fraser and Mr Mohammed Al-Fayed was discussed. The only meetings I had were with Mr Al-Fayed or his representatives, in particular Mr Royston Webb. Some of these meetings were also attended by Mr Ian Greer and Members of Parliament, namely Mr Neil Hamilton, Sir Michael Grylls and Sir Peter Hordern. The first of these meetings took place on 10 March 1986 over lunch at Harrods arranged by Mr Greer.

  2. On 17 June 1986 I initiated an adjournment debate on Lonrho's ownership of The Observer. I said that I was sorry that the directors of The Observer were either unable or unwilling to prevent Mr Rowland from pursuing his personal vendetta against the Al-Fayed brothers. It seemed to me that the independent directors of The Observer in particular ought to have been able to intervene. This debate took place 11 months before Mr Al-Fayed paid me any fees so there could be no question of any interest to declare.

  3. Between March 1987 and January 1989 I asked 27 parliamentary questions dealing with either House of Fraser or Lonrho or both. I tabled one early day motion in May 1989.

  4. I have no knowledge of any sum paid between 18 May and 27 July 1987 by Mr Al-Fayed to Mr Greer for the stated purpose of making payments to MPs. Part of any such sum was not paid by Mr Greer to me. Mr Greer has never paid me any money at any time.

  5. Between approximately May 1987 and January 1989, I received from Mr Al-Fayed approximately £18,000 in cash, for advice, consultancy and parliamentary services.

  6. I have no knowledge of a special invoice for £13,333 plus VAT rendered to House of Fraser by Mr Greer on 1 February 1990, specifically to cover disbursements to MPs including me. Mr Greer has never paid me any money at any time. Furthermore, I terminated my relationship with Mr Al-Fayed in February 1989.

  7. I did write once or twice to Ministers and I did have one or two meetings with Ministers to advance the cause of Mr Al-Fayed and House of Fraser. I regret that I did not disclose the fact that I was being paid by Mr Al-Fayed.

  8. I did register all of the payments received from Mr Al-Fayed by making an entry in the Register of Members' Interests. I regret that this entry was made much later than it should have been.

  I wish to respond to certain particulars of justification cited by The Guardian. I have numbered these in accordance with the draft Amended Defence of The Guardian in the High Court action 1994 H No. 1654 dated September 1996 which you sent me.

  (5A) As far as I am concerned, Mr Greer did not instigate or direct any of my parliamentary activities. I decided when I was going to ask questions in Parliament and I drafted these questions, in a limited number of cases using material supplied to me not by Mr Greer but by Mr Al-Fayed.

  (6) I did not discuss Mr Rowland's letter to me with Mr Greer. My activity in support of Mr Al-Fayed was not greatly reduced by Mr Greer. Mr Rowland's letter was one of the factors that I took into account in deciding to terminate my relationship with Mr Al-Fayed.

  (13) Mr Greer did not know of the payments to me by Mr Al-Fayed.

  (29) On 2 May 1989 I signed an early day motion tabled by Mr Dale Campbell-Savours about The Observer and the Tornado deal and on 15 May 1989 I tabled an EDM about the independent directors of The Observer. These EDMs were tabled three months after I terminated my relationship with Mr Al-Fayed.

  Finally, you ask for details of all benefits received by me or my family from Mr Greer and/or Mr Al-Fayed. In addition to the fees which I have already mentioned, I received from Mr Al-Fayed two Harrods teddy bears and two Harrods Christmas hampers and, for my wife, a Harrods staff discount card which she used once, to purchase goods to a value of less than £50. I received no benefits from Mr Greer.

30 January 1997


 
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Prepared 8 July 1997