House of Commons - Standards and Privileges

Select Committee on Standards and Privileges Second Report

APPENDIX 1

Draft report prepared by the previous Committee in the last Parliament

The Commissioner's Report

1. The Committee considered the memorandum from the Parliamentary Commissioner for Standards relating to a complaint by Mr Charles Hendry, Member for High Peak, against Mr George Galloway, Member for Hillhead. The complaint alleged that Mr Galloway had failed to declare a relevant interest during his speech in an adjournment debate which he had initiated.[5] At the time of the debate Mr Galloway had entries in the Register of Members' Interests as a director of and shareholder in Hawk Communications International, described as a company established "to assist democratic development in the Middle East and the Indian Sub-Continent"[6] Evidence produced in support of the complaint suggested that either directly, or through Hawk, Mr Galloway provided public relations services to the Committee for the Defence of Legitimate Rights (CDLR) an organisation whose members opposed the policies of the Saudi Arabian Government. The Commissioner considered that the evidence provided to him was not sufficient to validate the allegation that there had been a breach of the rules of disclosure. He concluded that he had no grounds for challenging Mr Galloway's version of events and recommended that the Committee should find accordingly.[7]

2. The Committee accepts the Commissioner's report and conclusions on the complaint submitted. However, there were four issues arising from the complaint which warranted further consideration by the Committee: (1) the accuracy of Mr Galloway's entries in the Register of Members' Interests; (2) the use made by the Mr Galloway of post-paid House of Commons envelopes on behalf of the CDLR; (3) the authentication of tape recordings supplied as evidence; and, most importantly, (4) the propriety of a Member acting as an intermediary for financial transactions between third parties in such circumstances as those described in this case. We therefore asked Mr Galloway to provide more detailed information on his financial relationship with Hawk Communications and with the CDLR. The relevant correspondence is appended to this report. We also invited Mr Galloway to give oral evidence which we also publish. As the evidence was an extension of the Commissioner's inquiry, Mr Galloway was heard in private. Mr Galloway chose to give this evidence on oath.

Registration of Hawk Communications

3. On 24 January 1994 Mr Galloway registered an unpaid consultancy in Hawk Communications. This was presumably anticipatory (the company still being in the process of formation) as the company's bank account was only opened on 18 March 1994. In the spring or early summer of 1994 Mr Galloway became a director and shareholder of the company but he did not register these interests until 16 January 1995. On 14 December 1994, the solicitors for Hawk Communications International filed dormant company accounts with Companies House and indicated that the company was being wound up.[8] However, Mr Galloway did not remove the two entries relating to Hawk from the Register until 12 March 1996, immediately prior to the publication of the 1996 edition of the Register. Mr Galloway assured us that he never received any pecuniary benefit from Hawk[9] and the Commissioner found no evidence that the company ever traded.[10]

4. In our opinion Mr Galloway was correct in registering both the directorship and the shareholding in Hawk Communications even though, in the event, he derived no actual pecuniary benefit from the company. The relevant rule which applied in 1994 was that if a company was engaged in any transaction additional to those required to keep it in being then it should be considered to be trading and a relevant directorship and shareholding should be registered.[11] However, the registration of the consultancy in January 1994 was not accurate, and subsequently Mr Galloway did not keep his entries in the Register up-to-date. Members are under an obligation to notify the Registrar within four weeks of any change in their interests. Accordingly the directorship and the shareholding should have been registered in the spring of 1994 and not in January 1995 and both entries should have been removed in December 1995, not in March 1996. It is important that Members ensure that their entries in the Register are regularly updated.

House of Commons Stationery

5. We were concerned by evidence we received relating to Mr Galloway's use of House of Commons stationery. The provision of free stationery and postage is a privilege which Members enjoy to assist them in their parliamentary duties. Among the rules which apply to their use is the requirement that they must not be used for circulars of any description. We draw the attention of the Administration Committee to the evidence given to us.[12]

Tape recordings

6. The complaint was accompanied by a transcript of interviews between a freelance reporter and Mr Al Mass'ari and Dr Al Fagih. The transcript was supported by a microcassette recording of those interviews. The sound quality of the microcassette is poor, the conversation only occasionally distinct. The tape was re-recorded, enhanced and transcribed on the authority of the Committee. The texts of the transcription provided with the complaint and the new transcription are appended.[13] There are significant differences between the two. The transcription provided with the cassette is no more than a selective summary to suit the reporter's hostile interpretation of Mr Galloway's actions. Moreover the microcassette itself is an edited compilation of extracts from what might have been a series of interviews. This is very unsatisfactory. It should be noted that in its inquiries the Committee will always undertake appropriate examination of any tape over which doubts exist before deciding whether or not to accept that tape as evidence.

Members acting as financial intermediaries

7. However, the Committee's main concern was Mr Galloway's account of his relationship with CDLR. This raises issues of general principle.

8. Mr Galloway's relationship with the CDLR was as an individual rather than through Hawk Communications. He described his role as attempting to "professionalise" the operation of the CDLR by providing advice on effective campaigning,[14] identifying professionals whose services would assist in this,[15] finding administrative staff,[16] organising travel and accommodation around the UK[17], advising on publications[18] and, in two cases, negotiating the provision of research by academics.[19]

9. Mr Galloway strenuously maintained throughout his evidence that he received no taxable, nor registrable, benefit from or for any of these actions.[20] He also told us that many of the payments were made directly by Dr Al Fagih, who was "in sole charge of the organisation's financial affairs"[21] although he also made some payments directly.[22] Mr Galloway provided evidence that he paid for some of the services using his credit card and he gave us copies of some of the bills he had paid by cheque. He said that the credit card statement and the bills represented the sum total of the payments he had made[23] and that he was reimbursed for this expenditure by Dr Al Fagih in cash.[24] On two occasions he had acted as an intermediary for Dr Al Fagih in making cash payments to academics for reports they had written for the CDLR.[25] Mr Galloway did not keep a record of the payments made to him. He told us "I had no reason to keep records of the reimbursements because I was not requiring them for income tax or any other purpose",[26] and "there is no record of them reimbursing me".[27] Nor did he hold out any hope of such a record being available from Dr Al Fagih.[28] To this extent the evidence before us is incomplete.

10. We note that Mr Galloway accepted that "the regime which obtains now in the House is different from and better than that which obtained" at the time he was acting as the CDLR's intermediary in the provision of services and that "it would certainly have been better not if I had kept better accounts, but if I had had nothing to do with the money at all, that I would have insisted that they open a bank account and that they sent cheques in the post like everyone else. That would have been undoubtedly better ...".[29]

11. It is undesirable for a Member of Parliament to act as an intermediary for third parties in such circumstances as those described in this case. In particular it is unacceptable for any Member to be involved in recycling cash between third parties.

12. It is also highly undesirable for any Member to act on behalf of any organisation where no full record is kept of all financial transactions with which the Member is associated. It is bound to be susceptible to misinterpretation and risks bringing the House into disrepute. We consider it to be fundamental to the House's system of declaration and registration that whenever a Member has a pecuniary relationship with an outside organisation which requires declaration or registration, the Member should ensure that this relationship is adequately documented.

13. We are particularly concerned that Mr Galloway's actions were on behalf of an overseas interest. Members should act with particular circumspection in any relationship with a foreign organisation or government where financial transactions of any kind are involved.

11 March 1997

5 Official Report, 24 January 1996, cols. 453-462. Back

6 Mr Galloway's entries in the Register for January 1994, January 1995 and March 1996 are reproduced in Appendix 8. Back

7 Appendix 3: Memorandum submitted by the Commissioner, paragraph 14. Back

8 Appendix 3: Memorandum submitted by the Commissioner, paragraph 6, footnote 1. Q.96. Back

9 Appendices 4 and 5: replies to letters from the Chairman; Q.2, 90, 95. Back

10 Appendix 3, paragraph 6; Q.2, 18, 87, 94, 96, 103. Back

11 Rules on the Registration and Declaration of Financial Interests, October 1994, paragraph 18. Back

12 Appendices 4, 5 and 6; Q.167-174, 202-207. Back

13 The transcription submitted with the complaint appears as Annex B to Appendix 1, the new transcription appears at Appendix 7. Back

14 Q.211. Back

15 Q.2. Back