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August D-day for Fayeds

The Observer, 31 July 1988



Observer City editor Melvyn Marckus reports on the anticipated imminent publication of the DTI report of the Fayed brothers' acquisition of House of Fraser; and comments on a front-page headline story published by the Guardian the previous day focusing on alleged criminal activities of the Observer's owners, Lonrho, during the early 1970s.



Sunday, 31 July 1988

August D-day for Fayeds


THE Department of Trade & Industry report on the Fayed family’s takeover of House of Fraser, owner of Harrods department store, is expected to be published within the next two weeks.

    The investigation was launched in April last year after sustained pressure for an inquiry from Lonrho, led by chief executive Tiny Rowland, which was consistently frustrated in its attempts to acquire House of Fraser by the DTI and the Monopolies Commission.

    It is widely anticipated that the DTI inspectors, Henry Brooke QC and Hugh Aldous of accountants Robson Rhodes, will prove highly critical of Mohamed Fayed, the self-styled Park Lane Pharaoh who claimed at the time of the £615 million takeover that the finance flowed from the Egyptian family’s liquid resources.

    Lonrho and The Observer have consistently maintained that such a sum was beyond the Fayeds’ resources. Fayed proclaimed he was a multi-billionaire.

    The inspectors’ report is also expected to criticise the Fayeds’ merchant bank advisers, Kleinwort Benson, who gave assurances to Sir Gordon Borrie, Director General of the Office of Fair Trading, and former Trade secretary Norman Tebbit that the Fayeds were descended from a wealthy Egyptian family whose fortunes were founded on cotton and shipping.

    Subsequent inquiries in Egypt made it clear that this was not the case. Earlier this year the US business magazine Forbes questioned the origins and extent of the Fayeds’ wealth and the issue was again raised last week in an hour-long programme on Channel 4.

    The programme, entitled ‘The Harrods Sale’, concluded: ‘This has been first and foremost a story about deception. Mohamed Fayed and his brothers duped the British Press and public about their family background and the origins and scale of their wealth.’

    It is expected that Trade Secretary Lord Young will preside over the DTI publication of the report, rather than hand the task over to Francis Maude, Minister for Consumer Affairs.

    Young is due to take his summer holiday in two weeks and wants the report behind him before he sets off for Australia at the end of August.

    At the same time as Young issues the DTI report, Lonrho intends to publish its own report on the House of Fraser affair. The Lonrho document will run to some 35,000 words.

    Meanwhile, The Guardian yesterday reported a story entitled ‘DPP’s dilemma on Lonrho bribes’. The story concerned the allegations made as a result of the DTI’s investigation of Lonrho completed in 1976.

    The Guardian quoted from three advices on evidence given by Sir David Tudor Price QC to the Director of Public Prosecutions concerning the Fraud Squad investigation of alleged criminal offences.

    The investigation centred on allegations of bribery, theft, concealment of information from shareholders and sanctions busting. No prosecution was ever mounted as a result of these inquiries.

    Lonrho yesterday issued the following statement: ‘The Guardian newspaper today reported that two weeks before the expected publication of the report by the inspectors appointed by the Department of Trade & Industry to investigate the circumstances in which the Fayed family came to acquire House of Fraser, 12-year-old secret documents critical of Lonrho have been leaked.

    ‘The DTI report on Lonrho was made in 1976. The authorities did not see fit to take any of the matters reported upon nor did the report make any reference to bribes, as suggested in the article.

    ‘Due to sanctions it was a difficult and sensitive period for all companies, including Lonrho, having businesses in Southern Rhodesia. The report recognised that special payments were made in connection with the development of the group’s business outside the United Kingdom.

    ‘The secret documents now being circulated were first seen by Lonrho two days ago, although they are 12 years old.

    ‘Lonrho must assume that they were stolen from official sources by persons unknown and that the police will wish to investigate the matter.

    ‘As the report into the circumstances of the Fayed acquisition of the House of Fraser is likely to be critical, it is assumed that the purpose of the circulation at this time is an attempt to detract from the likely criticism in the report, which Lonrho is pleased to note is to be published in two weeks’ time.’

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