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    Guards say that bugging equipment is kept in a basement room on the corner of South Street and Park Lane. In addition, says Dunt, "everybody who calls Fayed at 60 Park Lane is recorded, and all telephone calls in and out of the building are logged on a computer." Harrods' management offices are regularly swept for bugs and wiretaps. Another former guard, Russ Conway, told me that he personally bugged meetings at Harrods. Employees' phones there were also tapped. A former Harrods executive, newly hired, watched a guard come into his office every afternoon, open a panel in the wall, and take out what looked like a videotape and replace it with another one. Curious, he discovered a tiny video camera trained on his desk.
In 1990, Christoph Bettermann became Fayed's number two, the deputy chairman of Harrods. He had worked for Fayed in Dubai since 1984. In April 1991, Bettermann was approached by an American headhunter to work in the Arab emirate of Sharjah, and almost immediately, he says, Fayed told him, "I hear you are leaving me." In June, says Bettermann, "he showed me a written transcript of a phone conversation between the headhunter and me. He accused me of breaking our trust by talking to these people. I told him, 'If you don't trust me, I resign. I cannot trust you if you bugged my phone.' " Bettermann quit Harrods and took an oil-company job in Sharjah.

    Fayed promptly wrote the ruler of Sharjah, accusing Bettermann of stealing large sums of money. In a meeting with John Macnamara, an ex-Scotland Yard detective who is Fayed's security director, Bettermann asked if he was being taped, and Macnamara said no. A tape of that meeting later surfaced. Bettermann was cleared by three courts in which Fayed had pressed charges, but Bettermann's defense cost him $160.000. "Fayed has every law firm in London sewed up. It was intimidating," Bettermann says. "Fayed charms you at first. Once you do not turn out the way he wants, you're the bad guy, and he tries to get rid of you, sometimes in appalling ways."

    Bettermann's wife, Francesca, who was Harrods' legal counsel, resigned when her husband did. "The most common thing at Harrods was unfair dismissal," she says. "We had a huge amount." Last year Harrods was facing 32 such cases, compared with 2 at Selfridge's department store, which has a similar number of employees. "The law says you can't fire people without cause. Mohamed says, 'I can, as long as I pay for it.' " Francesca Bettermann adds, "He settles them all. He has never gotten into the witness-box. I think he'd be very frightened to go to court." Yet even when his lawyers told him that he couldn't win, she claims, he'd say, "Sue. Sue anyway."

    When Francesca Bettermann was hired, she had to take an H.I.V. test-women working close to the chairman had to undergo full internal exams and be grilled on their entire gynaecological histories-and her handwriting was analyzed. (In 1994, three former Harrods employees claimed that they were given H.I.V. tests although they had specifically withheld permission to be screened. Michael Cole says it was the doctor's fault. The doctor had blamed the medical lab.) Fayed has a strong phobia about germs. He does not eat out except on rare occasions, and eats only what his personal cook prepares for him. Each plate he eats from must be boiled and rimmed with a cut lime to disinfect it. When he helicopters from his country house to London, he wears a gas mask so that he won't inhale fumes.

    Whenever Fayed suffers a spate of bad publicity, the press seems to be flooded with stories and pictures of him helping needy children. In fiscal 1994, Fayed had House of Fraser donate £800.000 ($1.2 million) to charity. Yet Fayed's fear of germs is such, say ex-employees, that he can, barely stand to touch the children who get him so much positive press. He does not allow his own children to attend the annual Harrods Christmas party, they say, for fear of contamination, and he keeps Wet-wipes in his pockets so that after shaking every little hand he can wipe his own.

    He does not abide smoking. Revlon chairman Ronald Perelman showed up to meet Fayed in his office several years ago with his trademark cigar stuck between his teeth. According to an observer, before Fayed shook hands or said a word to Perelman, he yanked the cigar out of his mouth and threw it against the wall.


    The boss's strong likes and dislikes quickly become apparent to those who work closely with him. "He likes a pretty face. He wouldn't hire someone who was ugly. He liked them light-skinned, well educated, English, and young," says Francesca Bettermann. "I remember there was something on the application form that said, 'Your color, race…' I said, "You're not allowed to put that on the form,' and he said, "Well, make sure they put proper photos in, then.' " Last year, Harrods settled five racial-discrimination cases against the company, and, according to union officials, between June and September of 1994, 23 of the 28 people fired were blacks, who had held mostly menial jobs. Meanwhile, The Guardian reported that a Harrods spokesman had said, "Mohamed Al Fayed is very aware of the evils of racism. He hates racial discrimination in all its forms, and he would not entertain anybody working for him who might decide they should start acting this way."

    Fayed, ex-employees told me, changes his mind constantly, without warning. People who had worked for 20 years or more at Harrods were escorted off the premises in five minutes after having been told they were "redundant." Police were sometimes summoned for minor infractions, and officers hauled one executive off a plane at Heathrow. Shortly before Michael Ellis-Jones, ex-managing director of Harrods, left, he told staffers, "You can't run this place like a harem. The men aren't eunuchs, and the women aren't serfs."

    According to former employees, Fayed regularly walked the store on the lookout for young, attractive women to work in his office. Some were asked to go to Paris with him. Good-looking women were given gifts and cash bonuses almost before they understood that they were being compromised. "Come to Papa," he would say. "Give Papa a hug." Those who rebuffed him would often be subjected to crude, humiliating comments about their appearance or dress. A dozen ex-employees I spoke with said that Fayed would chase secretaries around the office and sometimes try to stuff money down women's blouses. A succession of women were offered the use of a free apartment on Park lane or a luxury car.

    Former Harrods workers can tell Fayed stories late into the night. He would brandish a two-foot plastic penis at male visitors and ask, "How's your cock?" He bought several of Liberace's pianos and ordered a painting of Harrods on Waikiki Beach, by actor Tony Curtis, to be reproduced for sale. Then there was Salah

Fayed, the peculiar third brother, codenamed by the security guards "the fruit bat" because he came out only at night. Salah, who lives in Egypt, has not applied for British citizenship; indeed, he is no longer even a director of Harrods. Salah once bought two 18-inch miniature horses, one for one of Mohamed's daughters and one for himself, which he would walk on a leash down Park Lane. When Mohamed found out, he ordered that Salah's horse be removed.

    The atmosphere in Harrods was terrifying to some, and it fostered political backbiting. Why, if so many people felt they were so badly treated, did they wait to be fired? Many of them would say that in a country where unemployment runs high the Harrods name carried the day, and Fayed's money bred their dependence. "He takes you on and pays you a relatively good wage," says former security man Bill Dunt. "You begin to live according to your wage, and when it comes to the thought you might lose it, they've got you."


Fayed's acquisition of Harrods coincided with a wide-open laissez-faire period in Britain in the mid-80s, when, under Margaret Thatcher's pro-business government, entrepreneurship was exalted as never before and strictures in the City were loosening. The casinos were awash with spectacularly rich Arabs, the brash Americans at Salomon Brothers and Goldman, Sachs were coming on strong, and after the Big Bang-the deregulation of Britain's financial markets in 1986-staid British investment banks and law firms did not want to be left behind.

    There's an old Arab saying, "Find out what a man wants and give it to him." Mohamed Al Fayed was one of those who provided visiting Middle Eastern potentates with whatever they desired. From his early boyhood in the Gomrok slum in Alexandria-not far from the exclusive Yacht Club-he had tracked the rich. After a flamboyant and checkered early career, he had ended up as a commissions agent and middleman for one of the world's wealthiest men, Mahdi AJ Tajir-the right hand of Sheikh Rashid of Dubai. But they had a falling-out. "He was a bagman. Your role as a bagman is exactly that. You owe 90 percent of the money to those whose bag you're carrying," says financial journalist Michael Gillard, who professionally has been both a friend and a foe of Fayed's. "If you do enough deals and the deals are big enough, you can make tens, hundreds of millions of dollars." Fayed also arranged parties. "If sheikhs were coming, he'd lay on a string of girls for parties," says Gillard.

    In 1979, Fayed had renewed an old acquaintance with Tiny Rowland, and he began to feed business reporters from Rowland's Observer leads for stories on bribes and corruption among his enemies in the Gulf. He and Rowland used to breakfast together, and Terry Robinson, Lonrho's former director responsible for House of Fraser, remembers that Fayed always seemed obsessed with sex. "He'd thrust on Tiny all these sex toys. He'd come back from these breakfasts laden with devices." Rowland and Fayed had met in the early 70s, when Lonrho bought Fayed's shares in the British construction company Costain and Fayed went on the Lonrho board. The relationship quickly frayed. "I ran away from all the crooked dealing, all the arms dealing and bribes," Fayed claimed. When I informed Rowland the next day that Fayed had said that he ran a "dirty company," he was taken aback. "Our chairman was a son-in-law of Winston Churchill, Lord Duncan Sandys. If Fayed refers to us as a 'dirty company,' he should have refused to join a company chaired by Duncan Sandys."
Born Roland Walter Fuhrhop in a German internment camp in India during World War 1, Tiny, by 1979, had made a fortune in Africa and held a 29.9 percent stake in the House of Fraser department stores. Lonrho frequently expressed interest in buying all of it, but had been ruled against by the British Monopolies and Mergers Commission, which regarded Lonrho's bid as not in the public interest. When Fayed, whom Rowland nicknamed Tootsie, offered to buy Lonrho's shares in House of Fraser, Rowland believed he had found a perfect vehicle with whom to park the stock until the political climate changed and he could find a way to acquire the whole company himself.

    Clashing with the government was nothing new for Rowland. In 1973, after a power struggle at Lonrho, the D.T.I. had investigated him and produced a blistering report. Prime Minister Edward Heath had called Rowland "an unpleasant and unacceptable face of capitalism." (Rowland rejoined, "Of course, being called the acceptable face of capitalism would be equally insulting.") Like Fayed, he was a self -invented outsider who sought to be more English than the English. Elegant, amoral, charismatic, and six feet two, Rowland was considered by many Africans to be a latter-day Cecil Rhodes. Others condemned him for bringing to that continent a way of doing business that depended on pay-outs and the granting of favors. In Britain, where he was educated as well as detained and jailed during World War II as a German sympathizer, he was adored by Lonrho shareholders but scorned by the Establishment.


    Rowland had a vast network of contacts and close personal relationships with African leaders. He knew things before anyone else. "Rowland could never be prosecuted in this country," Michael Cole claims. "Within a half-hour he could say enough to destroy the British Commonwealth. He's the man who knows too much." I asked Cole if Rowland's information was correct. "Yes. He knows everything." (Ironically, Cole denies most of what Rowland alleges about Fayed.) But for all his savvy, Rowland underestimated the wily Egyptian.
The purchase of Harrods came during a propitious moment of Fayed's life, when he had ingratiated himself with the richest man on earth, His Majesty Sultan Haji Hassanal Bolkiah Mu'Izzaddin Waddaulah, the Sultan of Brunei. The credulous sultan was irresistible to those who trafficked in the world's most expensive luxury goods and services, and wheeler-dealers from far and wide exhausted themselves trying to juggle their wares and prostrate themselves before him. Between the summer of 1984 and the spring of 1985, Fayed managed to elbow the competition aside.

    Fayed told me that he had known the sultan as a little boy and his father before him. He also said they got to know each other over discussions about building a trade center in Brunei. Tiny Rowland gave the D.T.I. another explanation. He said Fayed had told him that he negotiated an introduction to the sultan for $500,000 plus a piece of the action of any resulting business with a hustling, globe-trotting Indian holy man, Shri Chandra Swamiji Maharaj, known as the Swami.

    The Swami, a heavy-set former scrap-metal dealer once detained in jail on fraud charges, is today a power broker in New Delhi with close ties to Indian Prime Minister P. V. Narasimha Rao, and he has numbered Imelda Marcos and Elizabeth Taylor among his followers. He was especially sought-after once he became "spiritual adviser" to the sultan's second wife, Mariam, a former air hostess, in the course of predicting (incorrectly) that she would give birth to a son.

    Through the late Washington lawyer Steven Martindale, the Swami met Fayed's old enemy Adnan Khashoggi. Fayed had once been married to one of Khashoggi's sisters, and he had fallen out with the family. Martindale, with financial help from Rowland, later wrote a truth-is-stranger-than -fiction book about his experiences with the two men and their connections with Fayed. Called By Hook or by Crook, the book was never distributed. Fayed issued a libel writ on the press release announcing the book and told the English publisher that if he ever wanted to sell another book in Harrods-one of the largest book outlets in Britain-he would not publish Martindale. When I asked Fayed about his association with the Swami, he laughed and said that they had met only once.

    Beginning in the summer of 1984, Fayed received several powers of attorney and written authorizations from the sultan to carry out certain tasks for him. These powers of attorney gave him legal access to large sums of the sultan's cash. Two mandates to act on the sultan's behalf were given on August 20, 1984, and were to be used to cancel two previous contracts for the construction of a luxury yacht. Another, dispensed three days later, and naming Fayed "our personal and official Financial Advisor," was issued to retrieve nearly $100 million the sultan had advanced to a Swiss businessman named Carl Hirschmann. Hirschmann was to have customized for the sultan a special stretch 747 jet with several bedrooms and stalls so that the sultan could fly non-stop from Brunei to London with his polo ponies. They were trying to find out what to do about the horses' urine when Fayed reportedly persuaded the sultan to dump Hirschmann. Hirschmann's son was detained in Brunei until $86 million of the sultan's money was returned to a bank account Fayed would have control over. In addition, according to the D.T.I. report, another $200 million of the sultan's on deposit for the design of the yacht was transferred away from the marine designer's control by Fayed "once he had himself been granted appropriate authority by the Sultan."

    In June 1984, say the inspectors, the Fayed brothers had $69 million on deposit, "whatever its original source," in the Royal Bank of Scotland. But in the next two months, Mohamed was also busy incorporating two holding companies as receptacles for the brothers' assets in Liechtenstein, and traveling between Brunei and London acquiring the powers of attorney from the sultan. During that same period, according to the D.T.I. report, the three Fayed brothers' bank, the Royal Bank of Scotland, received a sudden transfer of hundreds of millions of dollars from Switzerland into the Fayeds' accounts. Fayed has never really explained where this money came from; the bank assumed it belonged to the sultan. However, Fayed told the bank that his portfolio was separate from the sultan's. "It may be no more than coincidence that this vast increase in disposable wealth followed quickly on the admission of Mohamed to the sultan's confidence," wrote the inspectors. "It is, however, a very powerful coincidence."

    By November, Fayed had struck a deal with Rowland to buy his House of Fraser shares for £138 million ($171 million). Rowland incorrectly assumed that the shares would be safely parked if he let Fayed have them, because he was sure that Tootsie didn't have the capital to acquire more. "I sold because I wanted him to keep the stock. I've made many mistakes in my life, but the worst was I trusted him!"

    Almost immediately, Fayed demanded that Rowland leave the House of Fraser board, and went behind Rowland's back to court the House of Fraser chairman, Professor Roland Smith, who received a handsome retroactive bonus from Fayed once he obtained ownership.

    Rowland also wrongly believed that if Fayed made a bid to buy a controlling interest in House of Fraser, it would never get past government investigation. "We were in the right place at the right time," says Michael Cole. "They'd let anybody buy it who wasn't Rowland."
Next, the little-known Fayeds and their new advisers had to convince the government and the public that they controlled enough assets to be able to hand over $700 million unencumbered. It required them to invent a history of old money; overnight they became "fabulous pharaohs." The Fayeds were represented by the investment bankers Kleinwort Benson and the law offices of Herbert Smith, two old-line British firms which basically accepted at face value what the Fayeds told them. "Remember," said Kleinwort's John MacArthur, who handled the deal for the Fayeds, "Kohlberg, Kravis Roberts was buying out RJR Nabisco on bus tickets. It was go-go time." As the D.T.I. report put it, "The lies which the Fayeds were telling about themselves and their resources were given a credibility they would not have otherwise attained when they were repeated by their very reputable advisers."

    The Fayeds' bankers submitted a now discredited one-and-a-half –page summary of their assets, which the government accepted. On November 2, Kleinwort issued a press release about its new clients: the Fayeds were an "old established Egyptian family who for more than 100 years were ship owners, land owners and industrialists in Egypt." To this day, the brothers are said to be "raised by British nannies, educated in British schools and unabashed admirers of British history, traditions and ethics." When Nasser came to power, they fled. With a couple of notable exceptions, the press swallowed the story whole.


    "Statements about the sources of their great wealth and about the scale of their businesses formed part of their central story," wrote the D.T.I. inspectors later. "If people had known, for instance, that they only owned one luxury hotel; that their interests in oil exploration consortia were of no current value; that their banking interests consisted of less than 5 percent of the issued share capital of a bank and were worth less than $10 million; that they had no current interests in construction projects: that far from being 'leading shipowners in the liner trade' they only owned two roll-on roll-off 1600 ton cargo ferries; if all these facts had been known people would have been less disposed to believe that the Fayeds really owned the money they were using to buy HOF."

    Fayed entertained the wowed House of Fraser board at the opulent 60 Park Lane and flew the Harrods manager over to the Ritz. American public relations advisers were hired-never knowing whether they were being paid by the sultan or Fayed-to broadcast the sultan's good works. Sir Gordon Reece, one of Margaret Thatcher's kitchen cabinet and her TV-image adviser, who was also advising Fayed, was provided with a Park Lane apartment.

    In January 1985, Fayed received another power of attorney to quietly purchase the Dorchester Hotel for the sultan. On January 29, Fayed accompanied the sultan to 10 Downing Street to visit Margaret Thatcher. The pound at that time was in drastic decline, threatening the economy, and the sultan, who had moved £5 billion ($5.6 billion) of assets out of sterling, kindly did Britain a grand favor. He moved it back in. Fayed has taken credit for the assist and also for persuading the sultan to give British defense industries a half –billion pounds ($560 million) in contracts.

    On March 4, 1985, the Fayeds announced a formal cash offer for House of Fraser of £615 million ($689 million), which Kleinwort claimed was untethered by any borrowings. The financing of the Fayeds' bid has been the source of intense scrutiny, and while no one, including Fayed, has supplied a comprehensive account, some numbers have emerged. According to the D.T.I. report, by October 1984 the Fayeds had at their disposal at least $600 million in the Royal Bank of Scotland and in a Swiss bank. "We were not told the source of any of these funds or given a credible story as to how and where they were obtained," said the inspectors. Tiny Rowland claimed that the architect behind the sultan's 1,788-room palace, Enrique Zobel, had said that Fayed controlled $1.2 billion in yet another joint account with His Royal Highness. Whatever the amount, the huge pile of cash the Fayeds claimed as their own was apparently used as collateral in order to guarantee a loan of more than £400 million ($480 million) to buy House of Fraser.

    "If you have a company with tremendous assets like Harrods," Fayed told me, "you have no problem. You don't need to use cash." That first loan, drawn on a Swiss bank, was then quickly replaced with another loan. secured by House of Fraser shares. Thus, within a short period of time, it seems, the Fayeds owned House of Fraser and didn't have any of their own money in it.

    "Nobody's been able to find out whose money is behind the purchase, because of secrecy laws of Swiss banking codes," asserts Terry Robinson, who spent nearly two months researching the Fayeds' accounts for Lonrho. "The D.T.I. inspectors tried, and sought British-government assistance. The Swiss will cooperate, but it has to be on a government-to-government basis. The British government refused the inspectors' request. That, to me, is the fishy side of things." The inspectors were thus denied definitive proof. Nonetheless, they said they were left to conclude "that this was somebody else's money," and, further, that "the conclusion that the money was derived from [Fayed's] association with the Sultan looks not only possible but probable."

    Tiny Rowland wrote Trade Minister Norman Tebbit a seven-plus-page letter repudiating the Fayeds' story, according to Tom Bower, who wrote an unauthorized biography of Rowland. Rowland also enlisted the former director of the Egyptian secret police and Nasser's son-in-law, Ashraf Marwan, to aid him in exposing the Fayeds-who had previously enlisted Marwan to help them buy Rowland's House of Fraser shares.

    A full-scale press battle began. Brian Basham, a slick P.R. adviser whom Kleinwort brought in for the Fayeds, was spinning pro-Fayed pieces while Tiny Rowland sought to influence his newspaper, The Observer. On the weekend of March 9 and 10, The Observer published an article using some of Marwan's information. That Sunday night on national television, John MacArthur of Kleinwort blithely reiterated that the Fayeds were worth "several billion dollars" despite the fact that he also admitted, "I have got no statement of their consolidated financial position." The next morning, March 11, the Fayeds bought more than 50 percent of House of Fraser.

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