Britain joins a growing list of countries engulfed in scandal

BRUCE WALLACE November 14 1994


Britain joins a growing list of countries engulfed in scandal

BRUCE WALLACE November 14 1994


Britain joins a growing list of countries engulfed in scandal


Ever since he was a boy growing up in the Egyptian port city of Alexandria, where he watched wide-eyed as British sailors in crisp white uniforms stood at attention on the decks of Royal Navy ships, Mohammed al-Fayed has been an avowed Anglophile. He bought his first British residence in 1972—a restored Scottish castle called Balnagown where he bottles his own whisky, is fond of wearing a kilt, and often invites local pipers over to entertain visitors. In the early 1980s, he used part of his fortune, earned from the construction of the Middle East oil port of Dubai, to finance the quintessentially British movie, Chariots of Fire. But al-Fayed’s most audacious—and still controversial—move came in 1985 when he took control of Harrods department store, a venerable London landmark and a symbol of the British establishment.

The fallout from that deal continues to rock British society, engulfing Prime Minister John Major’s ruling Conservatives in a bizarre scandal over influence-peddling, subterfuge and abuse of power. As a result, British politicians, more accustomed to scandals involving spies or sexual indiscretions, now find themselves as disgraced as their continental cousins in Italy, France and Spain, where a deluge of financial scandals has turned 1994 into Europe’s Year of Sleaze. “Parliament’s reputation has been damaged in an extremely high-profile way,” said Liberal-Democrat MP David Alton in an emergency House of Commons debate last week. “Public cynicism about our institutions and politics has reached dangerous new depths.”

That alarming assessment was supported by a Daily Telegraph poll that found that 73 per cent of Britons surveyed believed that the Conservatives “give the impression of being sleazy and disreputable.” And 64 per cent agreed that most politicians profit financially by abusing their positions.

The origins of the current British scandal are both byzantine and fascinating, dating back to al-Fayed’s purchase of Harrods. By his

own account, the Egyptianborn multimillionaire took for granted that his newfound prominence in London business circles would gain him easy acceptance into the British establishment. Instead, he discovered that the price of admission to society’s upper circle was not simply a matter of wearing a bowler hat and turning up on time for tea. However hard he tried and however much he spent—he claims to have given more than $500,000 to the ruling Conservatives in the 1980s—the doors to high society remained firmly shut.

For al-Fayed, no membership meant no privileges. He was infuriated when the Tories decided to investigate his purchase of Harrods because of allegations that he was a front man for other unnamed buyers. A subsequent government report concluded that he exaggerated his family’s wealth—although he had broken no law. But to an outraged al-Fayed, the entire affair was an unacceptable slap in the face.

Earlier this year, he lost an attempt to have the finding overturned by the European Court of H Rights. Soon after, he found that his application for British citizenship had struck a bureaucratic wall. “They could not accept that an Egyptian could own Harrods, so they threw mud at me and my family,” the 63-yearold businessman complained last month. “Much as I love Harrods, I would give it away to a passing beggar if the choice was it or the

good name of my family.”

So al-Fayed lashed back at the Establishment, with tactics that were most ungentlemanly. He began quietly dishing dirt on the Tories to The Guardian newspaper, alerting reporters to a practice that has become known as “cash for questions.” Al-Fayed alleged that in the late 1980s, at the time of the Harrods inquiry, a lobbyist with high-level Tory connections arranged payoffs to two Tory MPs who agreed to ask questions on his behalf in the Commons. Over the years, al-Fayed paid the two MPs many thousands of dollars, at a going rate of about $4,500 per question. And he claimed that in 1987 he had paid for one of

those MPs—Neil Hamilton, who subsequently rose to the rank of junior minister—to enjoy an extravagant, week-long stay at alFayed’s Ritz Hotel in Paris. What’s more, al-Fayed alleged that a prominent Saudi businessman had picked up another tab at the Ritz for Jonathan Aitken, chief secretary to the treasury and one of the most powerful Tories in the land, when the minister stayed at the hotel last fall.

The only hitch for Guardian editor Peter Preston was that he needed proof that Aitken had indeed stayed at the Ritz without

paying. Al-Fayed, for his part, was reluctant to turn over copies of the hotel bill because of the potential impact on the Ritz’s reputation if it were discovered that he had leaked confidential information about his guests. So Preston offered his source a cover. Al-Fayed’s protection would be a phoney fax, written on House of Commons stationery and including Aitken’s forged signature, asking for a copy of the invoice. The Egyptian agreed and, armed with Aitken’s Ritz bill, The

Guardian began pubfishing its allegations in late October.

With corruption scandals swirling 016mhng class' es the continent, it seemed like a welltimed assault against

Britain’s creaky 15year-old Tory government. The charges in late October sparked an immediate and massive outcry over sleaze in British politics. Hamilton and another MP, Tim Smith, who admitted to accepting bribes from al-Fayed, resigned. And Prime Minister John Major was forced to strike an independent inquiry into the way MPs juggle politics with outside business interests. But The Guardian did not escape the mudslinging over ethics. After the government accused Preston of duplicity in securing Aitken’s bill, Parliament voted overwhelmingly last week to investigate the newspaper’s conduct as well.

The source of the stories did not hide his identity for long. Declaring that he was “sick and tired of the hypocrisy that goes on at the highest levels of government,” alFayed went public with his professed dismay at discovering that British politics was not as pristine as its image. “Compared with ministers, MPs, and other Tory fixers I have had the misfortune to encounter,” he said, “the average carpet dealer in the Cairo

bazaar is a man of great probity and honor.”

Indeed, there is a distinct sourness about public fife in Britain these days, and no institution seems beyond the reach of scandal. In recent months the Royal Family has wallowed in tales of adultery, while critics have pummelled the Church of England, which denounces homosexual acts as sinful, for defiantly installing a bishop who was once convicted of committing public indecency with another man. Also this year, political scandals have erupted over a child bom out of wedlock to a cabinet minister, the shotgun suicide of the transport minister’s wife over his friendship with another woman, and an MP’s accidental death by strangulation while performing an autoerotic sex act.

Many Britons are quick to point out that, compared with their continental counterparts, British sleaze is a minor tempest—at least in financial terms. “This is embarrassingly small beer,” said Tommy Helsby, managing director of Kroll Associates, a company that investigates business fraud. Perhaps—although not everyone would consider $300 bottles of wine and a $9,500 total bill for Hamilton’s six days at the Ritz to be modest. “Everybody knew what was going on,” said Helsby. “There is not a significant change in the amount of sleaze. There’s just more of a will to chase it.”

British wrongdoing is, indeed, petty compared with corruption in Italy, where two years of investigations by prosecutors have swept away an entire ruling class. And in France, a widening investigation has uncovered a system of so-called “commissions” on public contracts paid by businesses to politicians and civil servants. Introduced originally as a means of circumventing the mies governing business donations to political parties, the commissions gradually became entrenched practice. One former cabinet minister, Alain Carignon, is now in jail, and the mayors of several large cities and the heads of some of France’s largest companies have been tried or are under investigation. “Corruption is no longer a Third World problem,” said Jack Mahoney, a business ethics professor at London Business School.

Various explanations have been put forward for Europe’s rising tide of scandal. One is that crusading prosecutors, armed with broad powers as in Italy or new securities regulations as in Britain, are more intent than ever to clean up Europe’s business culture. The heyday of the Old Boys network may be ending. “In Britain, things have always been based on decent people behaving decently,” said Christopher Napier, a senior accounting lecturer at the London School of Economics. “But Tory philosophy has emphasized self-interest, and over the years it has worn down the whole notion of public-service ethics.”

That points to another source of scandal: many European governments are getting long in the tooth. Spain’s Socialists, for example, have been in power since 1982. And during the Tories’ 15-year reign at Westminster, scores of politicians have left for the private sector, sometimes into directorships of former state-owned companies that they helped privatize while in government. They retain close ties with colleagues still in office.

Both Helsby and Mahoney argue that the recession’s squeeze encouraged otherwise honorable people to bend or break the rules in an effort to save themselves or their companies. “It’s not that people are less honest than they were 50 years ago—it’s just harder to be honest,” said Mahoney. “There are more opportunities and greater temptations to cut comers now.” A survey of 403 French business leaders in July found some support for that theory,

although most blamed the rise in corruption on a general loss of moral purpose. (Interestingly, roughly a quarter of the French businessmen said it was legitimate to break the law in order to capture more market share or to rescue their company from insolvency.)

But it is politicians who draw the most public scorn. An opinion poll conducted last week in France showed that 58 per cent of those surveyed felt that corruption scandals had damaged the entire political class. Breaking the link between politicians and sleaze will be difficult in Britain, where the word has been stamped into the political lexicon—and has brought a whiff of farce to public life. Last week, the 4.1 million readers

of The Sun, Britain’s largest daily, were offered a chance to win a “Freebie on us at the Ritz,” in a “sleazy-to-enter” contest. (The Sun's skill-testing question: “What is the capital of France?”)

“All of us are to some extent on trial,” acknowledged Labour Party deputy leader John Prescott. One improvement would be to prohibit British MPs from serving as paid lobbyists. (In 1989, Tory backbencher Richard Alexander even placed an ad in the House of Commons internal newsletter reading: “Hard-working backbench MP of 10

years standing seeks consultancy to widen his range of activities.”) But few observers expect reforms to go that far, in part because British MPs are not expected to be full-time politicians.

In any event, the Harrods caper has done more than merely tarnish a few political reputations. It is a tale with no heroes. The source, al-Fayed, had suspiciously personal motives. After all, it took him six years to blow the whistle. The reporters who helped break the story employed dubious methods of news-gathering; it also came to light that dozens of British journalists had availed

themselves of al-Fayed’s hospitality or received Harrods products as gifts over the years. All of it was aimed at exposing politicians engaging in questionable behavior for personal profit. There was a rush by other MPs last week to register their outside “consultancies” with parliament, as required by law. “The public want and expect us to put our own house—the House of Commons— in order,” Alton, the Liberal Democrat MP, warned his colleagues in imploring them to hold an open investigation into political misconduct. His plea was to no avail. The MPs voted to conduct their inquiry in secret.