Fox affair: donors' fury over 'lies'
Liam Fox and his best man Adam Werritty were battling damaging new allegations over their conduct last night.
Donors said they had given money to Mr Werritty, the ex-defence secretary’s best man, to promote their political agenda but were furious to discover the cash was used to fund his lavish lifestyle.
Dr Fox faces questions over whether he knew of the existence of the so-called secret “slush fund” and how it was being operated by Mr Werritty.
Secondly, the donors told The Sunday Telegraph that they had been promised that they would remain anonymous, but have now had their names made public in the growing scandal.
In a third development an MP last night urged the police to step in to investigate whether Mr Werritty had committed “fraud”.
But friends of the former minister insisted that he had nothing to fear and was confident that the inquiry being conducted by Sir Gus O’Donnell, the Cabinet Secretary, would not deliver a harsh verdict when its findings are made known this week.
However, Sir Gus will be under pressure this weekend to deal with the alleged promise by Mr Werritty to guarantee donors anonymity when they funded “Pargav” the company set up to further Dr Fox’s interest in foreign policy, in a possible breach of strict rules on declaring political donations.
One of the donors told The Sunday Telegraph they had been misled over how their money would be spent and had called in lawyers. Another company, whose employee set up Pargav on Mr Werritty’s behalf, had instituted a formal investigation by a leading City law firm.
It was the fury of the donors, many of whom are backers of the Conservative Party, which led directly to Dr Fox’s decision to resign on Friday, saying he had blurred his personal and professional lives.
The former defence secretary’s hopes of a Cabinet comeback at some point in the future now largely depend on Sir Gus’s findings.
One friend told The Sunday Telegraph: “Liam did not profit by a penny piece from all of this and I am sure the inquiry will make that clear.
“In a couple of months we will be looking back at all this and wondering what it was all about. It’s a load of absolute nonsense.”
In an impromptu reshuffle, David Cameron replaced Dr Fox with Philip Hammond, who had been the transport secretary, and promoted Justine Greening into the Cabinet to take Mr Hammond’s post. It was so rushed that Mr Cameron promoted ministers from a railway platform surrounded by morris dancers.
The new questions for Dr Fox and Mr Werritty came as:
Mr Mann has written to police demanding they investigate whether Mr Werritty committed a crime by calling himself Dr Fox’s adviser.
Mr Mann said: “I referred the matter to the police to investigate whether there is a potential fraud.
“Mr Werritty gave out business cards saying he was an adviser to Dr Fox.
“If that is not the case and he was getting money — for whatever purpose — by misrepresenting his relationship with the defence secretary, that cannot be right.” Mr Mann also said he would call for police and the Electoral Commission to look at whether Dr Fox could face potential criminal proceedings.
Sir Alistair Graham, former chairman of the Committee on Standards in Public Life, said: “The real question is how is it the Ministry of Defence and officials in Liam Fox’s private office were not alerting the Permanent Secretary that something pretty unacceptable was happening.”
Meanwhile the American chief executive of Atlantic Bridge has told The Sunday Telegraph that the organisation’s British arm, whose sole employee was Mr Werritty, “did nothing” and was “a shell game” — a reference to a US-style street confidence trick.
Amanda Bowman, whose US group raised more than $500,000 for Dr Fox’s cause, said what Mr Werritty did for the organisation was “something of a mystery”.
“I have never met Liam Fox without Adam Werritty there,” she said.
“He was the British operation, there was only Adam. But the British arm didn’t really do anything. Its money came from one donor, Michael Hintze. Adam was running it and I think he made some big mistakes.”
Atlantic Bridge was succeeded by Pargav. It was designed to pursue the defence secretary’s personal political agenda and guaranteed its financial backers “total anonymity”.
Donors were told it was promoting free trade and Britain’s special relationship with the United States. It was put together to ensure that nothing linked it to the Cabinet minister or his close friend and former flatmate.
During a 12-month period almost £150,000 was paid into Pargav’s bank account, based at a branch of HSBC in the Buckinghamshire town of Gerrards Cross, 30 miles from the central London home of Mr Werritty, 33, who used it to pay for his lifestyle as he travelled the globe in style.
The money was spent on first-class travel and five-star hotels, as well as tailored clothes, expensive shows, and entertainment, including a trip to Larry Flynt’s Hustler Club, a topless bar in New York.
The firm had no shareholders and no registered employees. Neither Mr Werritty nor Dr Fox appeared on any legal paperwork.
Donors included John Moulton, the venture capitalist, and the South African businessman Michael Lewis, who between them handed over £133,000. Its one director, Oliver Hylton, had no involvement in its day-to-day activities and set up the company at the request of Mr Werritty, sources said.
He works as an aide to Tory party donor Michael Hintze, the Australian multi-millionaire boss of hedge fund CQS, advising him on charitable giving.
Mr Hintze, alarmed by suggestions that he was backing Mr Werritty and underwriting his activities, ordered his employee to explain how the company had been set up and was operated, then discovered the extraordinary expenditure, sources said.
Mr Hintze was told the company had been set up as a favour done by Mr Hylton to his friend Mr Werritty and had nothing to do with CQS. Mr Hylton then made public how the money had been spent.
At the same time other donors who had given money to Mr Werritty began to question how he had used their cash, delivering a fatal blow to Dr Fox.
Mr Hylton faces a formal investigation over his role by City law firm Allen and Overy, which Mr Hintze has called in to ensure that his hedge fund or its employees have not broken any Financial Services Authority rules.
Sources close to the donors said Mr Hylton had acted “like a buffoon” by failing to ask why Mr Werritty did not want any official association with the firm.
It also guaranteed that the name of its backers, many of whom were Tory donors with a long association with Dr Fox, would never be revealed. Strict rules on political donations say they need to be fully declared.
A spokesman for Good Governance Group, which gave £15,000 to Pargav and £60,000 in total to organisations linked to Dr Fox, said it was investigating how money paid into Pargav was spent.
Mr Werritty was unavailable for comment last night.
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