- The Observer,
- Sunday January 28, 2001
On 18 December, between the documents on the criminal justice system and policing matters, was a one page letter from the parliamentary questions office in the Commons. It contained a two paragraph inquiry about two brothers and their relationship with two powerful men in the Government.
'To ask the Secretary of State for the Home Department what representations he has received in the applications of GP Hindiya and SP Hindiya for British citizenship from a) the Right Honourable member for Hartlepool and b) the Honourable member for Leicester East.' It was the start of a scandal.
The questions were sent to the office of Barbara Roche, the immigration Minister. Her officials looked nonplussed at the names being asked about: GP Hindiya and SP Hindiya. Did that mean the Hinduja brothers, billionaires, friends to the Labour glitterati and well-known Government glad-handers? They assumed it did.
The questions were from Norman Baker, the Liberal Democrat MP, who was determined to uncover the truth about Srichand and Gopichand Hinduja and their relationships with those at the highest levels of the British Establishment. He had misspelt the names in the question, but this small error would not be enough to prevent the story from unfolding. Baker had been involved in discussions with The Observer , which was undertaking an investigation of its own. The two chimed. The Home Office started making inquiries.
Half a mile away in the Northern Ireland Office, Peter Mandelson, the Secretary of State, was dealing with the finer intricacies of the stalled peace process. Gerry Adams and David Trimble had reached stalemate and Mandelson was gloomy. Looking forward to his Christmas break, he was not aware that a single piece of A4 paper circulating in the Home Office 'for comment'could damage him. He did not know that a bomb was ticking beneath him - a bomb that would destroy his career, threaten the future of another Minister and put a question mark over the judgment of Tony Blair himself.
Today we can reveal the remarkable story of how an Observer investigation and a series of parliamentary questions about three brothers few had heard of became a Government crisis - how a simple two paragraph inquiry opened a stinking can of deceit, lies and obsfuscation.
Yet Government officials knew for weeks that questions were going to be asked about ministerial 'inquiries' over passports for rich men. They still claimed they were caught on the hop when the calls came. We can reveal how official incompetence meant that, although the Home Office had agreed on 'lines to take', no one had bothered to tell the press officers who were fielding the calls. And we can reveal how a date of 1998 became 1997 because of an unexplained 'cock-up'. In short, this is a story of how passports-for-favours, official mistakes and a cover-up proved to be the bitterest blow to the New Labour project.
Fiona Millar was in her Downing Street office when her assistant put a phonecall through last November. A journalist from this newspaper wanted to know about a dress the Prime Minister's wife was wearing at a party.The party was organised by Srichand Hinduja.
It was an innocent inquiry and Millar, Cherie Blair's press spokeswoman, did not have to think long about her answer. 'They got it wrong,' she said of press reports that the dress was a gift from the Indian billionaires. 'They offered her an outfit. But she didn't want it and it went to charity.'
That was the start. What Millar said revealed a new strategy. The Government wanted to distance itself from the Hindujas, among the world's richest men, now caught up in an Indian arms corruption scandal. The problem was the Hindujas did not want to be distant from the Government.
A behind-the-scenes briefing battle began. The Government let it be known that the Hindujas were hardly part of Blair's inner circle; yes, Ministers (lots of Ministers) might have met them, but that was it.
Sources close to the Hindujas said something rather different. Not only were the Hindujas well connected, they could also count on friendly Ministers and backbenchers to put in a quiet word on their behalf. Peter Mandelson was mentioned. Keith Vaz, the slick Minister for Europe, was mentioned.
Later that month The Observer ran a story linking the Hindujas' £1 million donation to the Faith zone at the Dome to successful applications for citizenship by two of the Hinduja brothers. There was a picture of Cherie in the kameez. The calls started coming in. One non-political source suggested that Mandelson - a regular visitor to the Hinduja's offices - may have used his influence to get the billionaire a passport.
Rebuttal politics is a classic of the civil service: identify a potential problem and then provide a series of well defined lines to rebut the allegations to the point of boredom. Never volunteer information and be as economical with the facts as possible when asked questions. Then hope the problem goes away.
It is a well practised and well used system. The Hindujas would be a classic example of how it could go wrong.
Just before the Home Office packed up for Christmas, officials met to discuss the issue of the written question. It was recognised that legitimate questions could be asked about ministerial involvement in the brothers' passport applications. A rebuttal operation was put in place.
Mike O'Brien, the quietly spoken Home Office Minister who was responsible for immigration matters in 1998, was contacted after Christmas. The Northern Ireland office was also brought into the loop and Mandelson was given the opportunity to make amendments. Vaz was offered the same courtesy.
Although they could not have known the significance of the Mandelson call at the time, officials checked the timing and the exact nature of the approach. The file on the Hindujas was pulled out and a note was discovered detailing the call itself. A separate note from O'Brien's private secretary dated 2 July confirmed that the information passed on to Mandelson about SP Hinduja's application was correct.
As is normal procedure, Vaz and Mandelson were contacted to tell them that a parliamentary question referring to them was about to be answered. Their input was invited. Vaz's office has informed The Observer that they approved the draft quickly and that it was only stalling from Mandelson that held up the release of the answer. Such was Mandelson's concern over the contents of the 100-word answer it was redrafted by officials six times. Mandelson appeared to know that something significant could be about to happen.
On 18 January, in the vote office of the House of Commons, the answer arrived, exactly a month after the original question. A day later Mandelson would be asked about it. He would lie. Four days after that he would resign and be cast into the political wilderness.
As the piece of paper bearing the seven lines that would sink Mandelson fluttered into the wooden in-tray in the House of Commons 10 days ago, a distinctly A-list group of European politicians and financiers were descending on Versailles for a discreet meeting of minds.
The guest list ranged from Chancellor Gordon Brown - who arrived late on Friday from Brussels - and Jean Claude Trichet, governor of the Bank of France, to John Major's former adviser Andrew Tyrie and the ebullient former Dome chief, P-Y Gerbeau.
And, there, at the heart of such an influential group, was Peter Mandelson - the man supposedly so absorbed in the Northern Ireland peace process that he would soon be too busy to remember details of his involvement in the passport-for-favours row.
His heart hardly seemed to be in Belfast either. Mandelson's speech that Friday was on foreign policy and the only other thing on his mind was the Dome.
He was spotted in the hotel bar with Gerbeau, getting an animated briefing on the Frenchman's bid to buy the building - a joint scheme with Mandelson's good friend, the nightclub boss James Palumbo.
By early Saturday afternoon Mandelson, now on his way home from Versailles and being asked to provide answers, had briefed his special adviser Patrick Diamond with the now infamously dishonest statement to this newspaper: that it was his private secretary, not he, who placed the crucial call to O'Brien.
When O'Brien turned to his Warwickshire home late last Sunday night, he had no idea of the storm about to break around him. Even when he picked up his copy of The Observer , there was no way of knowing that the front-page story about Mandelson and Srichand Hinduja was about to put him at the centre of a political crisis. The headline said: Mandelson Helped Dome Backer's Bid For Passport.
O'Brien was, however, was puzzled by the statement that the matter was dealt with by Mandelson's private secretary, when he clearly remembered the phone conversation with Mandelson himself took place in June 1998. After a brief conversation with his private secretary, he went to bed assuming that a clarification would be made in the morning either by Mandelson himself or the Prime Minister's official spokesman, Alastair Campbell.
O'Brien was not even mentioned in the story and the duty press officer at the Home Office did not think it worth ringing him to tell him about the calls already coming in about the story.
On Monday morning, O'Brien began to feel uneasy. He still felt that the statement to The Observer could be interpreted as meaning that a telephone conversation had been set up by private secretaries - but that would be fine as long as Mandelson issued a clarification.
But the clarification did not come. Campbell briefed the press lobby on Monday that there was no direct contact between Mandelson and O'Brien. Alarm bells began to ring. Chris Smith, the Culture Secretary, also needed to know what was going on. With questions to his department in the Commons that day, he was concerned that he would be asked about Mandelson.
His private secretary duly placed a call to Mandelson's private office on Monday lunchtime, a couple of hours before he was due in the Commons, to check the line.
The answer he received underlined Mandelson's desperation to maintain the lie, and his belief that he could still pull it off: Smith was told categorically to say that Mandelson had not personally intervened. Smith repeated the line in parliament, oblivious to the fact that he was being misleading.
A senior press officer from the Home Office rang Downing Street. As O'Brien jumped into his ministerial car to travel back to his office after a function at the Fire Service College, his mobile phone rang. This needed to be sorted out, Downing Street told him. And quickly.
Campbell spoke to Mandelson, asking: 'What's this about a phone call?' The Northern Ireland Secretary admitted that the call had been a direct one but that he had 'failed to recollect it'. Campbell knew he would have a tough time at the next day's lobby briefing of parliamentary journalists.
Campbell decided to be straight. The original story was wrong, he admitted. Mandelson did not initially remember the call but now that 'offices were back up and running' the full facts were clear: there had been direct contact.
The story led the lunchtime news. At 4pm Godric Smith, Campbell's deputy, walked over to the Commons for the afternoon lobby. There was mayhem. Mandelson was accused of lying. Smith had to hold the line: Mandelson, he said, had not remembered the call.
After 40 minutes Smith stalked back to Downing Street. He spoke to Mandelson, at No 10 for talks on Ireland, and Campbell. 'It's meltdown,' Smith said.
Could they hold their position? A plan was worked out: Mandelson would do a round of interviews explaining the situation. But then came the Secretary of State's second moment of madness. Asked by Guy Gibbon of Channel 4 News that night why he had forgotten the original conversation, Mandelson said he had done no such thing and directly blamed Downing Street for any other indication. Why don't you ask them about it? Mandelson said. The No 10 switch board buzzed with calls.
On the wall in Keith Vaz's office is a line of photographs of former Ministers of Europe, stretching back from the gregarious Spanish-speaking Tristan Garel-Jones through to the fanatically Eurosceptic David Heathcoat-Amory and ending with a single, empty hook.
The hook is waiting for a photograph of Nigel Keith Anthony Standish Vaz, holder of the job since 1999. By Foreign Office convention, Ministers' pictures are hung only when their subjects leave, whether in glory or in disgrace. The question now is how long Vaz can keep his picture - and himself - off that hook.
When Mandelson resigned, Vaz was in the middle of doing what he does best, charming his hosts over a lavish lunch on an official visit to Prague. He was halfway through the main course when the pager message arrived telling him Mandelson was at that moment facing the cameras in Downing Street and telling the world that he was out.
Until then, like most of Westminster, Vaz had been unable to believe that the Northern Ireland Secretary would really fall. But once he had, the trap was sprung for a new quarry: suddenly Vaz, the second man in the written answer, was a target too. It was inevitable that when questions were raised about the Hindujas' passport application the Foreign Office Minister would be caught up in the web of intrigue. Many Asian journalists view Vaz as the Hindujas 'bagman in parliament' and he has admitted making representations to the Home Office about their various citizenship applications. When pictures of the myriad of parties the Hindujas host are published, Vaz is nearly always there, somewhere in the background, smiling and spreading cheer. Some have claimed that Vaz was the man who introduced Mandelson to the Hindujas.
Blair has said he is confident Vaz has not acted improperly since he became a Minister. Reports say he has 'topped and tailed' letters for the Hindujas, signing them and sending them to Mandelson and the Prime Minister, but this is supposed to have happened while he was a backbench MP in October 1997. The key question is whether Vaz, who refuses to discuss the letters, has helped the Hindujas since he became a Minister. Sir Anthony Hammond, who will investigate the passports-for-favours scandal, will grill him on the issue.
As Vaz's plane home from Prague touched down on the day that Mandelson resigned, the Foreign Office was still absorbed with other gossip - Foreign Secretary Robin Cook had been dragged from a dinner with the Spanish Prime Minister by a hasty pager message from Downing Street, telling him that Peter Hain was being abruptly transferred from the FO to the Department of Trade and Industry in the emergency reshuffle.
But by Thursday morning, when a worthy but dull foreign language initiative due to be launched by Vaz attracted a suspiciously large number of journalists, it was his turn in the spotlight. The Greek tragedy of Mandelson's fall now gave way to Whitehall farce.
Vaz made his five-minute speech as billed, but before his fellow speakers had finished at the lectern, he shuffled ignominiously to the side of the stage, almost tripping over a music stand in his haste to escape, and fled through a back exit pursued by shouting journalists.
As the double doors clanged shut behind him, Vaz had unwittingly sent a signal that he had something to hide. Although when doorstepped by reporters the next morning he insisted he would be vindicated, it did not look good.
Vaz's influence in the Asian community is legendary. Before Christmas, the Foreign Office Minister Peter Hain held an exclusive party for diplomats and non-government organisations in the Locarno suite of the department's central London headquarters. The Hindujas were not on the invitation list, but Gopichand Hinduja and his son Sanjay were there, enjoying the food. Many say Vaz, the arch party man, smuggled them in.
At least one leading member of the Asian political elite recalls warning the young Vaz to stay away from the Hindujas almost eight years ago, telling him they could only damage the bright and ambitious young MP, but he would not listen. 'This is where Peter Mandelson and he have one thing in common,' said the source. 'They always follow the rich.'
On Wednesday morning, Mandelson left his home in west London at 10am clutching two red boxes. Ten minutes earlier the Downing Street switchboard had called saying that the Prime Minister wanted to see him. The Northern Ireland minister cancelled all his other engagements. He had already spoken to two friends, the author Robert Harris at 7.10am and his former adviser Ben Wegg-Prosser, 20 minutes earlier.
He told both that, although the press looked bad, he thought he could still survive. He would explain to the Prime Minister that when he was asked about 'forgetting' the conversation with O'Brien he would say that he thought the allegation was that he had 'deliberately' forgotten. That was something entirely different, he would insist. On such fine lines are political reputations rescued. Or so he thought.
But by the morning the Prime Minister had made up his mind. His old friend would have to have an astonishing explanation for three days of inconsistencies and U-turns to survive.
When Mandelson arrived in Blair's private study at 10.45am, Campbell was already there. He was exasperated that there had been such confusion and that a 'good news' announcement on thousands of jobs at the Nissan car plant in Sunderland, due that week, was about to be overwhelmed.
Mandelson started on his 'deliberately' forgot line while Blair looked on, sometimes gently shaking his head. 'Remember, Tony is a barrister and he wanted a cold long look at the facts,' said one Downing Street aide. 'When he had heard all the facts he came to a decision and that was that Peter had to go.'
Campbell left after 10 minutes for the morning lobby briefing, aware that if he were too late the journalists would start putting two and two together. He said that the meeting upstairs was difficult and that he wasn't quite sure of the position. Thirty minutes later Blair told Mandelson that there was no way out.
Mandelson emerged and made his resignation statement on the steps of Number 10. But he was not contrite, blaming the press for his downfall. Even then, Mandelson thought he would find a way back into politics.
Speaking to a close friend on Friday evening, his sentiment was clear. 'This inquiry might be a lot more interesting than some people are saying. I would watch it with a great deal of interest.' He would not go gently into the good night.
Mandelson could not help himself, letting it be known through friends that he would continue as MP for Hartlepool. His many enemies did not want that. They wanted him gone. For Good.
Downing Street machinery has now made it clear that Mandelson had more than simply 'a moment of madness' when he lied to The Observer
In a scathing attack on a Minister once described as Tony Blair's closest ally, senior sources have said there was growing concern 'over a number of weeks' about his 'lack of focus' and his 'non-attention' to detail. A Downing Street source described him as 'slightly detached'. The last time this phrase was used to journalists, Campbell was talking about Ron Davies, the Minister who was caught during a 'moment of madness' on Clapham Common in London.
At No 10 there is exasperation that 'Peter is still up to his old tricks', as one official put it. Although Mandelson said he was tired of politics and no longer had the stomach for the fight, Blair allies blame him for a series of stories that have appeared detailing his feelings on the feuding with Gordon Brown.
Privately, ministers say Mandelson's influence has been quietly waning for some time. The first outward sign came when Downing Street let it be known last autumn that he had been told off by Campbell for leaking a speech to a secret dinner of pro-euro businessmen, causing a political row that upstaged several Government announcements. It was the first time a dressing-down had been publicly administered.
Then came complaints late last year from inside Millbank that Mandelson, busy in Northern Ireland, was too distant from the election campaign, leaving Brown an unexpectedly free rein.
Downing Street, far from, as some suggest, kicking the Hammond report into the long grass until after the next General Election, want it to be published quickly. Downing Street aides say that Tony Blair is well aware of the mess John Major got into over cash for questions. The former PM tried to lance the sleazy boil by calling a rapid end to his Government before the parliamentary report on Neil Hamilton, brown envelopes and Mohammed Al Fayed could be published. So it ran like a festering sore throughout the campaign and simply served to remind the electorate about matters of Conservative wrong-doing.
Then there is the role of Gordon Brown. His hand has been strengthened by Mandelson's demise. The emphasis will change. Brown will concentrate on core Labour values and prefers to have a few beers while watching football than going to opulent political parties as Mandelson did.
Not before time, many back benchers argue. Labour's big problem at the next election will be getting out its core vote - the heartlands issue - and not the Mondeo Man swing voter. Brown's allies say that Mandelson went just as his version of the New Labour future was becoming less central to Blair's future. Mandelson's allies grumble that this is the 'death of the project'.
But they should not over-egg that pudding. Brown is the arch pragmatist, the man who knows how to win elections. 'Gordon didn't get where he is today by simply saying he knows how to solve child poverty,' said one well placed Labour official. There will still be plenty of tummy tickling for Mondeo Man. Far from delight at Mandelson's fall, Brown grumbled that the man he barely speaks to had got Labour into 'another hole'. And the events of last week do not necessarily mean that Euro project so beloved by the member for Hartlepool is derailed either.
Although Roger Liddle, the European enthusiast in Downing Street, has lost his biggest backer, Brown is a political animal like no other. He is sceptical about the value of the euro at present because it is useful, given the public's opinion, to be sceptical. 'Gordon will move rapidly if he sees that it is in our interest and that public opinion is moving,' said one key pro-European campaigner. Robin Cook, the Foreign Secretary who has surprised Blair, not a natural ally, during his performances in Nice, will still plug away at the pro-euro line. Mandelson will still float gently in the background, cajoling his friend the Prime Minister to seize his moment in history and join up. The referendum will be delayed, not forgotten.
The excitable shouts of 'Resign!' from the Tory backbenches as Tony Blair faced the Commons on Wednesday might have been overly optimistic, but there is no doubt the week has boosted morale in Smith Square.
William Hague's promise of an 'unrelenting' pursuit of more ministerial scalps and of Tony Blair's 'appalling error of judgment' in trusting Mandelson, in a speech to a reporters' luncheon on Thursday which was hurriedly rejigged to take account of events, illustrated his strategy for the next week.
Although it had been pencilled in as the launch of big tax and spending initiatives, with two major Hague speeches on Tuesday and Wednesday, his most urgent mission now will be to try and convince voters it is not just Mandelson but New Labour as a whole that is dishonest. If he can make the charge stick, Central Office believes it could cost Labour seats. But Hague is walking a narrow tightrope nonetheless: not only have the Hindujas been Tory donors in the past, but some senior Tories are privately muttering that his vitriolic speech on Wednesday was over the top since Mandelson had already resigned and could have backfired.
It certainly won Blair one ally in Charles Kennedy. The Liberal Democrat leader meant to kick off his Commons speech by demanding a strengthening of the ministerial code: instead he was so irritated by what he saw as Hague's lack of generosity that he opened with an unscripted and impromptu attack on the Conservatives.
Blair has been left to wonder what exactly seized the Northern Ireland Secretary when he decided to hide the truth on Saturday afternoon about a matter that he had been aware of for many days. Campbell has said that Mandelson can't even explain it to himself.
It was ticking time bomb that might never have gone off. But Mandelson was never predictable. As yesterday's attacks on Mandelson his former allies underlined, they are still concerned that the man dubbed the Prince of Darkness could emerge again to cast a long shadow over the Government's record.
Mandelson's resignation
The resignation speech
Mandelson: a career in pictures
Audio: Peter Mandelson announces his resignation (3mins 30)
25.01.2001: A glittering career in ruins
25.01.2001: Hague attacks Labour's standards
25.01.2001: Benjamin Wegg-Prosser: the Mandelson I knew
Cartoon: Steve Bell on Peter Mandelson
