Fox bows to pressure and resigns

Liam Fox resigned as UK defence secretary on Friday afternoon after a week of allegations about how he secretly retained an informal adviser who was funded by several business groups.

The decision marks the fall of an experienced Tory minister who first served in government in the 1990s and is a flag-bearer for the rightwing of his Conservative party, having stood unsuccessfully for the leadership in 2005.

Pressure on the defence secretary to resign reached a critical mass on Friday after it emerged that his controversial associate Adam Werritty had his flights and hotels paid for by a network of donors including a corporate intelligence group and a billionaire who funds a pro-Israel lobbying group.

The revelations were fatal given the extensive access that Mr Werritty enjoyed to the defence secretary, with no fewer than 40 meetings since last year’s general election – 18 of them overseas.

Mr Fox’s departure is likely to be mourned by many right-wing MPs and commentators as he was seen to have performed competently in the Ministry of Defence, which has struggled manage the cost of long-term defence projects.

The final straw was when it emerged that Mr Werritty’s activities were funded by a not-for-profit company linked to an employee of Michael Hintze, the hedge fund millionaire. Oliver Hylton, who works for Mr Hintze’s CQS hedge fund, is the sole director of Pargav Ltd, although he has insisted he had no role in running the company.

Pargav has paid for flights and luxury hotels for Mr Werritty’s extensive international travels, according to financial records obtained by the Times. The newspaper reported that six groups had each paid up to £35,000 into the fund since October 2010.

These donors include Jon Moulton, the venture capitalist best known for trying to buy MG Rover, and Michael Lewis of Oceana Investments, a Tory donor who until two years ago was deputy chairman of Bicom, the pro-Israel lobbying group.

Another donor was Tamares Real Estate, a Liechtenstein-registered investment group owned by Poju Zabludowicz, the billionaire chairman of Bicom.

Mr Zabludowicz, son of an Israeli arms tycoon, was born in Finland but lives in London. He hosted secret talks in March between Israel’s president Shimon Peres and Palestinian president Mahmoud Abbas, it has been reported.

The last reported donor is G3 Good Governance Group, a strategic advisory company which carries out investigative work.

The FT revealed on Thursday that G3 until recently shared a London address with the Sri Lankan Development Trust, a mysterious vehicle set up by Liam Fox to carry out aid work. The trust has so far done little other than pay thousands of pounds to finance the MP’s trips to Sri Lanka while he was in the parliamentary opposition.

Its chairman is Chester Crocker, a former assistant secretary of state under Ronald Reagan, who sits on the board of Bell Pottinger Communications.

Pargav is registered at 60 Goswell Road, in Islington, north London, and has yet to file any accounts. Mr Hylton, its director, is already linked to Mr Werritty through their directorships of Security Futures, a consultancy which was dissolved last year. He is also manager of the Hintze charitable foundation, which has in the past donated £51,000 to the Atlantic Bridge, a charity set up by Mr Fox and run by Mr Werritty.

The revelations will add to pressure on Mr Fox, who has angered colleagues and Whitehall officials by appearing to run a “maverick” shadow foreign policy operation.

Mr Werritty, who was best man at the defence secretary’s wedding, is due to be questioned again later on Friday as part of a Whitehall probe into his relationship with the minister.

Mr Fox has repeatedly insisted that his friend does not work for him officially or unofficially. However, it emerged this week that the 34-year old had checked into a Dubai hotel earlier this year claiming to be part of the minister’s entourage. He has also handed out business cards which describe him as an “advisor” to the defence secretary.

The FT revealed on Friday that Mr Hintze has tens of millions of dollars invested in defence companies through his hedge fund, CQS. One of the companies in which CQS invested benefited from a strategic announcement made by Mr Fox in July this year in his role as defence secretary, the Financial Times has found.

CQS, which until last month had provided Mr Werritty with a desk in its London office, only has a small portion of its total assets invested in defence-related positions and there is no evidence or suggestion that CQS’s funds profited in any way from the association of Mr Hintze with Mr Werritty or Mr Fox.

Mr Hintze also paid for a private jet to fly Mr Fox and Mr Werritty from Washington to London in May.

US regulatory filings analysed by the Financial Times show that at the end of June, CQS had $34m (£21.5m) invested in L-3, a high-tech US communications firm.

In July this year, Mr Fox told parliament that the Ministry of Defence would go ahead with plans to award a contract to L-3 to provide the MoD with new “Rivet Joint” aircraft.

The MoD said on Thursday that the decision to select the programme was taken under the previous government and the contractor was chosen by the US government. L-3’s contract had not previously been publicly disclosed, however.

Meanwhile, it has emerged that Mr Fox and Mr Werritty attended a $500-a-head dinner in Washington with senior defence industry figures which had not been declared by the MoD.

The Daily Telegraph reported that both were guests at the September 2010 dinner at the Mandarin Oriental hotel. This did not appear in a list of official meetings between the two men produced by the MoD on Monday. The dinner was attended by some of the US’s leading generals, including General James Mattis, commander of US Central Command.

The MoD said the meeting at the Mandarin Oriental hotel took place during Fox’s annual leave and was not included in the original list released last week due to a “clerical error”.

Mr Fox’s spokesman had said on Friday morning that the defence secretary would not resign and was instead getting on with his job. “Adam Werritty does not work as an official or unofficial adviser to Liam Fox,” he said.

See original article FT.COM  here

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