Harrods faces scandal over allegations against Al Fayed

In 2010, Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), purchased the iconic British department store Harrods for £1.5 billion. It was expected to be a jewel in Qatar’s portfolio. However, Harrods now faces serious sexual abuse allegations stemming from the actions of its former owner, Mohamed Al Fayed. Many of these claims were highlighted in a recent BBC investigation, raising questions about what Qatar knew at the time of the purchase and the adequacy of its due diligence.

At the center of the allegations is a 2008 police investigation involving the alleged assault of a 15-year-old girl in a Harrods boardroom. Though no charges were filed at the time, legal experts believe Qatar either overlooked or dismissed warning signs about Al Fayed’s behavior when acquiring the store. The luxury retailer has since expressed shock and apologized to the victims, stating it is “utterly appalled” by the accusations.

The due diligence process typically uncovers potential risks before a deal is finalized. Given Mohamed Al Fayed’s controversial reputation, it is surprising that a more thorough examination was not conducted. Beth Hale, a partner at law firm CM Murray, suggests Qatar’s due diligence may have been inadequate or, alternatively, that it uncovered the allegations but proceeded with the purchase regardless.

In 2010, pre-#MeToo, sexual harassment claims were not scrutinized as rigorously as they are today. Catriona Watt, a partner at Fox & Partners, believes Qatar likely calculated the risk and deemed it manageable at the time, depending on the questions it asked during the process.

Despite the potential financial impact, the true damage to Harrods and its owner is expected to be reputational. Virginia Albert, a former marketing professor, predicts the backlash could be severe, with boycotts from customers who demand swift and decisive action. While Harrods enjoys loyalty from many long-term shoppers, Albert believes the store’s image may suffer unless it demonstrates genuine accountability. Harrods has already accepted vicarious liability for some of the claims, indicating it may face millions in compensation costs, as well as additional legal expenses. However, the lasting effect will likely be on the brand’s reputation, with its future success hinging on how it handles the allegations.