Matters For The Urgent Attention Of The Ethics Advisor

Matters For The Urgent Attention Of The Ethics Advisor

The tradition of resigning immediately in the face of tricky allegations exists not only because it is considered honourable and treated as such, but it is also pragmatic.

The Zahawi case could not be clearer in that when the press raised questions about his off-shore company, which appeared to owe tax on the UK sale of You Gov, the then Chancellor repeatedly denied the company was his or that he benefited from it in any way.

It has now emerged he has been forced to pay the tax and a punitive sum on top (£3.5m + £1.5m) which indicates those denials were false. He did not volunteer the information, but got found out at a much later date.

Today the head of HMRC devastatingly dismissed Zahawi’s claim that the punitive payment stemmed from a “careless mistake”, saying There are no penalties for innocent errors in your tax affairs.”

Moreover, the settlement with the tax authorities was arrived at whilst he was Chancellor, i.e. in charge of the tax department, and inevitably the talk from those familiar with such matters is that he got off comparatively lightly.

Maybe he convinced investigators that he had really thought somehow he had legitimately distanced himself from his profits or maybe it just helps to be the boss?

Whatever, all this was known by Prime Minister’s Questions on Wednesday and the whole country realised the only sensible solution was an honourable resignation to preserve the integrity of the highest offices of the land.

Except, Zahawi didn’t step down and his boss Rishi Sunak announced instead that his newly restituted ethics advisor would be given the job of concluding the obvious.

Zahawi may think this buys time for a fight-back and Sunak may hope to kick matters into the long grass. However, what they have actually done is prize open a can of worms that the ethics advisor cannot ignore, as might have been possible had Zahawi made himself scarce.

Contents Of The Can Of Worms

The full contents of this can of worms waiting for Sir Lauri Magnus in his new job are yet to emerge – the press is waiting. However, there is enough sufficiently in the open that will now have to be probed much more deeply.

This concerns not just Zahawi’s taxes but how this MP and others have conducted their roles within the present government. It is already possible to identify numerous potential ‘ethical red flags’ in the manner Mr Zahawi has combined his political and business careers and juggled his UK and foreign interests around the off-shore tax system.

Sarawak Report has reviewed the historical record of IPBD which describes itself as a British Iraqi company controlled by Zahawi’s father, Hareth Zahawi, set up in 2003.

The company claims to be based in the UK where is has a subsidiary that files small company accounts. However, the bulk of its operations have involved major reconstruction projects in Iraq funded by the British and Americans in the aftermath of the invasion.

The Zahawi family had fled Sadam Hussein in the late 1970s but were known to be highly well-connected, particularly in the oil producing and highly disputed Kurdish region of the country. Now, Hareth is firmly entrenched with his business back in the region.

The IPBD website archive reveals how closely his son was also involved. Nadhim had targeted UK politics straight from university becoming caught up in the conservative peer Jeffrey Archer’s campaign to support the Kurds oppressed by Sadam and also his later disastrous bid to become London mayor.



Through his contacts the young Zahawi got onto Wandsworth Council and later obtained his parliamentary seat in 2010. He also joined with Archer’s aide, Stephan Shakespeare, to launch the successful polling operation You Gov seen as his great business success.

However, as the IBPD website itself proclaimed, Nadhim was also prominently engaged in his father’s affairs involving enormous construction contracts won from allied concerns such as Halliburton. One of these, described by the company as a “multi-million dollar project”, involved the reconstruction and maintenance of the damaged Presidential palace.

Nadhim Zahawi became an MP in 2010. Shortly after the IPBD website was launched describing its multi-million dollar contracts since 2003 and citing Hareth Zahawi and Nadhim as the two key names in the company, with Nadhim promoted as a UK MP and described as an advisor to the company:

IPBD website described Zahawi as an 'Advisor' as a UK MP until 2018

IPBD website described Zahawi as an ‘Advisor’ as a UK MP until 2018

The same IPBD website entry waxed fulsomely about the influence of the Zahawi family over generations in Iraq emphasising its political connections at a time Nadhim was representing constituents in the United Kingdom. Under a section entitled The Zahawi Family it relates:

The Zahawi’s are a historically influential family whose prominence in Iraq spans from the Ottoman and British Empires to the present day. They have been at the forefront of the country’s affairs in various fields.

The family is well-known throughout the region and is proud to have produced renowned poets, economists, entrepreneurs and political leaders over generations.

Nadhim Zahawi, the father of IPBD Chairman Hareth Zahawi, was a highly respected economist. He occupied various senior governmental posts, including Minister of Economy, Minister of Oil and Governor of the Central Bank of Iraq.

Hareth’s son, also called Nadhim, is a Member of Parliament in the United Kingdom representing Stratford on Avon.

During the same period, having immediately become the chairman of the All Party Parliamentary Committee for Kurdistan Zahawi conducted several visits funded by the KRG (Kurdistan Regional Government) and local parliament for the region.

Zahawi & Zahawi

The ethics advisor to the prime minister will now be surely bound to check more closely into what remuneration Mr Zahawi gained from this role and if it was invested in the UK with profits duly declared.

A month after becoming an MP Zahawi set up a consultancy and advisory firm with his wife as a 50% shareholder called Zahawi & Zahawi Ltd which he declared in his member’s interests. He also initially declared three clients for the consultancy including You Gov and IPBD in keeping with his publicised role for the company.

He was also a consultant for an oil and gas company with interests in Kurdistan, Afren Plc, but dropped from the role after the company crashed in 2017 and the former chief executive and chief operating officer were charged with money laundering and fraud.

None of his remunerations for these consultancies have been declared however and Zahawi & Zahawi’s accounts merely give an indication of substantial receipts, through outstanding debts which on occasion were registered as six figure sums.

One indication of the value of his sway and connections across the jurisdictions came with his declaration of a later consultancy for Gulf Keystone Petroleum, a Kurdish oil and gas company listed on the London Stock Exchange that had been struggling against rivals to survive in a region where success is known to rely on connections and to be rife with alleged corruption.

Over two years from 2015 Zahawi netted £1.2 million, according to his disclosures, which has been estimated to represent a rate of £1,000 an hour whilst he was acting as a back bench MP.

Given these issues have now been raised, the ethics advisor must surely be bound to scrutinise the investments undertaken by this consultancy company which Zahawi put entirely into the name of his wife after becoming a minister in 2018 (at the same time as resigning from his position with Gulf Keystone).

A full public disclosure would also clear the air. This not least because from 2016 the ‘consultancy and advisory’ business moved into property in a very big way in London investing millions in a portfolio that is now estimated to be worth in the region of £200 million.

It is this, far more than the You Gov sale, accounts for the Chairman’s reputation as the second richest MP after Sunak himself.

As revealed by Sarawak Report on Tuesday, around £30 million in regular bank mortgages have been registered behind these purchases, however an almost identical sum in unsecured loans from unidentified sources also underpin those same investments.

Voters have a right to be made aware if these represent some of Mr Zahawi’s earnings from his Kurdish family business dealings (where his British parliamentary credentials are plainly key) and further to be reassured that there have been no further ‘errors’ or room for future errors over the taxation of any profits.

Zahawi’s role as an advisor to IBPD was no longer mentioned on the website following his elevation to ministerial status in 2018.

Full Transparency Over Second Jobs And Foreign Earnings Due 

There are clearly several potential concerns in terms of conflict over MPs with business, like Zahawi, in foreign regions of the world, particularly areas such as Kurdistan which is known for poor governance and institutional weaknesses which have gone hand in hand with acknowledged major corruption.

The missing billions in US investment in the post-war construction of Iraq remains an open scandal with companies such as Halliburton (which sub-contracted the Presidential Palace and Central Court reconstruction work to IPBD) at the centre of continuing questions.

Kurdish focused media have alleged that the US Waxman Inquiry into the matter received disclosures relating to an alleged $40 million bribe benefitting IPBD from US contractors. There is no proof provided, but Transparency International has called for far stronger rules of disclosure over such potential conflicts.

“Any new controls on MPs’ second jobs need to focus on potential conflicts of ­interests, not just the hours worked or additional earnings. Any company owned by an MP risks becoming a shell behind which the extent of the work and these conflicts remain hidden.” [Alex Runswick, Transparency International UK]

The Zahawi family’s close connections with one of the two leading power bases in the region, the Barzani family who have controlled the presidency of the regional government. The IPBD website archive has also revealed the company had a joint venture with Sirwan Barzani, the nephew of the previous President, Masoud Barzani,

It will now be for the ethics advisor to give his own opinion on this matter of business ties with foreign politically exposed persons based on a full investigation of the facts relating to Mr Zahawi, although his case is by no means unique.

Closing Down The NCA Investigation

The seriousness of the implications of such matters has been starkly revealed by the information that the Cabinet screening by officials at the time of Zahawi’s appointment had revealed that the then vaccines minister was at the time under investigation by the National Crime Agency.

Was this linked to connections in Kurdistan, who knows as the NCA does not generally concern itself with tax?  Then PM Boris Johnson (who had scrapped the ethics advisory post following the resignation of his second appointee) apparently decided to ignore the information, appointing Zahawi at the height of his crisis of government.

Sarawak Report has been informed that top civil servants have revealed that that NCA investigation was coincidentally closed down the very day Zahawi took up his post as the second most senior minister in the land, following which he negotiated his punitive settlement over taxes with HMRC.

These are matters that Rishi Sunak, taunted by the opposition over his own issues with regard to taxation over foreign family money, will not benefit from exposing further. That he has failed to simply dismiss his chairman has been seen as weakness and there is ugly talk of being held to ransom.

Some indeed have pointed to government contracts handed out to Infosys (the Indian global giant owned by his wife’s father) whilst Sunak himself was chancellor as another target in danger of being sucked into a broader inquiry into his successor’s conflicts – after all his successor will know all about them.

However, what is bad for the present government may in the end be good for the British body politic. It is time that rotten practices and double jobbing, conflicts of interest and the leveraging of political contacts by MPs were consigned to history and not allowed to flourish as they have over the past decade.

MPs are elected and paid to work for their country and their constituents and they should not be working for anyone else at all or making themselves rich off the back of their responsibility to represent the national interest.

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