In 2010, the Qatar Investment Authority (QIA), the sovereign wealth fund of the Gulf state of Qatar, made a landmark acquisition by purchasing the luxury department store Harrods for a staggering £1.5 billion. For Qatar, the purchase seemed like the crown jewel of its global investment portfolio, a high-profile deal symbolizing its growing influence and financial power on the global stage. However, more than a decade after the acquisition, Harrods is now embroiled in serious sexual abuse allegations involving its former owner, Mohamed Al Fayed. These allegations, recently uncovered by a BBC investigation, have sparked a conversation about whether Qatar missed or willfully dismissed red flags about Al Fayed’s behavior at the time of the purchase.

The sexual abuse allegations, including a particularly disturbing 2008 police investigation into the alleged assault of a 15-year-old girl in a Harrods boardroom, are now casting a long shadow over the once-glittering deal. Harrods, for its part, has expressed being “utterly appalled” by the allegations and has issued an apology to the victims. However, the repercussions of these revelations are poised to be substantial, both financially and reputationally, for the iconic store and its current owners.

A Troubled Legacy: Mohamed Al Fayed

Mohamed Al Fayed, an Egyptian billionaire, acquired Harrods in 1985 and owned it until its sale to Qatar in 2010. His tenure at Harrods was often marked by controversy, but the recent sexual abuse allegations have introduced a new, darker chapter to his legacy. According to the BBC investigation, multiple women have come forward to accuse Al Fayed of rape and sexual assault, many of whom were allegedly abused while working at Harrods or in association with the business.

Some of these claims, particularly the 2008 investigation involving a minor, were known at the time of the 2010 deal. However, as legal experts point out, Qatar’s due diligence during the acquisition seems to have been either insufficient or deliberately limited. Beth Hale, a partner at law firm CM Murray, explains that a thorough due diligence process should have included detailed inquiries into any complaints or legal claims against Al Fayed. “I think it would be sensible to ask detailed questions about the number of claims, number of complaints—informal or formal—even if not upheld,” she says.

Had Qatar’s legal team pressed for this information, they might have uncovered some of the troubling allegations now being reported. In modern times, a deal of this magnitude would almost certainly involve an exhaustive due diligence process that could either expose such issues or lead to a renegotiation of the terms to account for potential liabilities. However, in 2010, such scrutiny was not as rigorous, particularly in a “pre-#MeToo” era when claims of sexual harassment or assault were often settled privately and quickly, with the use of non-disclosure agreements (NDAs).

The Context: A Pre-#MeToo Era

The 2010 purchase of Harrods occurred during a period when allegations of sexual misconduct did not typically dominate the due diligence process as they might today. The #MeToo movement, which gained momentum in 2017, dramatically changed public perceptions and business practices around sexual harassment, especially in corporate settings. According to Hale, the pre-#MeToo world was “a world away in terms of attitudes and approaches to sexual harassment.” During this time, sexual harassment claims were often seen as minor hurdles in business deals, resolved through settlements and NDAs without much fanfare or impact on the transaction.

In Al Fayed’s case, it seems likely that Qatar’s advisors either chose not to ask probing questions or found the allegations and opted to proceed with the purchase despite the risks. Legal experts like Catriona Watt, a partner at Fox & Partners, believe it’s plausible that Qatar may have been aware of some of the claims but decided the potential rewards of owning a globally renowned brand like Harrods outweighed the risks. “It seems to me that it wasn’t a complete secret. It was probably a calculated risk,” Watt explains. This calculated risk, however, has now backfired as the scandal threatens to tarnish Harrods’ image and create a significant financial liability for its current owners.

Cultural Considerations

Another factor that may have influenced Qatar’s decision-making is its own cultural and political landscape. The Qatari government’s views on women’s rights, which are often criticized by human rights organizations, could have played a role in downplaying the significance of the sexual abuse allegations. Virginia Albert, a former marketing professor and current account director at advertising agency DeVito/Verdi, suggests that Qatar’s perception of these claims may have been shaped by its societal norms. “You could argue that brands align with brand values during mergers,” she notes. In this case, Qatar might have determined that the allegations did not conflict with its values enough to halt the purchase.

This approach, however, is out of step with modern business practices, where companies are increasingly held accountable not just for their own actions but for those of their partners and predecessors. In today’s environment, a buyer would likely face intense scrutiny from the public and media if they were found to have ignored such serious allegations during a high-profile acquisition.

Financial and Reputational Fallout

The financial cost of the scandal could be immense. Legal experts predict that Harrods may have to pay millions in compensation to the survivors of Al Fayed’s alleged abuse. Each individual claim could cost the company a six-figure sum, with the total payouts potentially reaching into the millions. Harrods has already accepted “vicarious liability” for some of these claims, a legal term meaning the company acknowledges it is ultimately responsible for the actions of its former owner. In addition to compensation, Harrods will also face substantial legal costs, including defending itself in court and hiring independent investigators to examine the claims. These expenses are expected to run into six figures as well.

However, the greater damage may be to Harrods’ reputation. As Virginia Albert warns, the store risks alienating its customer base, especially as public awareness of the allegations grows. “People are going to be really, really pissed,” Albert says. The scandal could lead to boycotts, with casual shoppers potentially choosing to take their business elsewhere, especially given the high price point of Harrods’ goods. While long-time loyal customers may stick with the store, attracting new shoppers or maintaining its luxury brand image could prove more difficult in the wake of the scandal.

Conclusion: Lessons for Future Deals

The Harrods scandal serves as a cautionary tale for businesses and investors alike. In today’s world, due diligence must go beyond the financial and operational aspects of a company and include a thorough investigation of any potential legal or ethical issues involving key figures. As the #MeToo movement has shown, claims of sexual harassment or abuse can no longer be brushed aside as minor inconveniences in a business transaction. Companies that fail to address these issues upfront may find themselves facing not only financial penalties but also long-lasting reputational damage.

For Qatar, the decision to proceed with the Harrods purchase despite potential red flags about Mohamed Al Fayed’s behavior could cost it dearly. The scandal threatens to tarnish the image of one of its most high-profile investments and serves as a reminder that in today’s world, even the most prestigious brands are not immune to the consequences of past misdeeds.