Sports Direct founder Mike Ashley is being sued by his ex-strategic development director Jeff Blue over allegations he breached an agreement over pay, according to The Guardian.
Blue used to work for Merill Lynch, a top US investment bank that served as a key advisor to Sports Direct until 2012. The bank moved away from the sportswear retailer four years ago because of concerns it manipulated its share prices.
The ex-banker alleges that: “In autumn 2012, Merrill Lynch withdrew from acting as Sports Direct‘s corporate broker.
“Merrill Lynch did so as a result of concerns that it had regarding Sports Direct‘s corporate governance, including the propriety of Sport Direct‘s decision in August 2012 to fund the Sports Direct Employee Benefit Trust to buy-back shares for the benefit of Sports Direct‘s employee share scheme, without complying with the Buy-back and Stabilisation Regulation as would ordinarily be required by a buy-back of shares by the Sports Direct itself.”
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This move breaches City rules as companies must inform the market if they are to buy their own shares, and that the £20 million bought overstretched the allowance of shares allowed to be bought in one day.
If these had not been bought by the employee trust Sports Direct may have been forced to offer them to a wider market, lowering the retailer‘s share price.
The court case brought by Blue is looking to sue Ashley for £14 million.
Ashley reportedly promised to pay Blue a £15 million bonus if the company‘s share prices reached over 800p, which was not honoured.
Despite Sports Direct’s share prices reachin 992p in April, a long list of public scandals and financial woes has brought this down to 300p.