LONDON — Sports Direct founder Mike Ashley made undocumented personal payments to executives including former CEO Dave Forsey, a court has heard.
Jeff Blue, a former advisor to Sports Direct who is suing Ashley over a £15 million bonus, claims in his testimony that there were “personal arrangements between Mr Ashley and various Sports Direct senior executives in relation to supplemental remuneration” that were “not documented.”
Blue claims he was told by two Sports Direct executives and the CEO of Sports Direct’s biggest rival, JD Sports, that Dave Forsey, who was CEO of Sports Direct until last year, was among those executives “personally paid substantial bonuses” by Ashley. He alleges that Forsey received up to £1 million a year directly from Ashley, far more than Forsey’s £150,000 salary from Sports Direct.
Blue’s testimony also alleges that Ashley paid Forsey and three other Sports Direct executives a £5 million bonus from “his personal funds” for helping with the stock exchange listing of the company in 2007. This was alongside a £5 million bonus they received directly from Sports Direct for their work.
Sports Direct did not respond to Business Insider’s request for comment. Dave Forsey could not be reached for comment. Ashley will appear at the High Court on Wednesday and is expected to dispute much of Blue’s testimony.
David Cavender QC, the barrister leading Ashley’s legal team, on Tuesday accused Blue of “making up evidence” and described the case as an “opportunistic try-on.” The Financial Times also reports that Cavendar said: “There are a number of wholly irrelevant and scandalous allegations in the evidence of Mr Blue.”
Here is the relevant part of Blue’s testimony (emphasis ours):
“According to Sports Direct’s annual reports, Mr Forsey receives an annual salary of £150,000 per annum. On that basis, Mr Forsey receives one of the lowest salaries of any chief executive leading a FTSE 100 or FTSE 250 listed company. However, I had been informed by Mr Leach [Barry Leach, head of International Brands Management Limited, Sports Direct’s international division], Peter Wood (Head of International Licensing at IBML) and was subsequently informed by Peter Cowgill (Chief Executive of JD Sports, Sports Direct’s major UK competitor) in separate conversations that Mr Forsey is in fact paid up to £1 million per annum directly by Mr Ashley. One benefit of this arrangement is that it imposes an artificial cap on all other salaries paid to employees at Sports Direct.”
It is not clear what Blue means by “an artificial cap on all other salaries paid to employees at Sports Direct.” Sports Direct did not respond to an email from Business Insider UK asking if there is an official CEO-to-employee pay ratio policy at the company.
Sports Direct vocally rejected claims of a high CEO-to-employee pay ratio earlier this year, calling a report on then-CEO Dave Forsey’s pay “fake news.”
Blue is suing Ashley for allegedly reneging on a deal struck during a meeting at the Horse & Groom pub in London in 2013. Blue, a former Merrill Lynch banker, claims Ashley promised him a £15 million if he could help double Sports Direct’s share price from £4 to £8. The share price hit that mark in the same year but Blue says he has only received £1 million from Ashley.
Ashley’s defence is that the deal was simply pub “banter” and not binding. However, Blue has sort to show in his testimony that the billionaire regular carried out serious business in settings like the pub while consuming alcohol. He also claims that Ashley often avoided paperwork.
“I trusted Mr Ashley and, in my experience, Mr Ashley and people like Mr Ashley rely on (and take pride in) the fact that those with whom they deal can expect that “their word is their bond”,” Blue says in his testimony.
The case is set to run until next Wednesday.