Mike Ashley, the controversial billionaire founder of Sports Direct, allegedly secretly paid his former chief executive £1m-a-year out of his personal funds in order to keep down the pay of other staff.
Ashley, who was exposed for paying warehouse staff effectively less than the minimum wage, is alleged to have paid former Sports Direct boss Dave Forsey £1m a year on top of his “official” £150,000 salary as “a side payment so as artificially to cap the wages of other staff”.
The sportswear tycoon is also alleged to have personally paid Forsey a secret £5m bonus – on top of a another publicly declared £5m company bonus – for his role in helping Sports Direct float on the stock market and turn Ashley into a billionaire in 2007.
The allegations of secret payments were made by a former banker who is suing Ashley in the high court for allegedly reneging on a £15m payment said to have been agreed over a boozy session in a London pub.
Jeff Blue, a former Merrill Lynch banker and former strategic development director at Sports Direct, said in his evidence that the side payments may explain why Forsey appeared happy to work at the company despite officially being one of the lowest-paid bosses of a publicly listed company in the UK.
“According to Sports Direct’s annual reports, Mr Forsey receives an annual salary of £150,000 per annum,” Blue said in evidence filed at the high court.
“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 was subsequently informed by Peter Cowgill [the boss of JD Sports, Sports Direct’s bitter rival] in separate conversations that Mr Forsey is in fact paid up to £1m 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.”
Blue also alleged that Ashley personally paid each of four Sports Direct senior managers, including Forsey, a £5m bonus for their role in the successful stock market flotation.
“Sports Direct’s 2008 annual report disclosed that Mr Forsey and Mr [Bob] Mellors each received a £5m bonus in recognition of their contribution to Sport Direct’s listing on the London Stock Exchange in February 2007,” Blue said.
“What was not disclosed is that, according to Barry Leach and Peter Wood [both Sports Direct directors], Sean Nevitt, Karen Byers [both senior Sports Direct executives] and Justin Barnes [a consultant not permanently employed by Sports Direct] also each received an IPO bonus of £5m from Sports Direct, and that Mr Ashley separately paid a further IPO bonus of £5m (each) to Mr Forsey, Mr Mellors, Mr Nevitt and Ms Byers from his personal funds.”
Ashley is due to give evidence on Wednesday. The court case on Tuesday heard that Blue had asked Topshop billionaire Sir Philip Green to intervene on his behalf with Ashley, in an attempt to collect £14m Blue claims he is owed from the deal allegedly agreed in the Horse & Groom pub in Fitzrovia, central London. Green declined to help.
“I had been going to extreme lengths to resolve this,” Blue told the court.
At one point, after weeks of trying to speak to Ashley, Blue recorded a conversation with the retailer. “I presented him with a letter I wanted him to read, yes I recorded it,” Blue said.
The recording was played in court. “I sent you a letter, I’d like you to read it,” Blue said in the recording. “I‘ve scan read it,” Ashley replied almost immediately.
The case continues.
