As The Sunday Times reported last week, the Financial Services Authority (FSA), the City watchdog, is looking at e-mails and other material that makes serious allegations against Middleweek.
These include the suggestion that he was at the centre of an illicit share-dealing ring known as the Readers’ Wives.
Middleweek has denied the allegations, and has said the e-mails he is supposed to have sent are fakes. He and his father, David Middleweek, deny using the Hotmail addresses from which the e-mails were sent.
David Middleweek insisted last week that he was unfamiliar with computers. “If an e-mail arrives on my computer, I have to get my next-door neighbour to get it off for me,” he said.
James Middleweek has asked the economic and specialist crime division of the police to investigate what he describes as “forgery and identity theft”.
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Microsoft, the software giant that owns Hotmail, has also been drawn into the affair. The FSA is understood to have approached Microsoft for help in corroborating or refuting the validity of the e-mails.
Microsoft’s MSN arm said its popular Hotmail service was misused by “a small minority”. It added: “Where this activity is illegal, MSN will work with the appropriate authorities to ensure the matter is dealt with.”
The Middleweek controversy may provoke concerns about the security of Hotmail. A number of the e-mails appear to have been obtained by sophisticated hacking techniques, which enable the Hotmail addresses to be linked to postcode information — thereby giving clues to the identity of the sender.
James Middleweek first came to prominence a year ago, shortly after he was sacked by Collins Stewart. The company accused Middleweek of attempting to blackmail it into giving him a £2.4m pay-off — a charge the City of London police decided not to pursue.
In turn, Middleweek accused Collins Stewart of market abuses and professional malpractice, detailed in a 32-page report to the FSA. This move wiped £200m off the value of Collins Stewart Tullett, the stock market-quoted parent.
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The FSA recently concluded its investigation into Middleweek’s allegations, deciding not to take any public disciplinary action against Collins Stewart.
Among other developments last week, Terry Smith, the chief executive of Collins Stewart Tullett, initiated a lawsuit against the Financial Times in a personal capacity. His company is already suing the FT for £240m in damages over its reporting of the Middleweek affair.
Frank Warren, the boxing promoter, and Sports & Leisure, his company and a Collins Stewart client, are also suing the FT for defamation.
Smith’s move is also thought to be aimed at closing a potential defence open to the FT — which is that it is not Collins Stewart that has been harmed, but only its shareholders.