It is perhaps little wonder that Middleweek and his wife Emma decided to emigrate to Australia, gloomily aware that his chances of resuming his City career were close to zero.
But even on the other side of the world, Middleweek has found it hard to escape his troubles and the controversy he left behind in London.
On May 19, in a car park in Perth, western Australia, Emma Middleweek was approached by a stranger. Discreetly, but with a hint of menace, the man told her he was acting in her “best interests” and that she should know some very damaging allegations were being circulated about her husband.
The stranger, who spoke with an English accent, proceeded to sketch out the allegations. The most serious concerned Middleweek’s professional conduct and share-dealing activities. Just as painful for Emma was a snippet of information about Middleweek’s personal conduct — an allegation calculated to sour relations between husband and wife.
“He is ruined,” the stranger told her. “The Financial Services Authority and the police are on to him. Make sure he does not take out any money from your account.”
Advertisement
The man provided details about Middleweek’s bank account in England.
Shocked by what she heard, she returned home and told her husband of the bizarre encounter. “We are getting into fantasy land,” said Middleweek.
A dossier setting out the detail of the allegations has been obtained by The Sunday Times, which has been looking into the charges made against Middleweek. This weekend, The Sunday Times passed the dossier to the Financial Services Authority (FSA), Britain’s senior financial regulator, for further investigation.
Much of the material in the dossier is drawn from e-mails supposedly sent by Middleweek and some of those closest to him — his wife, his father David, and friends in the City. Most of the messages were sent from Hotmail and other web-based e-mail accounts — making it harder to confirm the identities of the senders.
Few of the e-mails are in their original form, and most appear to have been electronically transcribed.
Advertisement
The e-mails, from October 2002 to September 2003, suggest Middleweek was tipping shares to a circle of his acquaintances. An accompanying report said the dealing circle was known as the Readers’ Wives — seemingly a reference both to a soft-porn magazine of the same name, and the fact that the members held their investments in the names of their wives.
One e-mail, from November 2002, read: “The indications are that (this) is a once in a lifetime speculative opportunity where the potential rewards are humuongous (sic).” Another, in January 2003, read: “Forget the rest this is the big one you can rest assured that this one will clear all your debts.”
The e-mails also apparently give an insight into Middleweek’s state of mind as his relations with Collins Stewart soured. By May he was beginning to despair: “I am lost at the moment and I cant (sic) concentrate. I could do with a break from all this, Im loosing (sic) track of everything.”
Just a few days later, David Middleweek is alleged to have told his son: “The plight of poor Middleweek. It reads like a book. Analyst gets bullied at work can’t take it anymore — moves to Australia under pressure.”
Shortly after the row with Collins Stewart became public, a year ago this weekend, Middleweek was again brooding on his position. “Without any indication of immunity I am standing in an ever-increasing void. Hope I manage to get out of it.”
Advertisement
The dossier also suggests that Middleweek was troubled by personal problems and was prompted to hire a private detective. Middleweek denies this, along with the allegations of misconduct made against him. He told The Sunday Times he had never used the Hotmail address attributed to him, and the e-mails were fakes.
He said: “This is complete baloney. I don’t recognise them in any way. They are are completely made up.”
There are serious doubts about the authenticity of at least some of them. One was supposedly sent on February 29, 2003 — a date that never existed.
Inquiries by The Sunday Times have raised other concerns. One message, innocuous in its content, was allegedly sent from jmiddleweek@hotmail.com to an employee of Brewin Dolphin, a rival firm of brokers, on October 6, 2003.
However, checks by Brewin Dolphin failed to confirm the existence of the e-mail. John Hall, Brewin Dolphin’s chief executive, said the employee’s inbox had been “restored” for October 6, 2003 and there were no e-mails in his inbox or deleted items from Middleweek or any Hotmail address.
Advertisement
Business and City figures named in the e-mails who were contacted by The Sunday Times denied being responsible for any of the communications, or receiving e-mails purportedly sent to them. One confirmed he knew Middleweek, but then changed his mind and said he had just been “trying to impress” the reporter.
The fact remains that the dossier contains an extensive amount of material. If it is a fake, it has been laboriously and painstakingly created.
So what is going on here? Is Middleweek the victim of a smear campaign that has targeted his private life as well as his financial affairs? Or has he been playing a double game?
Either way, the dossier suggests the full story behind Middleweek’s falling out with Collins Stewart has yet to emerge.
Advertisement
UNTIL July last year, Middleweek was little-known outside the confines of Collins Stewart, the up-and-coming stockbroking firm where he worked as a media analyst. He had joined the firm in April 1996 after a brief career as a solicitor, following on from a law degree at Bristol University. Colleagues said Middleweek was a quiet character. Though competent, he never succeeded in joining the ranks of the star analysts whose reports are hugely influential with investors.
As such, he is the antithesis of Terry Smith, who built a formidable reputation on his willingness to ruffle feathers and say the unsayable — irrespective of City conventions.
As a young analyst at Barclays de Zoete Wedd, Smith earned the respect of his peers when he issued a sell note on the high-street bank that was the broking firm’s parent. But his reputation was sealed when he was dismissed by UBS Phillips & Drew in 1992, after he insisted on publishing his book Accounting for Growth. The book laid into the questionable accounting practices of many prominent companies — including a number of UBS clients.
Several of the companies identified by Smith soon ran into trouble, underlining the strength of his analytical skills.
This reputation for integrity and good judgment was put seriously at risk last summer when the Middleweek affair blew up. Smith was by now chief executive of Collins Stewart, and had recently pulled off the highly successful £250m acquisition of Tullett & Tokyo Liberty, the money broker. Shares in the renamed Collins Stewart Tullett were riding high.
The origins of Middleweek’s problems with Collins Stewart are disputed. The company said it was unhappy with his performance, whereas the analyst said he was increasingly uneasy with the way the broker was running its business.
This tension eventually led to a confrontation in which Middleweek sought a £2.4m payoff — an enormous multiple of his salary. In return, he offered to sit on a 32-page report he had written for the FSA, which outlined his concerns about alleged market malpractice.
This set off a chain of events. Collins Stewart dismissed Middleweek for gross misconduct. It asked the police to investigate his alleged attempt at blackmail, though the police quickly decided not to pursue the matter.
As Middleweek sued for constructive/wrongful dismissal, details of his allegations became public. Among them was the suggestion that Smith had given price-sensitive information to his staff, enabling them to inflate the price of Collins Stewart shares — highly useful ahead of the Tullett & Tokyo takeover.
Middleweek also criticised the due diligence checks made on some of the companies Collins Stewart had brought to market, and said he had come under pressure to support unjustifiably generous valuations.
The battle lines had been drawn. Middleweek was casting himself as the honest crusader, shocked by the chicanery of his colleagues.
Smith saw himself as the betrayed employer. In his estimation, Middleweek was a grasping chancer. Smith, a boxing fan born in London’s East End, is one of the worst people in the City to pick a fight with. He is renowned as much for his belligerence as for his acuity.
Smith and Collins Stewart vigorously rejected all allegations. Its board asked Clifford Chance to conduct an internal inquiry, but the law firm found no evidence to support Middleweek’s allegations.
Nonetheless, the FSA began its own investigation. As a City celebrity, Smith’s embarrassment was widely covered in the financial press, where he could usually count on many friends.
Most damagingly, the Financial Times published a detailed account of Middleweek’s report to the FSA. Shares in Collins Stewart slumped heavily, wiping more than £100m off the company’s value.
Smith and Collins Stewart reacted furiously, accusing the FT of distorted and “thoroughly irresponsible journalism”. In typical no-holds-barred style, Smith sued the FT, and is now seeking damages of £240m (see below).
Many queried the wisdom of such legal aggression. The broker was hardly the FSA’s favourite firm. Besides the Middleweek affair, it is also involved in the split-capital investment trust scandal, subject of the FSA’s biggest-ever investigation.
Last week, however, a delighted Collins Stewart announced that the FSA had completed its investigation into Middleweek’s allegations and “the matter is now closed”. The FSA found nothing to warrant public disciplinary action.
A triumphant Smith seized on this as vindication, and promised to pursue Middleweek and the FT through the courts. “It leaves us in as good a position as I could possibly imagine,” said Smith this weekend. “If you had asked me what the best possible outcome was from the FSA investigation, it’s the one I’ve got.”
The FSA’s decision to take no further action has already reinforced the strength of Smith’s case. It will look even stronger if the dossier of e-mails seen by The Sunday Times is confirmed as genuine.
SMITH said he was not responsible for commissioning the dossier and does not have a copy of it, though he is aware of some of the contents.
He said many people had approached him over the past year, offering information about Middleweek. These included representatives of three law firms, who were aware of the stories about a share-tipping ring.
Smith said Collins Stewart had not tried to corroborate such allegations “because we did not know how to”. Friends point out that although Smith remains angry with Middleweek, he has little motivation to send a newspaper a dossier about alleged trading activities pursued outside work.
The dossier attempts to connect Middleweek with another investor who bears a grudge against Smith and Collins Stewart. Danny Hill, originally from Belfast, reputedly made a fortune from share trading after moving to Australia. He has a home in Perth — coincidentally the destination Middleweek chose when he emigrated.
Hill fell out with Smith after he lost money in two split- capital trusts. Hill bought the trust shares, for a Bahamas company called Limbort, through Collins Stewart’s Channel Islands subsidiary.
Smith has largely confirmed the account of the dispute that is set out in the dossier.
One Friday in September 2002, Hill came to see Smith, demanding that his losses be made good. Smith found Hill to be “a very unpleasant character — lots of effing and blinding for no apparent reason”.
Smith insisted Collins Stewart was not responsible. Limbort was initially introduced to Collins Stewart by Credit Suisse. As it had no idea at that point of the identity of its client, Collins Stewart could not give advice. Smith said: “We have an agreement that says we are not giving you any advice.”
Besides threatening legal action, Hill is alleged to have sought to embarrass Collins Stewart by leaking details of the dispute to the press. He also told one journalist he was out to get Smith “because he hasn’t shown me enough respect”.
To judge from the e-mails, Middleweek was thinking of a move and a change of career some months before he was fired. An e-mail allegedly written by his father in May, 2003 said: “I hear you have already signed the dotted line.” David Middleweek allegedly warned his son to be wary of crossing Hill, because “you will inevitably find the pats on the back will turn into lashes”.
The dossier suggests that Hill may have recruited Middleweek to get back at Smith. Is this far-fetched? Possibly. Certainly, Middleweek denies it emphatically.
Middleweek insists he is being smeared. But by whom, and why? At the moment, there are more questions than answers.
TERRY SMITH PRESSES ON WITH £240M LIBEL BATTLE AGAINST THE FINANCIAL TIMES
IT is the last thing the Financial Times needs. Struggling with declining sales in Britain, and with its revenues still to recover from the slump in financial advertising, the FT could do without a time-consuming legal battle that threatens to cost it £240m.
Traditionally proud of the accuracy and reliability of its reporting, the Pink ’Un is not used to fighting libel actions. Even when it does get things wrong — a more frequent occurrence in recent years, grumbles many a chief executive — few companies want to pick a fight with the newspaper that has traditionally served up their daily business breakfast.
However, Terry Smith is not like other City folk, as he has frequently demonstrated in the past. The chief executive of Collins Stewart Tullett rarely shies away from a fight, no matter how big his opponent.
Smith was outraged by a piece the FT ran last August that set out details of the allegations of malpractice levelled at the firm by James Middleweek, the analyst fired from Collins Stewart a few weeks earlier.
He indignantly demanded an apology from the Financial Times for publishing unfounded allegations of the ‘utmost seriousness’.
‘There is no truth in any of them,’ declared a letter from Collins Stewart’s lawyers. ‘You were informed of this prior to publication.’
When no apology was forthcoming, Smith went to war — issuing a legal claim for £240m of damages. The figure is based on the fall in Collins Stewart’s market value prompted by Middleweek’s allegations.
Smith was in ebullient form and confident of victory last week after the Financial Services Authority (FSA) effectively cleared Collins Stewart of wrongdoing after a year-long investigation.
Andrew Gowers, the FT’s editor, has insisted the FSA’s conclusions do not weaken the newspaper’s defence. ‘We had the right to publish these allegations in a fair and balanced way. We never passed comment on the truth or otherwise of any of the allegations.’
Smith said that he finds Gowers’ stance ‘remarkable’. ‘They are saying they don’t think it matters that their story was wrong.’
The FT is relying in part on the fact that Middleweek’s 32-page report to the FSA, the basis for the damaging story, was ‘annexed’ to legal papers relating to the analyst’s claim for unfair dismissal.
It contends that this made the report a privileged document, offering the newspaper protection against libel action.
The FT is seeking to have £230m of the damages claim struck out as soon as the courts return from their summer break.
Smith is hopeful that the full case could be heard as soon as November.
At least it will take Gowers’ mind off the circulation figures.