Daily Mail

Now judge raps Sports Direct over audit probe

- Rachel Millard

SPORTS Direct has been ordered to hand over documents to the accountanc­y watchdog as part of an investigat­ion into the company’s auditor.

As bosses at the sporting goods chain braced for a backlash at today’s annual meeting of shareholde­rs, a High Court judge said the firm had been ‘verging on obstructio­n’ in failing to comply with demands for the 40 documents.

Shares fell 5.3pc, or 19.1p, to 340.9p, piling more pressure on founder Mike Ashley ahead of the AGM where investors are expected to voice concerns about how the company is run.

Ashley, 53, who also owns Newby castle United Football Club, is set to skip the meeting in Soho, central London, after claiming he is too busy having just bought House of Fraser out of administra­tion.

The High Court ruling is yet another headache for the tracksuit tycoon.

The Financial Reporting Council wants the documents as part of its probe into the retailer’s lucrative business deal with a firm owned by Ashley’s brother.

Sports Direct had argued the papers were protected by privilege rules saying lawyers and clients can discuss matters in secret.

However, Mr Justice Arnold disagreed saying: ‘ Counsel for the FRC characteri­sed Sports Direct’s approach in responding as one of obfuscatio­n and delay verging on obstructio­n. In my view this criticism is entirely justified.’

The FRC is investigat­ing whether accountant Grant Thornton failed to disclose in Sports Direct’s 2016 accounts that the store hired Ashley’s brother John Ashley’s business Barlin Delivery for internatio­nal deliveries.

Barlin was reported to make around £300,000 a year from the arrangemen­t.

The FRC said at the time that Barlin Delivery was not disclosed as a related party in financial statements.

The arrangemen­t alarmed investors who have regularly raised concerns about corporate governance.

Last year shareholde­rs blocked plans to give John Ashley an £11m block payment. Mike Ashley said his brother had been underpaid compared to others who helped build the company.

Sports Direct stocks Ashley’s daughter Matilda’s line of cosmetics while it is also set to pay eldest daughter Anna’s fiance, Michael Murray, £5m for running its property team.

Influentia­l shareholde­r advisory group Glass Lewis has urged independen­t shareholde­rs to vote against the reelection of both Ashley and chairman Keith Hellawell to the board at today’s AGM.

It raised concerns about poor corporate governance as well as unsatisfac­tory responses to shareholde­r concerns. Its team also expressed worries about any regulatory interest in Ashley’s swoop on House of Fraser 90 minutes after it fell into administra­tion in August. The Pensions Regulator has confirmed it is monitoring the deal.

Last night Sports Direct said it planned to appeal certain aspects of the ruling on the appeal. It stressed it was a witness in the FRC’s investigat­ion, not the subject of it. The FRC regulates accountant­s and so its investigat­ion centres on Grant Thornton, which declined to comment.

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