Mike Ashley engulfed in $100m US legal battle
Judge orders boss of Sports Direct to testify under oath as deal turns sour
SPORTS Direct billionaire Mike Ashley has become embroiled in a bitter legal row over his ambitious plan to take a slice of the lucrative United States sportswear market.
The row centres on Sports Direct’s $100 million (£78 million) acquisition of 50 shops to ‘provide a footprint in US retail and a platform from which to grow US online sales’.
But the complex deal to seize the Eastern Outfitters retail group, in Chapter 11 bankruptcy protection at the time, has turned sour after Sports Direct was accused of shortchanging one of the company’s l enders. Newcastle United owner Ashley, who also owns House of Fraser, has been ordered by a New York judge to comply with a subpoena, compelling him to give evidence under oath.
It is the latest legal spat for the sportswear mogul. Two years ago Ashley f ought off a £15 million demand from a former adviser who said he had been promised t he money during a ‘night of heavy drinking’.
But hi s combative business style has reached new heights this year. He funded legal action that a court heard was intended to drive Debenhams ‘out of business’.
He also stunned markets by revealing a £ 605 million Belgian tax bill during summer and, only last week, lambasted boss es at Goals Soccer Centres f or ‘skulduggery’ after rejecting his overtures.
Documents filed in New York courts and obtained by The Mail on Sunday reveal that, during the process of buying Eastern Outfitters in 2017, one of Ashley’s associates met with former New York Mayor Rudy Giuliani who then held a senior position at Sports Direct adviser and law firm Greenberg Traurig.
Ashley allegedly turned down the opportunity ’unless it involved also meeting President Trump’. The acquisition of Eastern Outfitters, which owns Bob’s Stores and Eastern Mountain Sports, was Sports Direct’s first major US retail acquisition, the court heard. It included the $17 million purchase of debt from the group’s former owner Versa Capital which now claims Sports Direct owes it an extra $7.2 million.
Sports Direct has dismissed the claim and resisted calls for Ashley t o gi ve evidence. Sports Direct said Ashley is often not involved with deals until a late stage, leaving associates to do the leg work.
In one document his lawyer argued he ‘did not exchange or generate any emails, text messages, or other documents electronic or otherwise regarding the transaction’ and so has no documents ‘in his possession’ that would be relevant to the trial.
Ashley’s business associate Howard Moher has already taken the stand. Sports Direct lawyers argued that Justin Barnes, a Sports Direct consultant, should give evidence in Ashley’s place.
But New York judge Andrew Borrok ruled: ‘ Mr Ashley has information that is material and necessary to its claims in this action.’
The judge said claimant Vestis, a subsidiary of private equity firm Versa Capital, wants to question Ashley on‘ a specific conversation’ in which they say he agreed to include ‘ an additional consideration’ as well as paying $ 17 million to buy the debt.
Mo her told a New York court in July that Barnes is ‘ t he right hand man of Mike Ashley’ who acts ‘ as the gatekeeper on transactions for Mike Ashley’ even t hough Barnes does not have a specific job title at Sports Direct.
He said during the negotiations Moher initially spoke with Barnes and then with Ashley, who suggested offering $17 million for the debt. Ashley told Moher ‘don’t move’ despite pressure from the sellers to do so increase the offer to $20 million.
Sports Direct rejects the $7.2 million claim. Sports Direct and Vestis last night declined to comment. The next hearing is scheduled for January.