Yahoo Finance Morgan Stanley executive feared Mike Ashley could damage bank’s reputation, court hears
A Morgan Stanley executive at the centre of a legal row with Mike Ashley has said he did not want to do business with the retail billionaire because of concerns it would damage the bank’s reputation.
Simon Smith denied taking a personal dislike to the Frasers Group owner but admitted he had “reputational and regulatory concerns” about working with him.
Mr Smith, Morgan Stanley’s global co-head of investment banking, was giving evidence to the High Court as part of a legal dispute between the bank and Mr Ashley’s Frasers.
Frasers has sued Morgan Stanley alleging the bank unfairly tried to force the billionaire to abandon bets on Hugo Boss stock.
Morgan Stanley threatened to close out the trades unless Frasers provided nearly $1bn (£790m) in extra funds to cover the bet, a sum Mr Ashley claims was unreasonable and arbitrary. He believes the bank was trying to force him out because of a personal animosity towards him.
According to evidence presented to the High Court, Mr Smith told colleagues that Mr Ashley was a “working-class boy” and claimed to have “five dimensions of dislike” towards him weeks before the margin call was made.
The global co-head of Morgan Stanley’s investment banking division warned that Mr Ashley would have “zero respect” for the way Morgan Stanley operates and would do things which make the bank “extremely sick”.
He also shared concerns that Mr Ashley and his retail empire Frasers are known for being “hugely litigious”.
Mr Smith told the High Court: “If you spend your life in litigation, it’s not because you’re easy to deal with.”
The Morgan Stanley boss also claimed that Mr Ashley’s past relationships with rival investment banks – including Goldman Sachs and Bank of America – was a “pretty big red flag”.
He cited reports that Mr Ashley once challenged a top Merrill Lynch banker to settle £750,000 in outstanding legal fees through a game of spoof, where opponents must guess the number of coins hidden by players.
The banker claimed that the billionaire is of the “same ilk” to former Topshop owner Philip Green and UK property tycoon Robert Tchenguiz, suggesting Morgan Stanley should not do business with him.
Call records showed other Morgan Stanley bankers questioning whether Mr Smith disliked Mr Ashley because the bank chief wasn’t given season tickets to Newcastle United, the football club previously owned by Mr Ashley.
However, Mr Smith insisted that he had “no personal animus” towards the Sports Direct founder and said any initial “grumpiness” was because his colleagues were not being cautious enough.
Mr Smith claimed he is “not an angry person” and rejected suggestions that his personal dislike of Mr Ashley was behind the decision to block him from opening a prime brokerage account with Morgan Stanley.
He added: “I don’t have personal explosions of anger in my professional life.”
The dealmaker later denied making comments describing Mr Ashley as untrustworthy or dishonest, as claimed last week by the Morgan Stanley banker who triggered the cash call against Frasers.
Mr Smith told the High Court: “I don’t think Mike Ashley is untrustworthy, I actually think he’s trustworthy.”
The banker denied being directly involved in Morgan Stanley’s margin call on Mr Ashley’s €220m bets on Hugo Boss in May 2021.
Mr Smith, who has worked at Morgan Stanley for 25 years, was also questioned why he previously described Mr Ashley as a “working-class boy who happens to be a very talented retailer” who should get more respect than he does.
He told the High Court: “I come from working-class roots, I respect people who come from working-class roots and become a billionaire.”
The case continues.
