Morgan Stanley’s executive who is at the heart of the legal dispute with Mike Ashley said that he didn’t want to do any business with Ashley because he was worried it would harm the bank’s reputation.
Simon Smith has denied having a personal animosity towards the Frasers Group owner, but admitted that he was “concerned” about his reputation and regulations when working with him.
Mr Smith, Morgan Stanley’s global co-head for investment banking, gave evidence in the High Court during a legal dispute involving Mr Ashley’s Frasers.
Frasers sued Morgan Stanley, claiming that the bank had unfairly forced the billionaire to give up bets he made on Hugo Boss stocks.
Morgan Stanley had threatened to cancel the trades until Frasers paid an extra $790m (£790m) to cover the wager, which Mr Ashley claimed was arbitrary and unreasonable. He believes that the bank is trying to get rid of him because they have a personal vendetta against him.
According to evidence submitted to the High Court by Mr Smith, he told his colleagues that Mr Ashley is a “working class boy” and that he had “five dimensions” of dislike towards him. This was weeks before the margin decision was made.
The co-head global of Morgan Stanley’s investment banking division warned Mr Ashley that he would “zero regard” for how Morgan Stanley operated and would do things that would make the bank “extremely sick”.
He expressed concern that Mr Ashley’s retail empire Frasers is known as being “hugely litigation”.
Mr Smith said to the High Court, “If you spend all your time in litigation, that’s not because of how easy you are to deal with.”
Morgan Stanley’s boss said that Ashley’s previous relationships with Goldman Sachs, Bank of America and other rival investment banks was “a pretty big red flag”.
He cited reports stating that Mr Ashley challenged a Merrill Lynch top banker to pay £750,000 of outstanding legal fees by playing a spoof game where opponents had to guess how many coins were hidden.
The banker said that the billionaire was of “the same ilk” as former Topshop owner Philip Green, and UK property tycoon Robert Tchenguiz. Morgan Stanley shouldn’t do business with the man.
Morgan Stanley’s call records show that other bankers questioned whether Mr Smith disliked Ashley, because the bank head was not given season tickets for Newcastle United football club owned by Ashley.
Mr Smith, however, insisted that there was “no animus personal” toward the founder of Sports Direct and claimed any initial “grumpiness”, was due to his colleagues not being careful enough.
Mr Smith said he was “not angry” and denied suggestions that his dislike for Mr Ashley had been behind the decision to deny him an account at Morgan Stanley.
He said: “I do not have any personal eruptions of anger in the professional world.”
The dealmaker denied later making comments that described Mr Ashley as being untrustworthy or dishonest as was claimed by the Morgan Stanley Banker last week who initiated the cash call on Frasers.
Mr Smith said to the High Court, “I do not think Mike Ashley untrustworthy. I think he is trustworthy.”
The banker denied directly being involved in Morgan Stanley’s margin call for Mr Ashley’s €220m wagers on Hugo Boss, in May 2021.
Mr Smith who has been working at Morgan Stanley for over 25 years was asked why he had previously referred to Mr Ashley as “a working-class boy that happens to be an extremely talented retailer”. He should receive more respect.
He said to the High Court, “I am from working class roots. I respect people from working class roots who become billionaires.”