Bank blames FT for £37.5m lost business

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The Independent Online

The investment bank Collins Stewart claimed yesterday to have lost out on £37.5m of income since a former employee, James Middleweek, made allegations of wrongdoing at the company last year.

The investment bank Collins Stewart claimed yesterday to have lost out on £37.5m of income since a former employee, James Middleweek, made allegations of wrongdoing at the company last year.

Lawyers acting for the bank in a libel action against the Financial Times told a High Court judge that the company had suffered a loss of business from clients as a result of an article in the newspaper that reported the allegations. Richard Spearman QC, acting for Collins Stewart, said the loss of business had already reached £37.5m, and was rising.

This figure emerged from a hearing brought by the FT to throw out a part of Collins Stewart's claim for libel damages, which amount to £230.5m based on the harm done to its share price - separate to the alleged harm done to its business - after the article.

Desmond Browne QC, counsel for the FT, called the part of the claim based on the bank's share price performance a "legal heresy", saying the market value of a company was the "selective, collective judgement of a cabal" of "unidentified and unidentifiable investors" and other "shadowy figures".

The share price claim is based on a comparison with two rival companies, Numis and Icap, which saw their shares rise over the same period. Collins Stewart believes its share price would have been 27.45 per cent higher, and its market capitalisation £230m higher, had it not been for the allegations in the FT. It argues that the fall in the market price of Collins Stewart is an "accurate prediction" of the drop in future earnings of the company.

But Mr Justice Tugendhat, the judge hearing the case, said that he was "baffled" over what the company's share price measured. "Will the market not take into account the prospects of success of this action and add that into future profits?" he said. "If it hasn't, then the market is a flawed measure."

The FT is also fighting Collins Stewart's claim to have the final figure for damages based on its stock market value at the time of the trial. Mr Browne said: "It is for the court to assess these matters, not the stock market. One cannot base a claim for damages and advocate as a principle for setting damages on a constantly shifting target," Mr Browne said. He pointed to the high bonus awards given to Terry Smith, the chief executive of Collins Stewart, during 2003, which were based on the strength of its share price performance. "This is hardly consistent with a specific loss of £230m," he said.

The Financial Services Authority said last month it would take no action against Collins Stewart as a result of the allegations. The hearing will continue today, with the full libel trial not expected to take place until next year.

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