Collins Stewart gets tough over client poaching

Collins Stewart, the broker embroiled in a row with former employee James Middleweek, has slapped down rival investment bank Dresdner Kleinwort Wasserstein following rumours that employees of the German firm had been repeating potentially slanderous allegations about the company in a bid to steal its clients.

Collins Stewart contacted Dresdner's compliance department to say it had received reports that some of the bank's workforce had been telling clients that they had seen Mr Middleweek's writ and his report to the Financial Services Authority, which contains allegations of insider dealing and share ramping.

The Dresdner employees allegedly contacted both existing clients and potential clients that both brokerage houses were bidding to alert them to the full range of charges against Collins Stewart listed by Mr Middleweek. Collins Stewart, which is suing the Financial Times newspaper for repeating the allegations in the FSA report, warned Dresdner that any employees who were repeating the highly damaging claims could be sued.

Collins Stewart confirmed it had received reports of brokers bad mouthing it to clients. A spokesperson said: "We did get reports of some cowboy action from some of the wilder elements of a firm that should have known better. The matter has been sorted out by compliance officers and it is good to see a reputable firm has taken the right course of action."

Collins Stewart would not confirm the name of the rival brokerage it had been dealing with, but sources said it was Dresdner. Dresdner refused to comment. Collins Stewart has adopted an aggressive approach to the increasingly vitriolic legal dispute with Mr Middleweek.

As well as suing the FT - a move which surprised many in the City - Collins Stewart also reported Mr Middleweek to the City of London police for allegedly trying to blackmail the company. Mr Middleweek through his lawyer, Dale Langley, said he would retract his report if he received a settlement worth at least £2.4m. The company was dealt a blow when the police threw the blackmail charge out last week.

Despite continuing to vigorously deny that the contents of Mr Middleweek's dossier were true, Collins Stewart's shares have lost a quarter of their value in the past two weeks. Yesterday they closed down 3 per cent to 361p.

There were rumours that one of Collins Stewart's main institutional shareholders had been reducing its stake in the company. Terry Smith, the strident chief executive of the brokerage, owns nearly 5 per cent of the company. Amvescap, the fund manager, owns about the same about and the French insurer Axa controls nearly 4 per cent.