The Financial Services Authority will relaunch its attempt to pin a £750,000 fine for alleged market abuse on Paul "The Plumber" Davidson this week, as its case finally reopens at a London tribunal following a delay of more than 18 months.
Mr Davidson's first hearing to resist the fine lasted less than a week after the revelation of a late-night conversation between a member of the tribunal and one of the FSA's enforcers, which was deemed to have prejudiced proceedings.
The FSA's allegations relate to two spread bets linked to the fledgling biotech company Cyprotex, which were carried out just weeks before its flotation on the Alternative Investment Market in 2002.
Terence Mowschenson QC, a member of the four-man tribunal, was discovered to have held a conversation with the head of the FSA's Regulatory Decisions Committee (RDC), Christopher Fitzgerald, while out walking his dog in the early hours of the morning shortly after the tribunal hearing had begun. Mr Fitzgerald's RDC was the internal FSA body which had originally heard the case against Mr Davidson.
After news of the late-night conversation emerged, Mr Fitzgerald resigned from his job, and the tribunal was disbanded. Due to the heavy caseload - a result of the increase in enforcement actions which the FSA has launched over the past three years - Mr Davidson's case has not found a new slot until now.
Mr Davidson's spread bets were hedged by a broker, City Index, by taking out a "Contract for Difference" with Dresdner Kleinwort Wasserstein. In turn, DKW hedged its position by buying a substantial amount of the Cyprotex placing.
The FSA alleges that Mr Davidson, who owned a 35 per cent stake in Cyprotex at the time, deliberately engineered the spread bets to help get the company's float away, after institutional interest in the placing had flagged.
Mr Davidson denies any knowledge of the transactions, insisting that it was his broker who made the bets without his knowledge or consent.
Since the last hearing, Mr Davidson has declared himself bankrupt. However, last month, a court denied him the automatic discharge from bankruptcy which he would usually have been entitled to after one year. The ruling came after the accountants PKF objected to the move, claiming that Mr Davidson still owed some £20m to his creditors.Reuse content