Sir Richard Needham, the former Conservative Trade minister, and John Mackay, chief executive of brokers Seymour Pierce, are being sued by internet investment firm IEQ, where they were directors.
The writ claims Sir Richard, Mr Mackay and other former directors – Tony Caplin, now a director of the brokers Durlacher, Chris Foster, a director of building company Wiggins Group, and John Shaw – acted in "breach of fiduciary duties" at the firm. It also requests the return of severance payments given to Sir Richard and Mr Caplin of £25,000 each.
The action claims about £1m for damages, costs and investments made by the directors with IEQ's money. It says they were not made in the best interests of the company, and that the former directors had "acted for a collateral purpose".
A £200,000 investment in Radio First is said to have led to a "conflict of interest", because Radio First's brokers and advisers were Seymour Pierce, where Mr Mackay was the chief executive.
Sir Richard, Mr Caplin and Mr Mackay were also said to be "in breach of their fiduciary duties" over investments in Isle of Wight Cable and Telephone Company (IOWCT), made in 2000, for a total of £377,400. The action claims no analysis was made of the company, and the investment was against IEQ's investment criteria. It also alleges that Seymour Pierce and several of IEQ's directors had shareholdings in IOWCT, introducing "conflicts of interest". The company is in administration.
Allegations are also made against Strand Partners, the advisory firm, which received a fee of £50,000, but the writ says there was no evidence that the company had provided any corporate advice. Richard Fenhalls, the chief executive of Strand Partners, said it had done significant merger advisory and due diligence work, and had a contract for the fee.
A lawyer for Sir Richard and Mr Caplin said: "My clients are experienced businessmen who retired from the company in November 2000, so a great part of the claim is not related to them. We will be filing robust defences in a fortnight."
A spokesperson for Seymour Pierce said: "We note this individual has lodged a writ; if and when it comes up it will be contested vigorously. The people named in the writ see no substance to the allegations, which they see as wholly without foundation."
Mr Foster and Mr Shaw did not return calls. IEQ is now headed by Greg Lloyd Smith, who built up a stake at the end of last year.Reuse content