'Plumber' appeal told that witness lied

Paul "The Plumber" Davidson, the bankrupt entrepreneur accused of market abuse, launched his defence against a £750,000 fine from the Financial Services Authority yesterday, telling a London tribunal he would prove that one of the regulator's key witnesses had lied under questioning.

Representing himself on the first day of his appeal, Mr Davidson claimed the ex-wife of the City trader Nigel Howe - who placed an allegedly illegal spread bet on Mr Davidson's behalf in 2002 - had told him that her husband had lied to the FSA when he was interviewed.

The FSA's allegations against Mr Davidson relate to two spread-bet transactions linked to the biotech company Cyprotex, which were conducted weeks before its flotation on AIM in 2002.

The spread bets were hedged by the broker, City Index, by taking out a "Contract for Difference" with Dresdner Kleinwort Wasserstein (DKW) Securities. 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 interest in the placing had waned. Mr Davidson denies any knowledge of the transactions, insisting it was his broker who made the bets without his knowledge or consent.

Mr Howe was fined for his involvement in the débâcle two years ago, but is expected to be called as a witness by the FSA. Ashley Tatham, at City Index, was also fined, and is appealing against the verdict. If the FSA is successful in defending its fine against Mr Davidson it is unlikely that they will receive a penny. Mr Davidson has been in bankruptcy since 2004.