Paul "The Plumber" Davidson, the businessman at the centre of one of the country's biggest market abuse cases, will tomorrow ask the three remaining members of the Financial Services and Markets Tribunal to step down from hearing his case.
Lawyers acting for Mr Davidson will claim that the tribunal is compromised and a new panel should take over the case. The move comes after extra- ordinary events that saw the resignation of Christopher FitzGerald, the chairman of the Financial Services Authority's regulatory decisions committee, nine days ago, followed by that of the tribunal member Terence Mowschenson QC on Thursday.
Mr Davidson's camp says the existing tribunal should stand down in the wake of the revelation that Mr Mowschenson had a private conversation with Mr FitzGerald early one morning, during which the attitudes of other tribunal members were discussed. One of the most powerful regulators in the City, Mr FitzGerald oversaw the FSA inquiry into Mr Davidson. The conversation has been likened to a private meeting between a judge and prosecutor in the middle of a case without the knowledge of the defence.
The hearing is reconvening tomorrow after allowing Mr Davidson a week to instruct lawyers.
Mr Davidson's appeal to the tribunal over his £750,000 fine for market abuse - the largest handed out to an individual by the FSA - has become the best show in town for City watchers.
The tribunal got off to a roaring start when Mr Davidson, a pugilistic Mancunian, fell out with Nigel "The Spaniard" Howe, a stockbroker, accusing his former friend of lying in giving an account of the events that triggered the fine.
Mr Davidson had until recently represented himself. Although he is a multi-millionaire, his £80m assets have been frozen by a court.
How the after-midnight meeting between Mr FitzGerald and Mr Mowschenson became known is not yet clear. According to one version, Mr FitzGerald mentioned it to his colleagues. They felt compelled to blow the whistle. Another version says the meeting was observed by a third person.
Both men, who are friends and live in the same area, said the meeting occurred by chance. Mr Mowschenson was passing Mr FitzGerald's house, walking his dogs, when the FSA official spotted him and a long conversation followed. The men don't deny that they discussed matters relating to Mr Davidson's appeal, including some of the provisional thoughts of panel members. Both have said there was no attempt to influence the outcome of the case.
Under pressure from the FSA, Mr FitzGerald resigned on Friday from the regulatory decisions committee. The FSA described his conduct as "inappropriate". After initial defiance, Mr Mowschenson resigned on Thursday.
Mr Davidson's was the first market abuse case to be heard by the tribunal, which was set up by the Government to provide an independent counterweight to the powerful regulator.
The case concerns Mr Davidson's placing of a spread bet two years ago on Cyprotex, a biotech company that was floating on AIM. Mr Davidson is the largest shareholder in the company.
City Index, which took the bet from Mr Davidson, covered its position by taking out a "contract of difference" on the stock with Dresdner Kleinwort Wasserstein. The investment bank, in turn, covered its position by buying shares in Cyprotex.
The FSA, which regulates spread betting, did not like the bet. It said that Mr Davidson placed the spread bet knowing that DKW would be forced to take a position in the stock, ensuring that all the shares in Cyprotex were successfully sold before the float. Mr Davidson said he was unaware of the transaction.
Mr FitzGerald's committee investigated the bet, decided it was improper and fined Mr Davidson £750,000. Two individuals, including Mr Howe, who helped Mr Davidson were also fined, although these fines were far less.
HOW HE TAPPED INTO A FORTUNE
Paul Davidson, 50, is known as "The Plumber" in City circles because of his rough and ready background and the invention on which his fortune based.
Mr Davidson, who comes from Manchester, created a valve that allows plumbers to remove a central heating radiator without the whole system being drained.
In fact, he is not a plumber at all. He became an apprentice fitter and welder after leaving school at 15 and set up his own contract pipe-fitting firm, Oystertec. He realised that many companies owning intellectual property were undervalued, and increased his fortune through acquisitions.
He is married to Karen, 46, a beautician, and has two children, James, 21, and Lauren, 18. The family live in a £4m manor house in Prestbury, Cheshire.
Mr Davidson does not hide his wealth. He is said to own 19 cars, and his huge yacht can comfortably seat 32 for dinner, served by his personal chef.
He doesn't brook City rules easily and has had a number of spectacular court bust-ups. In court earlier this year, he said that not being able to do business had cost him "millions of pounds". Having given his main occupation as "property development", he claimed that he was behind on some mortgage payments.