Collins Stewart man 'offered £500,000 hush money'

James Middleweek, an analyst sacked by the City investment group Collins Stewart for allegedly trying to blackmail his former employer, has claimed the brokerage made him an offer worth almost £500,000 in exchange for him shelving his dossier of accusations about the company.

The allegation, which is included in Mr Middleweek's claim for wrongful dismissal from the company, yesterday intensified the row between the two parties that helped knock shares in Collins Stewart for the second successive day yesterday. Since the beginning of the week, 13 per cent has been wiped off the value of Collins Stewart's shares.

Collins Stewart said it sacked Mr Middleweek on 9 July for "gross misconduct", after he allegedly tried to blackmail the company by offering to settle a dispute between the two sides for £2.4m. The company alleges that in exchange for the payment, Mr Middleweek through his lawyer, Dale Langley, said he would not send a report to the Financial Services Authority detailing allegations of insider dealing, share ramping and biased research by Collins Stewart.

However, Mr Middleweek has asserted that the company did in fact offer him a package worth £457,000 in exchange for him burying his report.

This, he claims, was made in two letters sent by the company's lawyers in July. The offer included £50,000 in lieu of severance pay and also "the value of the second tranche of shares" which Mr Middleweek had options over. At the time of the offer the shares were worth £407,000.

Dale Langley, Mr Middleweek's lawyer, yesterday issued a statement saying he "categorically denied any attempt to blackmail Collins Stewart". Mr Langley continues that "it is a matter of considerable surprise" that Mr Smith forwarded the blackmail allegations to the police, given that his company was "pursuing substantial settlement negotiations" with Mr Middleweek.

Terry Smith, chief executive of Collins Stewart, yesterday said: "I never offered money not to send the report to the FSA." He added that Collins Stewart had itself sent the report to the FSA and had initiated an independent investigation into the allegations by the lawyers Clifford Chance. The spat has been complicated by the fact that Collins Stewart admits it made an offer of £50,000 plus his share options to Mr Middleweek if he agreed to drop the allegations in his report.

But documents filed by the two parties do not make clear whether he would have been allowed to keep the options, or actually receive cash for them, under Collins Stewart's offer.

In addition, Mr Middleweek's lawyers believe that because he was fired for gross misconduct, he was not entitled to keep the options. They believe that by offering to allow him to keep them, or "the value of them", Collins Stewart may have undermined its own allegation of blackmail.