New dossier fans flames of Collins Stewart row with analyst

The battle between Collins Stewart and its former employee James Middleweek took yet another bizarre twist this weekend, as a new dossier containing refuted allegations of insider dealing against the former analyst was anonymously sent to police in the City and the Financial Services Authority.

The battle between Collins Stewart and its former employee James Middleweek took yet another bizarre twist this weekend, as a new dossier containing refuted allegations of insider dealing against the former analyst was anonymously sent to police in the City and the Financial Services Authority.

The FSA confirmed yesterday that it had received the documents, and was reviewing them to consider whether they merited further attention.

The source of the dossier remains unknown. However, it is believed to claim that Mr Middleweek was involved in an insider dealing circle known as "Readers' Wives" - so called because transactions were allegedly carried out in the name of the group's members' wives.

Mr Middleweek, who emigrated to Australia last year, was unavailable for comment yesterday, but has vigorously denied the accusations. Elsewhere, Mr Middleweek's current lawyer from The Simpkins Partnership, a media law specialist, was reported at the weekend as saying that Mr Middleweek had seen the latest dossier and was confident that the emails contained within it were fakes.

He is waiting to meet Collins Stewart in court over allegations of wrongful dismissal. In a separate action Collins Stewart is suing Mr Middleweek for alleged defamation and blackmail. The case is scheduled to begin next spring.

In the meantime Mr Middleweek is considering amending his defence against the allegations, to argue that his former lawyer, Dale Langley, acted autonomously and without his consent in the affair. However, last Friday, Collins Stewart won a promise from the court that if any change in the defence is made, it will be granted access to all correspondence between Mr Middleweek and Mr Langley.

Collins Stewart said it would also sue Mr Langley for alleged defamation. The company is also in the process of settling with an associate of Mr Middleweek's, Jeremy Benjamin, who has admitted to defaming the company.

Mr Middleweek left Collins Stewart in a blaze of publicity last summer. He later reported his former employer to the FSA accusing them of insider dealing. Shortly afterwards Collins Stewart launched a £230m libel action against the Financial Times for reporting the confidential allegations made to the FSA, stating they were untrue and that the FT had repeated a libel. The paper maintains that the dossier of allegations, which was attached to Mr Middleweek's High Court writ for wrongful dismissal, was protected by legal privilege. However, Collins Stewart said the document benefited from no such protection, and that the FT's reporting amounted to "thoroughly irresponsible journalism" which was responsible for the collapse in the broker's share price. About £128m was wiped off Collins Stewart's market value in the days after the emergence of the story.

Last week, the FSA said that having finished analysing Mr Middleweek's dossier, it would not be bringing any formal charges against Collins Stewart.

The editor of the Financial Times, Andrew Gowers, said last week that the ruling would be inconsequential to its case. Both parties said they would not be looking to reach an out-of-court settlement, making the likelihood of one of the City's biggest ever public showdowns with the media an increasingly likely event.