Newcastle owner Mike Ashley’s Sports Direct business was today named at the center of a fraud investigation.
The Evening Chronicle is today reporting The Serious Fraud Office (SFO) has began an investigation into suspected price fixing and alleged fraud at Sports Direct and also at competitor JJB.
The Office of Fair Trading (OFT) referred the case to the SFO.
In a statement today, the SFO said:
“The Serious Fraud Office can confirm that it is investigating the activities of JJB PLC and Sports Direct International PLC.”
“The investigation is in to suspected offences under the Fraud Act and the Enterprise Act. This investigation follows a referral by the Office of Fair Trading.”
A statement by the OFT said:
“The OFT has today executed entry warrants at two addresses as part of an investigation into alleged anti-competitive conduct in the sports goods retail sector.”
“The investigation is being carried out under the Competition Act 1998 and relates to alleged breaches of EC and UK competition law.”
“The OFT will not be in a position to conclude whether it considers the law has been infringed until it has completed its investigation and assessed the available evidence. The OFT’s investigation is at an early stage.”
JJB Sports, was granted full immunity last month from any financial penalties of up to 10% of revenue (turnover). The company also said the investigation could take years.
In return for the immunity, JJB must co-operate fully with the OFT, withdraw from any further participation in the alleged fraed, and pledge not to act in bad faith.
The company, whose shares fell 10% on the news, said it could be liable for third party damages despite the wider immunity.
The competition inquiry puts JJB back in the spotlight less than six months after the company managed to stave off bankruptcy with a late rescue deal.
Chris Ronnie bought founder Dave Whelan’s (Chairman of Wigan Athletic) stake in the Wigan-based retailer in 2007 with Icelandic investor Exista. Ronnie used the shares as security against the £190M loan from Icelandic bank Kaupthing for the deal.
Chris Ronnie was fired as CEO in March after his 27.5% stake in the business had been seized by administrators when the Icelandic bank collapsed, due to the world-wide finanacial collapse.
The Sports Direct company, where Ashley s the founder later said it was assisting officials from both the OFT and SFO at its head office in Shirebrook, Nottinghamshire, but wouls make no further comment on the investigation, other than to say:
“Sports Direct’s philosophy is to promote competition in the sports and leisure market and its record demonstrates this.”
Let’s hope this stuff will not be any distration to the Newcastle club or playing staff, but if it forces Mike to sell the club more quickly, that would be good.