Today, a judge in London ruled that the Sports Direct of Mike Ashley must hand over some documents to the accounting regulator in order to assist with the investigation into its 2016 financial results.
After the court judgement, the shares in the retailer dropped by as much as 9 percent and closed five percent down
Currently, the Financial Reporting Council (FRC) is conducting an investigation over the conduct of Grant Thornton, an auditor of Sport Direct, and one of its employees, after they failed to disclose that Sports Direct had hired Barlin Delivery, a firm that is run by Mike Ashley’s brother, John Ashley, in the audit of the 2016 financial results of the company.
The FRC is also conducting an investigation on an employee of Sports Direct as part of the oversight of the accounting practices of the firm.
Sports Direct argued that the emails and documents were protected by legal privilege, however, the lawyers for the FRC said that the behaviour of Sports Direct amounted to “obfuscation and delay verging on obstruction,” which the London judge agreed with.
A spokesperson for Grant Thornton refused to comment on the matter.
In a statement that was released by Sports Direct, it said that it would appeal some aspects of the judgement, as it attempted to ease the share decline by informing the investors that the retailer was not the subject of the investigation that was launched by the FRC.
The statement read: “The company would like to clarify that Sports Direct itself is NOT the subject of an investigation by the FRC, which has jurisdiction over accounting firms and accounting professionals.”
It added: “Sports Direct is a witness in an FRC investigation, details of which were made public by the FRC on 28 November 2016. This court application relates to the FRC’s requests for the provision of certain documents.”