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War has broken out between JJB Sports and Sports Direct, after allegations appeared to smear the former's chief executive Sir David Jones in an attempt to derail the retailer's plans to raise cash in the City.
At the end of last week it emerged that beleagured JJB, which is only just recovering from almost sliding into bankruptcy during the spring, is set to go to shareholders to raise Ł50 million.
Over the weekend however, extraordinary revelations emerged over an apparent conflict of interest between Jones and Mike Ashley, boss of arch-rival Sports Direct.
There were also detailed allegations of a litany of past mismanagement at JJB.
The reports revealed that Jones, the former supremo at Next who was brought in to save JJB earlier this year, has an outstanding loan of Ł1.5 million with Ashley.
The financial arrangement has not previously been disclosed, and given the history of rivalry and intrigue between JJB and Sports Direct, amounts to an embarrassing conflict of interest for Jones.
There were further reports detailing internal reports made by JJB's auditor Deloitte.
They variously detail concerns raised about the arrival at JJB of its discredited former chief executive Chris Ronnie, sometime friend and associate of Ashley, over his spending at the company as it teetered on the brink financial implosion, and the board's oversight of Ronnie's reign.
In a statement to the Stock Exchange today, JJB confirmed it is looking at a City fund-raising but declined to comment on the financial arrangement between Jones and Ashley.
A spokesman for Ashley said: “It is a private matter between the two men.”
City sources were incredulous that details of the loan between Ashley and Jones had been leaked.
“It looks very much like someone who does not want JJB's fundraising to be a success is going all out to derail it,” said one insider.
Leaked letters indicate that Ashley lent Jones Ł1.5 million in 2007 which was supposed to have been paid back last November, around the time when Jones first arrived at JJB.
The loan was extended to January, when Jones took control of the management of JJB. However, the loan was not repaid and its term has now been extended until next summer.
One letter alleges that the loan concerned Jones's temporary personal financial difficulties.
That has been strenuously denied by friends of Jones who say the loan concerned an investment in a technology firm.
The leaking of the letters and the counter-allegations of dirty tricks comes as Ashley faces his own problems. Struggling to sell his football club Newcastle United, billionaire Ashley will this week let down his minority shareholders in the City by scrapping Sports Direct's dividend.
JJB lost Ł200 million last year and only avoided bankruptcy after the sale of its health clubs.
Shares in JJB, which have been rallying in recent months, plunged 5¼p today to 25½p.
The stock was trading as high as 132p last autumn but had plunged below 3p by Christmas.
