Gallagher vs Ardonagh: David Ross attacks Gallagher for “morally bankrupt” loan offer

Ardonagh chief executive David Ross appeared in court yesterday defending an unsecured £625,000 interest-free loan issued to Peter Burton while he was still working for Gallagher-owned Alesco.

Burton was one of six Alesco team members to join Ardonagh-owned Bishopsgate or Price Forbes in 2017. Gallagher is suing Burton, Ardonagh, Bishopsgate and Price Forbes in response for a launching a targeted attack on Alesco.

The loan, issued by Nevada, a banking subsidiary of Ardonagh’s private equity owners Highbridge, was put to Ross in questioning by Gallagher QC Gavin Mansfeld, who said it constituted a conflict of interest.

Ross conceded offering a loan to the employee of a rival broker did constitute a conflict of interest, but told the court it had been brought about by Gallagher’s own actions.

“Given the fact that Gallagher were aware of the predicament that Pete was in, my interpretation of it was that Gallagher created the problem for Pete,” Ross said.

“I felt the offer they made was morally bankrupt, quite frankly.”

The court heard from Mansfeld that then Alesco boss Simon Matson had offered to lend Burton £1m over and above his remuneration.

But Ross said it was a seven-year cliff vest loan that was replacing Burton’s shareholder’s agreement due to expire that year.

Ross said Ardonagh “never would have offered him that”.

Part humanitarian

The court heard Burton first spoke to Ross about getting a loan from Ardonagh’s private equity owners in April 2017.

Ross said that Burton was at risk of losing his house, and that the money offered was intended as short-term bridging loan to help Burton that was “part commercial and part humanitarian.”

Burton had been due to pay 10% above base rate on the loan if he hadn’t completed payment by the end of September 2017, but the loan has been extended a number of times, most recently up until July 2019.

Mansfeld described the terms as “uncommercial”, and suggested Ross had been the architect of the arrangement, rather than the private equity house.

Ross told the court that he had supported the loan, rather than directed it, in a bid to make Ardonagh look good in Burton’s eyes, as colleagues had made him aware he was looking to leave Alesco. He described the terms as “favourable”.

“We weren’t competing against Gallagher for Peter Burton. We were competing against everyone else,” Ross said.

The court heard that RK Harrison and Ed Broking were two alternative destinations for Burton, but Ross said the loan would not have been cancelled if he chose to join either firm.

Ross accepted that the arrangement of the loan offer to Burton was “very unusual”.

Conflict

The loan was discussed at a May remuneration committee meeting, where Ross was given permission to hire Burton.

But the court heard Ross advised Burton to remain with Alesco until July so he could complete a series of upcoming renewals at Alesco.

Ross said it was a move that “suited everyone” and meant that he could leave Gallagher “with minimal fuss”.

But Mansfeld suggested that Ross had instructed Burton and fellow defendant Nawaf Hasan to wait to ensure they could pick up the business in 12 months time when it was up for renewal again, without breaching their contract conditions.

At the same meeting, in which no minutes were taken, four senior hires from Gallagher were discussed, and a manuscript note afterwards stated “conflict inevitable”.

Ross told the court he believed Gallagher would sue, but that it was worth hiring the four anyway.

He said: “My recommendation to the RemCo was the group couldn’t afford to let the opportunity pass and end up reading about the resignations somewhere else, which is what we thought was inevitable.

“My recommendation was to proceed in hiring them even though it was probably going to come at some cost.”

Unlawful

Ross told the court he was “wary and cautious” to ensure the hires from Alesco were lawfully completed.

But Mansfeld disputed this. He said: “The reality is quite the opposite, you didn’t care if you went about this in a lawful way or not provided you didn’t get caught.”

Ross denied this, but Mansfeld picked out an incident where Ross joined Hasan in meeting a Gallagher client while Hasan was still working for Alesco.

Mansfeld said this amounted to a breach of contract from Hasan, and Ross admitted he should not have taken the meeting.

But Ross vowed he “didn’t go there to pitch to the client”.

Nevertheless, Mansfeld told Ross: “This is one instance that shows you just didn’t care whether you were on the lawful or unlawful side of the line.”

“That definitely is not true,” Ross responded.

Ross returns to face further questioning this morning as the trial continues.