The UK retail sector has witnessed a dramatic escalation in corporate governance tensions this week, as Frasers Group publicly called for the immediate suspension of Boohoo founder and executive vice-chair Mahmud Kamani. The demand follows explosive allegations, first reported by The Telegraph, that Kamani may have orchestrated a controversial loan scheme involving Boohoo suppliers, a development that Frasers believes warrants immediate and independent investigation.
Allegations Surrounding Kamani’s Supplier Loans
According to the claims outlined by The Telegraph and referenced in a stern open letter from Frasers Group, Mahmud Kamani is alleged to have been involved in making loans to Boohoo suppliers through third-party entities, notably Pinstripe Clothing (now trading as Pinstripe Property), a private company co-owned by Kamani. The allegations suggest these loans appear to be repaid by the suppliers to Mr Kamani through a scheme whereby funds are taken from boohoo and instead deposited into Mr Kamani’s personal accounts or the accounts of other companies he owns. If substantiated, such arrangements could result in serious breaches of fiduciary duty and potentially criminal activity.
Frasers Group’s Challenge to Boohoo’s Board
In its open letter, Frasers Group’s legal team, White & Case, did not mince words when addressing Boohoo’s chair, Tim Morris. “Given the seriousness of the matters which have now been published by the Telegraph in the article, Frasers requests urgent reassurance from you that you will arrange for these matters to be properly and independently investigated. This letter has been sent to you directly due to the seriousness of the issues raised with regard to the conduct of Mr Kamani,” said.
The letter goes further, stating, “Frasers considers that it is extremely important you take immediate legal advice as to the most appropriate way to have these issues investigated to ensure that you deal with them in accordance with all applicable laws,” said.
Calls for Immediate Suspension and Document Preservation
In one of the letter’s pivotal demands, Frasers Group requests “that boohoo suspends immediately any roles or responsibility held by Mr Kamani and any of his associates involved in this matter, pending outcome of the independent investigation,” said. The intention is to reduce further risk and set the stage for an uncompromised inquiry into the alleged wrongdoing.
Furthermore, the letter instructs Boohoo to “preserve all information and documents in its possession, including email and other electronic documents, that potentially relate to the matters described in this letter.” White & Case warns that “Failing to preserve potentially relevant documents could have serious consequences for boohoo and the relevant individuals, including the incurrence of criminal liability for attempting to conceal information from law enforcement,” said.
Serious Legal and Regulatory Implications
The allegations carry significant weight, with Frasers Group stating that “if proven, it appears that Mr Kamani may have breached his duties as a director of Boohoo and could also have committed various criminal offences, said.” This strong assessment reveals the potential severity of the situation facing both Kamani personally and Boohoo as an organization.
The retail giant’s lawyers make the board’s responsibility clear, stating, “Frasers also considers that it is your responsibility, as well as that of the entire board of directors of boohoo, to protect boohoo and its shareholders from Mr Kamani and any of his associates who may be complicit in these matters,” said.
What Comes Next?
With an urgent call for action issued publicly, Boohoo’s next steps will be closely watched by the retail and corporate communities. The situation calls attention to the vital importance of transparency, strong oversight, and accountability in corporate governance. Should the claims be substantiated, Boohoo may face regulatory scrutiny, legal consequences, and potentially significant reputational harm.
As the controversy unfolds, all eyes turn to Boohoo’s board to see how they respond to this unprecedented challenge and whether they will heed Frasers Group’s demands for immediate action.
