Adam Pearson has spoken of his "extreme surprise and disappointment" and is seeking legal advice after being sacked as head of football operations by Hull owners Assem and Ehab Allam.
The Allam family confirmed this morning that Pearson, 47, the club's chairman for six years from 2001, had had his consultancy role terminated "without notice and without compensation".
Pearson said in a statement: "I wish to register my extreme surprise and disappointment at the sudden, and in my view totally unjustified, termination of my agreement.
"I had very much been looking forward to assisting in the development of a successful Hull City squad this summer.
"I have enjoyed my association with the club and wish them success in the future.
"This matter is now in the hands of my lawyers and I will be making no further comment until it is resolved to my satisfaction."
Speculation had mounted on Monday night that manager Nick Barmby, 38, had been suspended for comments made about the club's finances and that Pearson's future was in doubt. It had also been rumoured that the Allams were ready to sell the club.
The Allams flatly denied they were considering selling the club this morning and refused to comment on whether or not Barmby had been suspended.
But they did confirm that Pearson's consultancy role had been terminated.
The Allams' statement read: "When we acquired the football club we made it clear we would run it in accordance with sound and proper business principles and procedures.
"We have not and will not deviate from those principles.
"Therefore although we fully appreciate the supporters' and media's desire for information we cannot comment on the manager's position at the present time. We will however provide further information when we are able to do so.
"Having listened to media speculation today over funds not being available in the January transfer window, we reiterate that funds were available as previously stated by us.
"We also confirm the club has terminated the consultancy agreement with Adam Pearson without notice and without compensation.
"We are also aware of speculation about the club being up for sale. We can categorically confirm there is no truth in that rumour and we are fully committed to Hull City and its future."
The majority of Hull fans have expressed their outrage at Barmby's treatment on local radio, while a small minority believe the former Tigers player has antagonised the owners.
Barmby has insisted on several occasions in recent weeks, after it became apparent Hull would miss out on a play-off place, that team strengthening was vital during the summer if they were to mount a serious promotion challenge.
Pearson had said that he expected most new acquisitions this summer to arrive on free transfers.
Pearson quit as Leeds' commercial director in 2001 to buy Hull and take over as chairman while they were in administration and languishing at the bottom end of the old Third Division.
In July 2007 he resigned to make way for new owner Paul Duffen, but returned to the club as chairman again in November 2009 and then became head of football operations under new owner Russell Bartlett after the club had been relegated from the Barclays Premier League in the summer of 2010.
Pearson stayed on in his role when the Allam family took control from Bartlett in December 2010.