The £80,000-a-week deal for 30-year-old Freddie Ljungberg in particular was singled out by Sullivan, prompting Magnusson to speak publicly for the first time since he left West Ham two years ago to defend himself against accusations of negligence.
Related ArticlesZola handed funds to buy two strikersFernandes's mixed feelings over West HamSullivan reveals £110 million West Ham debtsJury is out on West Ham's new ownersSullivan brings whole new meaning to claret and blueSullivan: West Ham buy-out 'makes no sense''There was much criticism about wages when we signed Ljungberg, Matthew Upson, Lucas Neill, Craig Bellamy and Scott Parker,' Magnusson told the Sun newspaper.
'Does anyone honestly think I did that on my own? That I did it without the full knowledge and support of the owner, the chief executive and the manager Alan Curbishley? Of course not.
'And people have quickly forgotten we managed to maintain our Premier League status in that first year and that was a miracle.
'Things could have got a lot worse had the club dropped into the Championship.
'Most of it was down to the manager and the team but I like to think I played some part in it, giving the club belief. I was always positive and we never gave up.
'And everybody was aware of the deals we were doing, it wasn't just down to me.
'Some players will be a success and others will not, whenever you make a signing. It happens at every club. Look at Andrei Shevchenko and Chelsea for example.
'If people are blaming me, so be it. But I know better and am still proud of my time at West Ham United. Maybe I wasn't told the right things about the club when I went there.
'Maybe I was led to believe there was more money available than there was. I was told that there was a lot of money to do things.
'I still think West Ham may have made a mistake letting Neill leave. He was a superb right-back and a great character in the dressing room.
'And look at Bellamy. He is playing pretty well at Manchester City and look how much West Ham made as profit out of that transfer.'
Sullivan suggested in an interview that Magnusson had tried to become involved with the club again during the recent takeover and that the former Birmingham owner dismissed such a notion immediately.
However, Magnusson disputes that description of events.
'I have never spoken to David Sullivan in my life,' he said.
'I telephoned David Gold some time ago because I had an investor who I thought might have been interested in the club.
'Karren Brady called me back and we had a discussion about it but that was it. But I don't even know David Sullivan.
'I know David Gold and I really like him. I even sent him a text message last Friday wishing good luck with his bid to buy West Ham.
'I really believe that he and Sullivan are the best people to be in control of West Ham right now. They have their own money, it's not paper money or loans from banks.'
'I love the club. They are real football people and they have real football fans.'