A communications breakdown yesterday led to the resignation of Carphone Warehouse deputy chairman David Ross after he belatedly disclosed he had used some £130m of shares he owned in the mobile phone retailer to guarantee loans.
A communications breakdown yesterday led to the resignation of Carphone Warehouse deputy chairman David Ross after he belatedly disclosed he had used some £130m of shares he owned in the mobile phone retailer to guarantee loans.
Ross was effectively co-founder of the chain, joining the business as chief operating officer in 1990, a year after it was founded by his schoolfriend Charles Dunstone.
Ross yesterday also admitted using smaller stakes in transport company National Express, storage chain Big Yellow and Cosalt, the safety equipment maker, as loan guarantees. He is a director of all three and chairs National Express.
Analysts said yesterday that it was thought that he had used the stock to support loans on property purchases. The loan agreements were made between 2006 and 2008.
At the beginning of that period Carphone Warehouse's share price had been as high as £3 and the commercial property market was approaching its peak.
Ross's problem stems from Financial Services Listing Authority rules that say "persons discharging managerial responsibilities and their connected persons" must notify the company concerned of all transactions concerning the holding.
Penalties from any transgressions range from a private warning to a fine.
Carphone Warehouse said in a statement yesterday that it had been told on Sunday by Ross, who left his chief operating officer post in 2003, that he had pledged 136.4 million shares, some 15% of its capital and 80% of Ross's stake in the company, as security against personal loans.
"David Ross has also notified the company that none of these loans is currently in default and that he has no current intention to sell any of his shares in the company," it added.
Similar statements were issued by Big Yellow, National Express and Cosalt, where Ross is the biggest shareholder with a 15.1% stake.
Despite reassurances from the affected companies, fears that the loans could be called in by Ross's creditors sent their shares down even as the wider UK stock market soared.
Carphone Warehouse, which was down 6.5% at one point, closed the day off 4p, or 4.3% at 89p. National Express was down 8p or 1.67% at 470.5p, Big Yellow down 25.7p or 12.13% at 186.5p and Cosalt shed 0.5p, or 0.4%, to close at 140.5p.
Ross, a chartered accountant and Conservative Party supporter, has a prominent position in UK corporate and political life. He is a former director of publisher Trinity Mirror and Wembley stadium, has served on the advisory board of investment firm Frontiers Capital, was a board member of Sport England until 2005, and had a seat on the Home Office audit committee.
His most high-profile role currently is as London mayor Boris Johnson's representative on the board of the organising body for the 2012 Olympics.
Ross is from a prominent business family: he is the grandson of John Carl Ross, founder of the Ross Group frozen food business, which began as a four-boat fishing fleet in Grimsby in the 1930s. It eventually became part of Young's Bluecrest although the Ross brand was retained for some frozen fish products.
Ross studied law at Nottingham University and went on to train as an accountant after graduating in 1987 and joined Arthur Andersen.
Ross's resignation comes at a crucial point for Carphone Warehouse. It is in the middle of a strategic review of its TalkTalk internet division. It is also planning the roll-out of its joint venture with US electricals giant Best Buy.
In addition, retailers are facing their toughest Christmas trading period for decades.
This is not the first time that Carphone Warehouse's corporate governance has come under scrutiny. It was embroiled in controversy after giving disgraced former Guinness chief Ernest Saunders a consultancy role after he was released from prison having been convicted of involvement in an illegal share support scheme.
