HOWZAT

That point may not wash with Carphone’s other shareholders. Ross may insist he doesn’t have to sell his shares yet, but observers think it cannot be long. Dunstone says he won’t buy him out because it would prompt a takeover of the whole business — something he cannot afford.

When he pledged his Carphone shares in 2006, Ross might reasonably have expected the company to be taken over before he would have to worry about repayment of his loans. Carphone had become close to Best Buy, America’s largest electricals retailer. But if Ross wanted to sell, Dunstone appeared not to. However, a joint venture led to Best Buy paying £1.1 billion for half of Carphone’s retail arm.

If half the proceeds had gone back to shareholders, Ross would have bagged more than £100m. Instead, it was used to pay down group debt.

Ross’s foray into commercial property in 2003 had looked smart. Over the following three years his private company, called Kandahar Group, amassed a portfolio comprising 13 shopping centres and 22 high-street shops, bars and restaurants, including the Jackson Square shopping centre in Bishop’s Stortford and St Mary’s Place shopping centre in Market Harborough.

The properties soared in value and in 2006 they were injected into a £500m joint venture with Morgan Stanley, the American investment bank, which added its own Drake Circus shopping-centre scheme in Plymouth. Last summer the joint venture was refinanced with a new £460m loan from Bank of Scotland Corporate, which represented more than 75% of the properties’ value.

Just a year later the partnership has turned sour. Plunging property values have wiped out the equity and Morgan Stanley is said to be refusing to inject any more cash into the joint venture. Banking covenants on the Bank of Scotland loan have not been breached, but that may be only a technicality because the bank has not called for an up-to-date valuation of the portfolio.

Yet it is regulation and not repayment that has tripped up Ross. Lawyers think disclosure is a grey area, where the rules have changed since Ross first pledged Carphone stock as collateral for a loan in 2002. Since Ross’s revelation, several other directors have owned up to doing the same thing.

The truth is that it has become commonplace for the City’s nouveaux riches to take out loans against wealth tied up in shares that are difficult or impossible to sell. The practice was rife at Lehman Brothers, where staff were heavily incentivised with stock awards. However, the rules say such arrangements must be disclosed to the board — which Ross failed to do.

Hugh Osmond, the entrepreneur, said: “When we were running Pizza Express there was a steady stream of bankers from all the big houses offering us ‘liquidity schemes’ that would allow us to release cash without selling shares by borrowing against them. I never availed myself of such facilities, but they were readily available.”

According to some wealthy businessmen, banks have marketed these loans as a means of avoiding bad publicity from the sale of shares.

For Ross, the lure proved irresistible. Together with Dunstone, he had caught the mood of the country by selling mobile phones to the masses. Almost 20 years after first teaming up, though, he was keen to come out of the shadow of his old friend.

While Dunstone has remained at the helm of the business, founded in a basement flat in Marylebone, central London, with £6,000 of savings, Ross, the friend he had made at Uppingham, the exclusive East Midlands school, has spent the past five years diversifying his interests.

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