Upwardly mobile: Ernest Saunders

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The Independent Online
FEW listeners to commercial radio stations know when they hear the jingle advertising the Carphone Warehouse that the man behind the marketing campaign is the disgraced former chairman of Guinness, Ernest Saunders.

Saunders, 58, was the marketing man brought into the drinks company with a mission to make its founders, the Guinness family, rich. But the keenly fought battle to take over Distillers in 1985, involving an illegal support operation for Guinness's own shares, was to lead to his downfall.

In 1990, in what was then Britain's biggest ever fraud trial, Saunders was found guilty on counts of theft and false accounting, and sentenced to prison for five years.

On appeal, however, his jail term was cut by half. And when he had served 10 months, he was released early on a parole board recommendation after doctors said he was suffering from Alzheimer's, an incurable disease that leads to personality disintegration.

Saunders' principal activity now is understood to be giving speeches on management - including business ethics - in addition to drawing a Guinness pension. His other business is not, it seems, one in which he has a shareholding. But he has worked for the Carphone Warehouse as a consultant for the past three years.

Even in the world of mobile phones, which have come from nowhere to more than 21 2 million subscribers in less than 10 years, the Carphone Warehouse is something of a phenomenon. Founded in February 1989, it turned over pounds 1.5m in its first full year on the back of a heavy advertising campaign. It went from two to 14 employees and lost only pounds 2,000 - unusual in the initial year of trading on such a scale.

Turnover nearly doubled the following year. The company made profits of pounds 36,000 and paid its first dividend. In 1991-2, in the depths of recession, profits reached pounds 158,000 and in 1992-3 it made pounds 245,000 on turnover approaching pounds 9m. Profits reached pounds 302,000 in 1993-4 on more than doubled turnover.

The Carphone Warehouse's founder is a former NEC mobile-phone sales manager called Charles Dunstone. Dunstone, just 29, is a contemporary of Saunders' son, James, who wrote a book defending his father, and a friend of his daughter Jo, whose supportive appearances with her father during the trial won Saunders sympathy.

Dunstone and his fellow directors cut something of a dash in the industry. The others on the board are little older than Dunstone himself. David Ross is 29, Guy Johnson is 30, and Michael Smith is 39. They appear to have taken modest salaries of between pounds 30,000 and pounds 40,000, at least until 1993, but Ross and Johnson have appreciable shareholdings in the business. Dunstone, however, controls the company, with 90 per cent of the A shares and a majority of the B shares. On current growth trends the Warehouse is worth at least pounds 5m, probably more, after a mere five years.

Dunstone said last week: 'Ernest Saunders works for us, as a consultant. I do not think it is right for me to say anything more. I met him because I know his kids very well.' Saunders himself turned down several opportunities to speak to the Independent on Sunday and one employee claimed he did not work at the company.

But it is believed that Saunders has played a major role in the planning of Carphone Warehouse's expansion to 17 branches round the country so far. He works from the company's head office in Marylebone Road, London.

There is nothing illegal about this. The judge who convicted Saunders did not ban him from acting as a company director. Nor indeed is Saunders a director of the Carphone Warehouse.

The three eminent psychiatrists who wrote to the British Medical Journal that the diagnosis of Alzheimer's in Saunders's case was 'certainly incorrect' may or may not be amused.

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