One of Britain's leading businessmen and a close ally of David Cameron was forced to resign in disgrace from the company he founded yesterday for misusing shares valued at £130m.
David Ross, the co-founder of Carphone Warehouse, left his post as deputy chairman of the company after admitting that he used his holding in the business to guarantee personal loans on commercial property – thought to be a portfolio of shopping centres – without telling his colleagues.
Mr Ross, 43, now faces a possible investigation by the Financial Services Authority and is under pressure to resign as Boris Johnson's Olympics financial adviser. He may also be forced to step down from his other board positions, including his chairmanship of National Express.
The revelations will be embarrassing for Mr Cameron, who in October flew from London to West Yorkshire and back on Mr Ross's private helicopter.
Two summers ago Mr Ross also paid for a return flight for Mr Cameron from Germany, where he had attended a World Cup match. Since 2001, Mr Ross has donated £117,560 to the Tories, either to Conservative Central Office or to local branches of the party near his home in Northamptonshire.
The Carphone Warehouse chairman Charles Dunstone, who founded the company in 1989 with Mr Ross, said it was a "great personal sadness" that his schoolfriend had quit.
It later emerged that Mr Ross, who was once thought to be worth £900m, also used shares in other companies of which he is a board member as guarantees against loans without telling them.
Carphone Warehouse released a statement saying it had "received notification from David Ross ... that he had ... between 2006 and 2008 ... pledged 136.4 million ordinary shares in the company against personal loans".
It added that none of the loans was in default and that Mr Ross had "no current intention to sell any of his shares in the company".
The news caused Carphone Warehouse stock to slump by over 6 per cent in early trading. The group's share price, which has plunged 75 per cent in the past year, ended the day down 4 per cent at 89p, while shares in other companies of which Mr Ross is a board member, including Big Yellow, the self-storage group, and National Express, also fell.
The Financial Services Authority declined to comment on whether it would be investigating Mr Ross's dealings. Under the rules of the UK Listing Authority, which is part of the FSA, directors of quoted companies must make public their use of shares in those companies as security against borrowing.