GORDON BROWN’S most senior aide has been accused of deceiving thousands of shareholders during his former business career, according to court documents.

Stephen Carter, who was last week appointed the prime minister’s chief of strategy and principal adviser, is said in the documents to have told a fellow executive who feared he had misled shareholders: “What I tell them is nine-tenths bullshit and one-tenth selected facts.”

Carter was then a senior executive of NTL, a cable television firm based in America. Soon after his alleged remarks the group - dubbed NTHell by disgruntled customers - went bankrupt with debts of £12 billion.

It was one of the largest corporate bankruptcies in American history. But in a move that outraged investors, Carter walked off with £1.7m in compensation, including a £600,000 bonus.

Gordon Brown's Black Wednesday

The Northern Rock disaster has torn away any remaining credibility the Prime Minister had

BACKGROUND

• Sorry story tests Gordon to the limit

• Gordon, how wonderful, wise and talented am I?

• Brown’s brain and his hand are not always connected

• How 'cruel' schooling scarred Brown

Related Links

• High living costs hit Labour in poll

Hundreds of pages of US court documents accuse him and three other directors of “deceit” and making “materially false and misleading statements” to the media about the company’s true financial status.

Carter yesterday declined to comment other than to say that US court actions were “often complex and long-running”. His lawyer said Carter flatly denied the allegations.

Brown surprised Westminster last week by appointing the former advertising executive to beef up his administration after a string of high-profile scandals.

The £137,000-a-year job makes Carter one of the most powerful officials in government. He will oversee the work of 18 other special advisers at No 10, take charge of the Downing Street policy unit and attend cabinet meetings. Insiders say he has already started work reviewing five key policy areas.

On his appointment, Brown declared that Carter, 43, had “an enviable track record in the private and public sectors”. Although the No 10 press release mentioned Carter had worked at NTL, it failed to address the bitter fall-out with investors.

In 2002, after NTL’s shares became virtually worthless, thousands of angry shareholders whose investments had been destroyed issued a class action lawsuit in New York. The documents emerged following a multimillion-pound settlement in the case.

They allege that Carter “issued various false and misleading statements in the news media”. He was brought into the company in October 2000 and left seven months after it filed for bankruptcy in May 2002.

The papers allege Carter and three fellow NTL directors took part in a series of “deceptions” and “machinations” designed to conceal the disastrous state of its finances. Although based in New York, NTL became Britain’s biggest cable TV firm, with 3m customers.

The US court papers claim that in order to raise money to keep the business going, Carter and his colleagues “made materially false and misleading statements” about NTL’s true business prospects. The company’s claims about the true number of subscribers were “fictitious or otherwise manipulated”.

The shareholders claimed: “Defendants were manipulating the size of NTL’s customer base by, among other means, refusing to honour customer requests to terminate their accounts [and] acquiring new subscribers through false pretences.”

The court papers allege that to increase its purported customer base, NTL “promised services that were not yet available . . . and offered promotions that NTL later disavowed”.

It is also said to have reconnected customers whose accounts had been terminated for nonpayment and deliberately recruited customers with poor credit ratings. Because of this, the papers claim, “subscriber growth was fictitious or otherwise manipulated”.

At the same time, directors were claiming the firm was developing customer growth – statements that helped justify to the market its multi-billion-pound debt burden.

Carter is alleged to have given media interviews “carrying the banner” for the group by publicly claiming that its growth prospects were bright. After a tele-conference call, a fellow executive is said to have asked him: “How can you . . . persuade investors to believe that NTL is going to be okay when you know it isn’t?”

Carter is said to have responded: “What I tell them is nine-tenths bullshit and one-tenth selected facts.”

NTL, Carter and his three former colleagues have consistently denied the claims. But in a court settlement agreed after five years of litigation last July their lawyers agreed to pay $9m (£4.5m) in exchange for the case being dropped. The settlement – small by US standards – was paid by insurers.

His supporters insist Carter arrived at NTL after it had taken on huge debts. They say that far from being responsible for the mess, he spent most of his time trying to clean it up.

Yesterday Carter said in an e-mail response: “You will forgive me for not wishing to add anything further to this than what is already on the record myself. US class actions are complex and often long-running.”

Yesterday, Brooks Burdette, the US lawyer who defended him, said: “In over five years of proceedings no allegations of misconduct against Mr Carter were ever proved.”

Downing Street said it had nothing to add to Carter’s consistent denials.

Additional reporting: Anna Mikhailova

Carter court documents

Amended class action complaint, 2005

Agreement of settlement

2002 complaint, Haber vs NTL

Carter's defence

Explore UK News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• In Margot Fonteyn's footsteps
• Forget beautiful people, let's have wonky Brits
• Fundamentalist brew: faith and power