The man Gordon Brown hopes will pull the government out of its popularity slump was accused of deliberately misleading investors over the financial status of NTL when he was its COO.

Documents filed in a New York class action suit - the cable firm was listed on Wall Street - claimed that after a 2001 conference call Stephen Carter was asked "how can you... persuade investors to believe that NTL is going to be OK when you know it isn't?"

Carter was poached from a City PR firm and appointed strategy chief by the Prime Minster last week.

The case was settled for $9m without admitting liability by an insurance company acting on behalf of Carter and nine other directors in 2006.

At the time of the call, NTL was saddled with massive debts from investment in the UK cable network. Much of the bill has been inherited by the current owner Virgin Media, which was formed after NTL merged with Telewest in 2006.

Carter left his job as NTL's chief operating officer in 2002. The suit said he and other senior executives illegally lied to spin their way out of the share price nosedive triggered as the full extent of its financial woes emerged.

The conversation is recalled in evidence from his former customer marketing director Charles Darley. It piles further embarrassment on the government, as it tries to move on from a series of scandals that have brought its integrity into question in many eyes.

According to The Times, Carter declined to comment other than to say that US court actions were “often complex and long-running”, while his lawyer said Carter flatly denied the allegations.

We asked Number 10 for comment - we're still waiting.®

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