Posted on 04/28/2005 2:09:27 PM PDT by HAL9000
ST. LOUIS -- A former Charter Communications Inc. executive sentenced last week to probation in a plot to dupe investors through fraudulent cable television disconnect practices said in a court document that Charter Chairman Paul Allen was aware of the scheme.Former Charter Vice President James "Trey" Smith III on Wednesday filed a counterclaim against the suburban St. Louis company in a dispute over legal fees related to the accounting scandal involving the nation's third-largest cable TV company.
Smith was among four ex-executives sentenced April 22 in federal court in St. Louis, where he received two years of probation and was fined $175,000.
All four men pleaded guilty to one felony count of conspiracy to defraud. Allen and the company itself were not accused of wrongdoing.
In February, Charter sued all four executives to recoup legal costs. For Smith, that amounted to $1.9 million.
Smith's response claimed that Allen, the billionaire co-founder of Microsoft Corp., and former Charter general counsel Curtis Shaw were aware of the scheme and implicitly approved it. Smith wants the federal court to deny Charter's request that he repay $1.9 million in legal fees, and that Charter pay an additional $1 million in legal costs.
"A corporate giant owned by one of the richest men in the world is trying to bankrupt this man," John Roche, Smith's attorney, said Thursday.
Michael Nang, a spokesman for Allen, said, "Any suggestion that Paul knew of any impropriety whatsoever is utterly and completely wrong."
Charter spokesman David Andersen said the company's agreement with all four executives was that it would pay legal costs only if the men were found innocent.
The legal case, as well as scores of lawsuits from stockholders, stems from a scheme in which the executives instructed employees to delay disconnecting customers seeking to end their service and those failing to pay their bills until after the end of financial quarters.
The disconnect plan came early this decade as Charter was finding it difficult to meet projected subscriber goals because of the weak economy and increased competition from satellite TV companies.
Smith cited an e-mail from former Charter President and Chief Executive Officer Carl Vogel to Allen. In the e-mail on Nov. 12, 2001, Vogel wrote that "the way we will make the numbers is by carrying over some 86,000 disconnects, which I don't like but I will allow until I have better visibility to the 2002 budget."
The e-mail "establishes conclusively that Allen was aware of, and therefore implicitly (if not explicitly) approved of, the managed disconnect practices ...," Smith's counterclaim read.
But Anderson noted that the e-mail was among the many documents the government looked at during its investigation.
At the April 22 sentencing, former chief financial officer Kent Kalkwarf was sentenced to a year and two months in prison and former chief operating officer David Barford was sentenced to a year and a day. Another former vice president, David McCall, received the same sentence as Smith - two years of probation.
Kalkwarf, Barford and McCall were fined $200,000. U.S. District Judge Carol Jackson said she considered Smith the least culpable, fining him $175,000.
In August, Charter agreed to pay $144 million in cash and stock to settle shareholder lawsuits accusing the company of inflating its financial results and customer numbers.
Charter has said it has reviewed its business practices, hired new management, instituted new financial procedures and developed ways to ensure that its employees comply with laws and regulations.
The company has continued to struggle financially.
Vogel, who was not accused of wrongdoing in the accounting scandal, resigned in January after last year's big losses - $4.35 billion, on the heels of $242 million in red ink in 2003 - and a debt load that stood at $19.5 billion as of Dec. 31.
So, tell us, Hal. Care to bet over whether Paul Allen is going to get indicted? I'll take that bet.
Maybe so. Looks like the feds have some cooperative witnesses now.
PA owes me some money...the stock holders have lost big on this piece of poop!
And the cable industry just keeps building that good will with their customers, don't they?
I have Charter and would be without broadband if they go under, but I'm sure another band of marauding Huns will move in and, except for the name, will be indistinguishable from the current band of marauders, just as the current band of pillaging Huns is indistinguishable from the two prior bands.
I thought it was only RIGHT-wing corporate fat cats who scammed the public ... You know, Ken Lay, Michael Milkin, Ivan Boesky, those types ... Paul Allen is a left-wing corporate hypocrite in the Bill Gates/Warren Buffet mold. He can't be guilty of any white-collar deception, can he????
That was the plan. Paul Allen sent Charter on a reckless acquisition spree paid for by the shareholders, and racked up $19 billion in debt.
Now Charter can go bankrupt and Allen can acquire it all for pennies on the dollar.
Mark Cuban figured it out just recently and dumped his 19 million shares.
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