Four former Charter Communications execs were indicted Thursday on 14 counts of fraud connected with inflating cable subscriber numbers and revenues. The indictments were handed down by a federal grand jury as part of an investigation by the U.S. Attorney for Eastern Missouri into business practices at the company during 2000 and 2001.
Former chief operating officer David Barford, chief financial officer Kent Kalkwarf and senior VPs David McCall and James Smith were indicted on mail and wire fraud through schemes that misled investors by inflating company revenues. Specifically, court document claims Charter inflated the numbers by agreeing to pay its set-top box suppliers an extra $20 per box and then receive that money as ad revenue for its cable TV service. As a result, Charter was accused of falsely accounting for more than $17 million in revenue in 2000. The indictment also claims other schemes were carried out by the execs the following year, including counting non-pay subs.
Kalkwarf and Barford were fired last December, while Smith left the company in 2001 and McCall exited earlier this year. Charter says it has been in full compliance with the fed investigation. The four defendants are expected to before a federal magistrate by noon Friday.
If they are convicted, the defendants could be liable for fines of up to $250,000 per count and up to five years in jail.
In a statement, Charter Communications president-CEO Carl Vogel said the indictments “should not impact the company’s ability to execute its operating plan going forward.”
“Neither the company nor any of its current directors is a target of the inquiry,” Vogel said, noting that the U.S. Attorney’s Office stated that “the company’s current non-target status is based, in part, on the extraordinary cooperation provided by Charter during the course of the investigation, including coming forward with possible criminal conduct at the company of which the government was unaware.”
Auditors KPMG restated the cabler’s financials for 2000 and 2001.
Charter said it has since established a new management structure and has implemented a comprehensive companywide corporate compliance program to ensure that its employees comply fully with applicable laws and regulations .