Charter Communications Being ProbedAug 16, 2002 | AP
Federal prosecutors are investigating Charter Communications Inc., the nation's fourth-largest cable television company, for how it accounts for some expenses, Charter officials said Friday.
The company, controlled by billionaire Paul Allen, received a grand jury subpoena from the U.S. Attorney's office in St. Louis on Thursday, seeking documents related to how the company accounts for costs for current and disconnected cable TV subscribers. St. Louis-based Charter serves more than 6.8 million customers in 40 states.
"We are taking this very seriously and cooperating fully," Charter spokesman David Andersen said. He said the company denies any wrongdoing.
An attorney with the U.S. attorney's office would not comment.
In February, Charter announced a change in accounting for how it deals with customers who don't pay their bills. The company said it had tightened its collection policy and procedures relating to those customers, and that it expected to disconnect approximately 120,000 "marginal" customers from its basic customer account in the first quarter of 2002, a number that later rose to 145,000.
A class-action lawsuit by shareholders filed on Thursday in federal court in East St. Louis, Ill., accused Charter of issuing a series of false and misleading statements to the market from 1999 through July of this year. Among other things, the suit said Charter issued quarterly reports that inappropriately boosted earnings by improperly capitalizing the firm's labor costs. It said the company also artificially inflated its subscriber count by listing internet-only subscribers as cable customers.
The suit is one of about nine class-action suits filed against Charter in the last few months after a Forbes magazine article in which a Merrill Lynch analyst questioned how the company accounts for some internet subscribers.
Shares of Charter stock fell 18 cents, or 6.6 percent, to $2.53 in midday trading on the Nasdaq Stock Market.
Charter is now the second big cable company whose bookkeeping practices have been called into question. Adelphia Communications Corp., the nation's sixth-largest cable company, is also under investigation.