Charter Communications Subpoenaed in Accounting Inquisition

20 August 2002

Microsoft co-founder and billionaire Paul Allen may find himself in an unwelcome spotlight as part of a criminal investigation into the accounting methods and treatment of customers by Charter Communications, America’s fourth largest cable operator.

The company has been subpoenaed by a federal grand jury in the Eastern District of Missouri, it was disclosed Friday. But Charter executives point out that the accounting matters under investigation have been properly disclosed and publicly aired.

Also under investigation is cessation of service to 145,000 customers who Charter alleges weren't paying bills – an unusually high number of disconnects ordered by chief executive Carl Vogel who took office last October.

The investigation was triggered by a report issued by Merrill Lynch earlier this summer. This accused Charter of a “more aggressive” policy for capitalizing expenses than other cable operators. It also questioned the company’s practice of counting customers who primarily buy the company's cable-modem service as basic cable subscribers.

Charter has 6.8 million subscribers in St. Louis and other major markets such as Los Angeles and Dallas-Fort Worth. It is 56% owned by Allen, who recently notified the SEC that he was considering taking the company private, also mulling the purchase of some of Charter’s public debt, or a debt-to-equity swap.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff