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Feds put heat on Charter

Grand jury prosecutors subpoena MSO's records but, so far, no executives 8/18/2002 08:00:00 PM Eastern

Criminal lawyers are finding a whole new client base among media companies, with Charter Communications becoming the latest target of federal prosecutors over accounting issues.

Federal prosecutors in Charter's hometown of St. Louis delivered a subpoena to Charter last Thursday seeking records. One immediate issue involves how the company reports its levels of connected and disconnected subscribers. The other is the company's capitalization policies: how it counts some expenses as capital spending, which wouldn't affect reported earnings, rather than an operating expense, which would be directly subtracted from operating cash flow.

The good news, so far, is the grand jury subpoena seeks only company records. No individual executives have been subpoenaed.

AOL Time Warner is facing a similar criminal inquiry about revenues it counts as advertising sales on the America Online service and at its cable systems, prompting the company to seal the office of its top online business affairs executive, who was cutting deals with other Internet ventures. And, of course, Adelphia Communications executives have been handcuffed and "perp-walked" before news cameras on accounting and fraud charges.

Unlike in the other criminal investigations, however, prosecutors are investigating Charter ahead of the Securities and Exchange Commission. Typically, the SEC looks at accounting disputes and calls in the criminal investigators afterward.

But, after Enron and Adelphia, prosecutors seem to be moving for a first look.

Charter said prosecutors' attention seems to have been sparked by civil lawsuits filed by lawyers seeking to form a class action for shareholders. The company "will cooperate fully with the subpoena," an executive said.

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