Monday, January 31, 2005

Charter Communications Prosecution Ends with Fourth Defendant Pleading Guilty

The government's prosecution of four former executives of Charter Communications, Inc., the large cable TV company, ended when the fourth defendant, former CFO Kent Kalkwarf, agreed to enter a guilty plea.  According to the press release issued by the U.S  Attorney's Office for the Eastern District of Missouri (St. Louis):

In an effort to generate approximately 15 to 20 million dollars in additional revenue needed to meet these cash flow projections, Charter solicited advertising business from some of Charter’s largest suppliers, including their suppliers of set-top boxes. Kalkwarf and others offered Charter funds to these suppliers so that they could then use those same funds to purchase advertising from Charter at no cost to the suppliers, and these suppliers agreed to return that money to Charter by buying advertising in an equal dollar amount. Charter paid $20 more than necessary for each set-top box, but then received that same $20 back as advertising revenue, creating nothing but a "wash transaction."

Another example of the effect of the enormous pressure on corporate executives to churn out numbers (here, cash flow) to meet Wall Street's expectations, the same show being played out in the WorldCom and HealthSouth prosecutions. (ph)

Fraud, Prosecutions, Securities | Permalink

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