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Charter exec pleads guilty to fraud charges for inflation

Friday, December 17, 2004

ST. LOUIS -- The former chief operating officer of cable television company Charter Communications Inc. pleaded guilty Thursday to a federal charge that he conspired to defraud investors by inflating subscriber numbers, federal prosecutor James Martin said.

David Barford, 46, of Chesterfield, faces sentencing March 11 for conspiracy to commit wire fraud. He could face up to five years in prison and a fine of $250,000, but has agreed to testify in the trial of two other former executives, Martin said.

As part of the plea agreement, 13 other counts were dismissed, Martin said.

"We made a decision that we felt was in the best interest of everyone, particularly Mr. Barford and his family, and chose not to proceed to trial," Barford's attorney, Art Margulis, said. "We felt the risk of going to trial was outweighed by the benefits of resolving it this way."

Barford was one of four Charter executives accused in a July 2003 federal indictment. Former senior vice president David McCall, 49, of Laurens, S.C., has pleaded guilty to one felony count of conspiracy to commit wire fraud. He awaits sentencing.

A trial is scheduled for Feb. 7 for former chief financial officer Kent Kalkwarf, 45, of St. Louis, and former senior vice president James Smith, 56, of California.

The company, based in suburban St. Louis, is controlled by Microsoft Corp. co-founder Paul Allen and has about 6.3 million subscribers in 37 states. It is the nation's third-largest cable TV provider.

Martin said that from June 2001 to March 2002, Charter was having a difficult time meeting subscriber growth projections. The executives allegedly instructed employees to delay disconnecting customers seeking to end their service and those failing to pay their bills until after the end of financial quarters, defrauding investors.

0002000005E90000072F5E3,"This is a significant step for this case," Martin said. "We have the former chief operating officer of the company acknowledging the fraud and the scheme."

The company said it has reviewed its business practices, hired new management, instituted new financial procedures and developed ways to ensure its employees comply with laws and regulations. Charter spokesman Dave Andersen noted that the U.S. attorney's office has said that neither the company nor its directors are targets of the investigation.

"Because Mr. Barford is no longer an employee of Charter, his plea today will have absolutely no impact on our operations, and we'll continue to cooperate with the investigation," Andersen said.

Charter, founded in 1993, grew rapidly through acquisitions as part of Allen's "wired world" vision. The company's stock peaked at $27.75 per share in November 1999.

But debt from those acquisitions began to catch up with Charter, and analysts and investors began to question its business practices. By October 2002, Charter stock had dipped to 76 cents per share. Charter shares were down 1 cent to $2.07 Thursday in afternoon trading on the Nasdaq Stock Market.

In August, Charter agreed to pay $144 million in cash and stock to settle shareholder lawsuits accusing the company of inflating its financial results and customer numbers.

Margulis said Barford currently owns a small company with a few other people. He would not elaborate.


On the Net:

Charter Communications Inc., http://www.charter.com


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