Two former Charter executives plead innocent

ST. LOUIS -- Two former top executives of Charter Communications pleaded innocent Tuesday to 14 federal charges that they conspired to defraud investors.

Former chief operating officer David Barford and former chief financial officer Kent Kalkwarf appeared before U.S. Magistrate Judge David Noce. Both men, accused of mail fraud, wire fraud and conspiracy to commit wire fraud, are free on $100,000 bonds.

"We don't think any crime has been committed," Kalkwarf's attorney, Robert Haar, told reporters after the hearing.

Barford and his attorney, Jeff Demerath, declined comment.

Barford, 44, of Chesterfield, and Kalkwarf, 45, of St. Louis, are among four former executives accused in an indictment announced Thursday. Former senior vice president David McCall, 48, of Laurens, S.C., pleaded guilty Friday to one count of conspiracy to commit wire fraud, and is cooperating in the investigation against the other three, U.S. Attorney Ray Gruender said.

The fourth defendant, James Smith III, 55, of La Quinta, Calif., pleaded innocent Monday to eight counts of wire fraud and conspiracy.

Charter, based in suburban St. Louis, is controlled by Microsoft Corp. co-founder Paul Allen and has about 6.8 million subscribers. It is the nation's third-largest cable TV company.

Gruender said the executives schemed in 2000 and 2001 to inflate revenue and operating cash flow and indicate the company had more cable subscribers than it really did.

In August 2000, Kalkwarf and Barford allegedly gave money to Charter's suppliers of digital set-top boxes, asking them to charge the company $20 more per set-top box, then having them return the money.

As a result, Charter falsely included more than $17 million as revenue and cash flow for 2000, Gruender said.

The scheme in 2001 came about as Charter was finding it difficult to meet its projected subscriber goals because of the weak economy and increased competition from satellite dish companies, Gruender said.

The four 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.

Asked about the involvement of others in the scheme, McCall told a judge last week, "It really involved a lot of people across the company."

Gruender would not say if the investigation continued or if additional charges would be filed. Charter chief executive Carl Vogel said neither the company nor its current directors are under investigation.

In a statement, Charter 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, 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 the company, and analysts and investors began to question Charter's business practices. By October 2002, Charter stock had dipped to 76 cents per share. It has rebounded in recent months and was down 4 cents to $5.00 per share in late-morning trading on the Nasdaq stock market.

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