The former chief financial officer and three other former executives of Charter Communications Inc. have been sentenced for their role in the cable company’s accounting scandal, according to the Securities and Exchange Commission.
Judge Carol E. Jackson of the U.S. District Court in St. Louis sentenced former finance chief Kent D. Kalkwarf to 14 months in prison. Former chief operating officer David G. Barford was sentenced to one year and one day in prison; former senior vice presidents of operations David L. McCall and James H. Smith III were sentenced to two years’ probation. Each of the four individuals will pay fines ranging from $175,000 to $200,000.
The quartet had pleaded guilty to wire fraud or conspiracy to commit wire fraud for their roles in two financial reporting schemes that were the subject of a July 2004 SEC action against the company. In their plea agreements, Barford, McCall, and Smith stipulated to knowingly participating in a scheme to artificially inflate subscriber numbers to meet forecasts for the second and third quarters of fiscal 2001 and for that fiscal year.
Kalkwarf stipulated that he and others knowingly devised a separate scheme to artificially inflate Charter’s fiscal-year 2000 revenue and operating cash flow by $17 million to meet analysts’ projections. According to the SEC, Kalkwarf entered into an agreement under which Charter agreed to pay two suppliers an additional $20 for each digital converter that the company purchased. Simultaneously, the SEC maintained, the company entered into a second contract under which those suppliers agreed to purchase $20 in advertising services from Charter for each converter purchased. In effect, the SEC charged, Charter gave these suppliers money to purchase its advertising services.
Kalkwarf, who pleaded guilty to federal fraud charges in January, was “terminated” by Charter in December 2002 after an internal investigation.