Paul Allen's Charter Communications fires top executives

St. LOUIS — Charter Communications, controlled by Seattle billionaire Paul Allen, fired Chief Financial Officer Kent Kalkwarf and Chief Operating Officer David Barford after an internal review of its accounting and a probe by federal investigators, the cable provider said.

Charter had put Barford on leave in October, citing a U.S. investigation of whether Charter improperly sought $12 million to $15 million in rebates from television-program suppliers. The terminations came after Charter said it would revise two years of financial results to record an extra $1.4 billion in assets and an equal amount in liabilities.

Charter said fourth-quarter operating cash flow will fall short of its forecast. Charter is losing customers to satellite TV and has $18.5 billion in debt. It might have trouble making loan payments and eventually file bankruptcy, some investors said. The shares have plunged more than 90 percent this year.

"Charter has a wall of debt on one side and management chaos on the other," said Matt Kaufler at Clover Capital Management. "They may have to go through some sort of prepackaged bankruptcy to try to wipe away or restructure as much debt as possible. I don't see how they avoid it at this juncture."

Clover sold its Charter shares in September. Clover bought the shares at $14 and sold at $3, Kaufler said.

Charter shares rose 4 cents to $1.17 yesterday.

Charter spokesman David Andersen said, alluding to issues raised by the grand jury investigation and Charter's own review, "that regardless of the outcome these changes were appropriate."

"The board is committed to taking all corrective action appropriate to position the company to move its business forward and to move ahead without distraction," he said.

Charter said the government has told it that no one on the company's board, including president and chief executive Carl Vogel, is a target of the investigation.

Ted Henderson, a Denver-based cable industry analyst for Stifel, Nicolaus, said the executive shakeup appeared "intended to show the grand jury that, 'At Charter, we're not going to tolerate this, and we're fixing these procedures.' "

"That's the problem with this — it's all speculation," said Henderson. At Charter, "I think there's either a siege mentality or a fresh-start one — one of the two."

Charter yesterday said re-audits of its 2000 and 2001 results and an audit of 2002 will be done in the first quarter. Accordingly, the company said it would not offer further specific guidance until completing the 2002 audit.

Executive Vice President Steven Schumm will be CFO until a replacement is named, Charter said in a statement. Barford will be replaced by Margaret Bellville, who was named executive vice president of operations earlier this month.

Charter said it will hire a corporate compliance officer to improve its reputation.

Kalkwarf joined St. Louis-based Charter in 1995 from Arthur Andersen and became CFO in 2000. Barford had been COO since July 2000. Kalkwarf and Barford couldn't immediately be reached to comment. Calls to their former offices weren't returned.

"We are moving as rapidly as practicable to ensure that Charter is on the right track," Chief Executive Carl Vogel said in the statement. "We intend to take the appropriate corrective actions — both operationally and financially."

The company said it is "actively cooperating" with the government's investigation. Last month, Charter said it received an informal inquiry from the Securities and Exchange Commission about accounting for customers whose service is disconnected.

Vogel said this month that the FBI has contacted program suppliers to determine whether Charter improperly sought $12 million to $15 million in rebates from them.

Charter is trying to sell cable systems with 400,000 to 600,000 subscribers, but preliminary bids were lower than it expected, Vogel said this month.