Cable Operators

Plea for Ex-Charter Executive

1/09/2005 7:00 PM Eastern

James “Trey” Smith III is the latest former Charter Communications Inc. executive to cut a deal with federal prosecutors, pleading guilty to one count of conspiracy to commit wire fraud and agreeing to testify at the upcoming trial of one of his former colleagues.

The charge carries a maximum sentence of five years in prison and/or a $250,000 fine. Smith, formerly senior vice president of Charter’s Western region, is set for sentencing in April.

Smith is the third Charter executive to plead guilty to fraud charges stemming from a 14-count indictment handed down in July 2003, involving an alleged scheme to defraud Charter investors by inflating subscriber numbers in 2001. Also at that time, Smith and former Eastern region senior vice president David McCall were indicted on one count of conspiracy to commit wire fraud and eight counts of wire fraud.

McCall pleaded guilty to one count of conspiracy to commit wire fraud in July 2003.

He was followed by former chief operating officer David Barford, who pleaded guilty to the same charge last month. Barford is scheduled to be sentenced in March.

“Three of the four defendants have now pled guilty,” U.S. Attorney James Martin said in a statement. “These guilty pleas clearly establish the significant corporate fraud which was committed in this case. The clear message is, corporate executives who cook the books will pay the price.”

Like the other former executives who have reached deals with the government, Smith’s plea agreement requires that he testify for the government in the upcoming trial of former chief financial officer Kent Kalkwarf. Kalkwarf’s trial is scheduled for Feb. 7.

While it appears Kalkwarf could take the fall for Charter’s past accounting foibles, others believe it is a matter of time before he also engineers a plea deal with the government.

The government’s case against Kalkwarf centers on the fact that the company kept non-paying and disconnected subscribers on the rolls in order to meet Wall Street’s growth expectations. While that technically defrauded investors, it is hardly the headline-grabbing criminal activity of other high-profile cases, such as that of former Adelphia Communications Corp. executives John and Timothy Rigas.

The Rigases were convicted of 18 counts of fraud and conspiracy in July, stemming from a scheme to pilfer $200 million from Adelphia’s coffers. They are scheduled to be sentenced on Feb. 23 in New York.

“My sense is that the government just wants this to go away,” said one source familiar with the matter.

Charter spokesman David Andersen declined to comment on Smith’s plea agreement, noting that Smith resigned from the company in 2001. The plea will have no impact on the MSO’s operations, he added.

Charter has fully cooperated with the government in its investigation, and neither the company nor any of its current officers or directors is a target of the inquiry, Andersen said.

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