After Fall, Few Land Safely

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It's been five months since 14 people, including AMC Networks chief Kate McEnroe and two of her general managers, were abruptly dismissed in the wake of a probe into alleged accounting irregularities at Rainbow Media Holdings Inc.

Since those firings, which stunned the cable industry, only a couple of those jettisoned executives have found full-time employment and are working. One landed a job at Fox Sports and another at Adelphia Communications Corp.

In addition to those executives, several of the 14 are consulting. One has started her own company, while the others are biding their time with freelance work until the conclusion of investigations into Rainbow by its parent, Cablevision Systems Corp., and by federal authorities.

"A lot of them are looking to do projects consulting until the investigation is over," one source said of those fired by Cablevision.

To date, the top three officials Cablevision let go in June — McEnroe; Noreen O'Loughlin, AMC's general manager; and Martin von Ruden, WE: Women's Entertainment's general manager — have not been working, according to several cable-industry sources familiar with the situation.

The latest chapter in the Rainbow accounting scandal emerged last week. Cablevision revealed that its internal probe — of $6.2 million in marketing expenses for 2003 that allegedly were improperly accrued in 2002, and of invoices that were allegedly fabricated — had widened beyond just the networks that had been under McEnroe's purview, AMC and WE.

Cablevision acknowledged it had found almost $10 million in additional improper accruals, including some outside of Rainbow, "at most other business units."

In addition to having Cablevision's own independent auditor — Wilmer, Cutler & Pickering — look over the books, the Securities and Exchange Commission and reportedly the U.S. Department of Justice are also investigating Rainbow, where morale is said to be low.

Whether what allegedly happened at AMC and WE — marketing expenses being accelerated and booked a year earlier than they should have been — is a common practice or not at cable networks continues to be debated.

"The reality is everybody has done this," one veteran cable marketer argued.

Either way, the pending investigation at Rainbow continues to make it difficult for the higher-level AMC and WE executives who were let go in June to find jobs at publicly owned companies, numerous cable-industry insiders said.

Their best prospects are at private companies until the Rainbow probes conclude, according to the sources. McEnroe and her top lieutenants, in particular, are too tarred by too many unanswered questions until then.

"Were they fired for cause or not for cause? Nobody knows," another cable-industry veteran said. "Is this a parking ticket, or is it a homicide? Some of the junior people clearly didn't have signing authority."

Initially, McEnroe had been actively seeking work, going on interviews and telling potential employers that she was flexible and willing to relocate from her Long Island, N.Y., residence, according to several sources. She reportedly ran into brick walls at public firms, like MSOs.

Recently, industry sources were linking McEnroe and ex-CNBC executive Caroline Vanderlip, as teaming up on a venture. But Vanderlip, who is chief marketing officer for an insurance company, said while she and McEnroe have had casual talks about possibly doing something in the future, "There's nothing imminent … I have a full-time job." In fact, at this point McEnroe is planning to use this break as an opportunity to spend time with her two 4-year-olds at home, one source said.

McEnroe, reached last week, declined to comment.

O'Loughlin, who reportedly took her dismissal hard — and took the summer off — is just starting to actively seek consulting work, several sources said. She couldn't be reached for comment, and von Ruden declined to comment last week.

Two Who Landed

One of the 14 who found a new job is Melani Griffith, who had been senior vice president of affiliate sales and marketing for AMC and WE. She is now working for Fox Sports Net, as an ad-sales account executive in New York.

Kristen Raybould, formerly AMC Networks director of marketing, is now a video products manager for Adelphia's Northeast region, based in Andover, Mass. That regional office covers 1.6 million subscribers.

Adelphia, which has endured its own accounting investigations and woes under the Rigas family, declined to comment on its hiring of Raybould. Neither Raybould nor Griffith returned phone calls.

Lee Heffernan, WE's former senior vice president of marketing, said she has started her own consulting firm in Manhattan, Heffernan Marketing. But she declined to comment further, or to name her clients. A spokeswoman for Oxygen confirmed that Heffernan is doing some work for that network.

Heffernan — an industry veteran of such programming services as Turner Broadcasting System Inc. and Lifetime Television — is offering her expertise in marketing, promotion, ad sales and distribution.

Bonnie Boyle, the former director of affiliate marketing for AMC Networks, is also consulting, several sources said, and reportedly has done work for Martha Stewart Living Omnimedia Inc. Martha Stewart Omnimedia CEO Sharon Patrick is the former head of Rainbow.

Patrick's office and a Martha Stewart Omnimedia public-relations official didn't return phone calls. Boyle couldn't be reached for comment.

There is the belief in at least part of the cable industry that Cablevision went too far when it dismissed lower-level WE and AMC executives who didn't have authority regarding any accounting decisions.

And yet the whole group — many of whom are highly respected within the industry — has a dark cloud over it, even though none of the 14 have been charged with any wrongdoing.

"This is a terrible situation for them," said one cable veteran. "Everyone in the industry realizes that they're being scapegoated."

While at least some of the 14 have retained lawyers, Cablevision last week declined to say if it is being sued by any of those employees over their dismissals.

'Use It Or Lose It'

The apparent rationale for the accounting discrepancies at AMC and WE — the inappropriate acceleration of expenses — was to help the networks "make their numbers." By moving expenses to a prior year, the current year's numbers would look better by comparison.

But sources familiar with the situation at Rainbow also explained that money — budgeted for expenses for a particular year — that hadn't actually been spent would be booked as "spent" so that a network wouldn't "lose" that money.

Pointing a finger at Cablevision's detail-oriented higher echelon — the executives above McEnroe — one source said, "Suddenly, it's a big surprise that you have managers whose general policy was to use it [expense money] or lose it, which is not uncommon? … You have managers who want to use their budgets up."

But that source alleged that some AMC Networks officials probably crossed the line by doing things like "parking" $1 million with a third-party vendor "so they could use [that money] later," and by allegedly fabricating invoices.

"It was egregious. It's going overboard," the source said.

Controls At Issue

The source also said Cablevision should share the blame for the financial discrepancies at AMC and Rainbow; for not having financial controls and guidelines in place for its executives regarding the booking of expenses; and for not having policies regarding carrying budgeted money over from year to the next.

"They left a lot of the finance issues in the hands of the marketing and programming people, who are not finance people," the source said.

The corporate culture at entrepreneurial Cablevision and Rainbow "was about growing the businesses … with an emphasis on sales, marketing and programming" while being "light on the accounting and finance side," according to the source.

Employee morale at Rainbow has reportedly suffered as auditors go through the books.

Another source familiar with Rainbow said that the old dynamic at the family-run business — where there was a special loyalty between the company and its employees — has been shattered.

And it's "very stressful, really demoralizing," to have the audit teams around, the other source said.

Kathleen Dore was promoted to the post of Rainbow's entertainment services president after McEnroe was dismissed, and she is attempting to rally the troops.

"Kathy has done a remarkable job trying to keep the spirits up and to refocus everybody, but it's tough," the source said.

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