The California county of Santa Cruz 'arbitrarily and unreasonably' interfered
with efforts to transfer ownership of the local Charter Communications Inc.
system to Paul Allen when the local government concluded that the billionaire
lacked the 'financial and technical' qualifications to own the cable company,
according to a judge in California.
The county was one of four jurisdictions in the same area of the state that
refused to approve the transfer in 1998.
According to court documents, the county was concerned that Allen had paid so
much for the system that consumer rates would soar. Charter itself had acquired
that system for $1,564 per subscriber only months before Allen stepped in with
his offer to buy the MSO for a reported $3,600 per subscriber, or 14 times the
estimated 1999 operating cash flow, according to the legal opinion.
When it submitted its request for the transfer in 1998, the company was
bombarded with requests for financial and other information above and beyond the
required Form 394 disclosures required by the Federal Communications
When Charter refused to provide more financial information, the county
rejected the transfer. When Charter pleaded for reconsideration to meet, the
county demanded a $500,000 payment and financial support for a due-diligence
Ruling March 7 after a bench trial in U.S. District Court for the Northern
District of California, Judge William Alsup ruled in favor of the company and
Allen. Santa Cruz violated the operator's franchise-agreement promise not to
'unreasonably refuse' a franchise transfer, he said.