Charter Communications Inc. on Friday said a U.S. grand jury has subpoenaed the company regarding its method of counting subscribers.
"Charter believes the issues under investigation are similar to those raised in previously reported class actions pending against the company, and certain individual defendants, and will cooperate fully with the subpoena," Charter senior vice president of communications David Andersen said in a prepared statement.
Charter said in the statement that it has received the subpoena from the U.S. Attorney's Office for the Eastern District of Missouri. The grand jury requested documents relating to Charter's current and disconnected customers, as well as its policies and procedures relating to the capitalization or expense of various costs and related matters.
Charter continued that in response to the issues under investigation, on Feb. 11 it announced an increase in its reserves for uncollected customer accounts receivable as of Dec. 31, 2001; tightened its collection policy and procedures relating to these marginal customers; and expected to remove approximately 120,000 marginal customers from its basic-customer account in the first quarter of 2002.
In its 10-Q report for the quarter ended March 31, 2002, Charter updated this estimate and reflected the disconnection of a total of 145,000 marginal customers during the quarter.
The disconnected customers were primarily those that have failed to pay for service.
In an interview, Andersen stressed that the subpoena was for documents, not individuals.
"We're taking this very seriously," Andersen said. "We are cooperating fully."
Back in May, Adelphia Communications Corp. announced that federal grand juries in New York and Pennsylvania were investigating the company's off-balance-sheet partnerships. While the U.S. Attorneys Office in Manhattan decided to file a formal complaint against five Adelphia executives on June 24 — all of whom were arrested by U.S. Postal Inspectors that same day — no grand jury indictments have come down as yet.
In its statement, Charter alluded that the grand jury investigation may have stemmed from allegations in several civil lawsuits filed against the company.
This month, at least five class-action suits have been filed in various courts against Charter, alleging that the company made materially false and misleading representations concerning its financial condition and that it overstated revenue, failed to appropriately account for installation costs, and artificially inflated the number of its basic-cable subscribers.
"I think they [the civil suits] have tickled someone's fancy," said one person who asked not to be named.
Jeff Jensen, an assistant U.S. Attorney for the Eastern District of Missouri, confirmed that a grand jury has been convened and has subpoenaed information from Charter, but declined further comment on the case.
However, Jensen said that in general, grand jury investigations are basically fact-finding missions. Depending on the information obtained, a grand jury could decide to go ahead with a full-blown indictment or opt to do nothing, he said.
Charter stock, which is down about 84 percent since the beginning of the year, fell about 13 cents each in afternoon trading on Aug. 15 to $2.58 per share.