SEC Files Cease And Desist Order Against Charter Communications Inc.

SEC NEWS DIGEST
Issue 2004-144 July 28, 2004

On July 27, the Commission issued an Order requiring Charter
Communications, Inc. (Charter) to cease and desist from committing or
causing any violations and any future violations of certain reporting,
books and records, and internal control provisions of the federal
securities laws. Charter, a Delaware corporation with its principal
office in St. Louis, Missouri, is the third largest operator of cable
systems in the United States. The Commission's Order finds that from
the first through the fourth quarters of 2001, Charter inflated its
subscriber numbers in an attempt to meet analysts' expectations for
subscriber growth and depict itself as a growing company. According to
the Order, beginning in 2001, employees at Charter stopped disconnecting
the services of customers whose services would have ordinarily been
disconnected because they were delinquent in paying their account
balances or had requested their services be terminated. This practice
was known as "managing disconnects." By not disconnecting the services
of these subscribers, Charter inflated its subscriber count and enabled
it to meet subscriber growth targets for the company. As a result of
this conduct, the Order finds that Charter reported materially inflated
subscriber numbers to the Commission and to the public from the first
through the fourth quarters of 2001 in its Forms 8-K, Forms 10-Q and
Form 10-K. The Order further finds that by inflating subscriber numbers
Charter was able to falsely depict itself to the public and analysts as
a growing company when Charter actually experienced flat to negative
growth for those periods.

In addition, the Order finds that in the fourth quarter of 2000, Charter
inflated its year-end revenue and operating cash flow by $17 million
when it realized its year-end revenue and operating cash flow for 2000
was going to be short of analysts' expectations. According to the
Order, to generate additional revenue and operating cash flow, Charter
entered into one contract under which it agreed to pay two of its
digital set-top box suppliers an additional $20 for each set-top box it
purchased and simultaneously entered into another contract under which
its set-top box suppliers agreed to purchase $20 in advertising services
from Charter for each set-top box Charter purchased. As such, Charter
gave the suppliers the money to purchase the advertising services from
Charter. By increasing its revenue and operating cash flow with the $20
it was paid by the suppliers as advertising revenue, Charter improperly
inflated its 2000 year-end revenue and operating cash flow that it
reported to the Commission and to the public in its Form 10-K for 2000.
Charter, while neither admitting nor denying the Order's findings,
consented to the entry of the Order and certain remedial undertakings.
In determining to accept Charter's settlement offer, the Commission
considered remedial acts promptly undertaken by Charter and cooperation
Charter afforded the Commission staff. (Rel. 34-50098; AAE Rel. 2064;
File No. 3-11563)