Charter Says SEC Opens Formal Probe

Cable television giant Charter Communications Inc. said Tuesday that federal regulators upgraded an inquiry into the company’s accounting practices to a formal investigation.

The designation allows the Securities and Exchange Commission to subpoena records and documents.

Charter first disclosed in November that the SEC was conducting an informal probe into how it accounts for subscribers and capital expenses.

The company, controlled by billionaire and Microsoft Corp. co-founder Paul Allen, made the latest disclosure in its 2002 financial filing with regulators.

Charter also is under criminal investigation by federal prosecutors for the way it counted subscriptions and capital expenditures.

Two weeks ago, the St. Louis-based company said it had overstated its sales and cash flow figures back to 2000 and said it lost $1.87 billion in the fourth quarter after conforming to new accounting rules.

The company, which ordered an accounting review, had said it recognized that errors had been made after meeting with its auditor, KPMG, and with the SEC. The accounting review caused Charter to delay filing its annual report, which put the company in violation of its bank loan terms.

Chief Executive Carl Vogel said Tuesday that KPMG had completed its review of Charter’s financial statements and that the company would be in compliance with its lenders.

Charter’s board approved an offer from the company’s controlling shareholder, Allen, for a $300-million backup credit line to ensure that the company would be able to service its almost $19 billion in debt.

Allen also is in talks with Comcast Corp., the largest U.S. cable TV operator, about buying the company’s 30% stake in a joint venture for about $725 million. The venture owns cable systems serving about 954,200 subscribers in the Midwest.

Allen may be forced to transfer the venture stake he acquires to Charter’s holding company in exchange for equity, according to the filing.

Charter shares rose 12 cents, or nearly 11%, to $1.25 on Nasdaq. The stock has dropped 87% in the last year.