Charter 2004 Annual Report Download - page 29

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
In October 2002, Charter filed a motion with the Judicial internal controls and procedures. Unspecified damages, allegedly
Panel on Multidistrict Litigation (the ‘‘Panel’’) to transfer the on Charter’s behalf, are sought by the plaintiffs.
Federal Class Actions to the Eastern District of Missouri. On The consolidated State Derivative Action is entitled:
March 12, 2003, the Panel transferred the six Federal (Kenneth Stacey, Derivatively on behalf of Nominal Defen-
Class Actions not filed in the Eastern District of Missouri to that dant Charter Communications, Inc., v. Ronald L. Nelson,
district for coordinated or consolidated pretrial proceedings with Paul G. Allen, Marc B. Nathanson, Nancy B. Peretsman,
the eight Federal Class Actions already pending there. The William Savoy, John H. Tory, Carl E. Vogel, Larry W.
Panel’s transfer order assigned the Federal Class Actions to Wangberg, and Charter Communications, Inc.
Judge Charles A. Shaw. By virtue of a prior court order, On March 12, 2004, an action substantively identical to the
StoneRidge Investment Partners LLC became lead plaintiff upon State Derivative Action was filed in the Missouri State Court,
entry of the Panel’s transfer order. StoneRidge subsequently filed against Charter and certain of its current and former directors,
a Consolidated Amended Complaint. The Court subsequently as well as its former auditors. The plaintiffs in that case alleged
consolidated the Federal Class Actions into a single action (the that the individual defendants breached their fiduciary duties by
‘‘Consolidated Federal Class Action’’) for pretrial purposes. On failing to establish and maintain adequate internal controls and
June 19, 2003, following a status and scheduling conference with procedures. Unspecified damages, allegedly on Charter’s behalf,
the parties, the Court issued a Case Management Order setting were sought by plaintiffs. On July 14, 2004, the Court
forth a schedule for the pretrial phase of the Consolidated consolidated this case with the State Derivative Action.
Federal Class Action. Motions to dismiss the Consolidated This action is entitled:
Amended Complaint were filed. On February 10, 2004, in
(Thomas Schimmel, Derivatively on behalf on Nominal
response to a joint motion made by StoneRidge and Defendants
Defendant Charter Communications, Inc., v. Ronald L.
Charter, Vogel and Allen, the Court entered an order providing,
Nelson, Paul G. Allen, Marc B. Nathanson, Nancy B.
among other things, that: (1) the parties who filed such motion
Peretsman, William D. Savoy, John H. Tory, Carl E. Vogel,
engage in a mediation within ninety (90) days; and (2) all
Larry W. Wangberg, and Arthur Andersen, LLP, and
proceedings in the Consolidated Federal Class Actions were
Charter Communications, Inc.
stayed until May 10, 2004. On May 11, 2004, the Court
Separately, on February 12, 2003, a shareholders derivative
extended the stay in the Consolidated Federal Class Action for
suit (the ‘‘Federal Derivative Action’’), was filed against Charter
an additional sixty (60) days. On July 12, 2004, the parties
and its then current directors in the United States District Court
submitted a joint motion to again extend the stay, this time until
for the Eastern District of Missouri. The plaintiff in that suit
September 10, 2004. The Court granted that extension on
alleged that the individual defendants breached their fiduciary
July 20, 2004. On August 5, 2004, Stoneridge, Charter and the
duties and grossly mismanaged Charter by failing to establish
individual defendants who were the subject of the suit entered
and maintain adequate internal controls and procedures.
into a Memorandum of Understanding setting forth agreements
Unspecified damages, allegedly on Charter’s behalf, were sought
in principle to settle the Consolidated Federal Class Action.
by the plaintiffs.
These parties subsequently entered into Stipulations of Settle-
The Federal Derivative Action is entitled:
ment dated as of January 24, 2005 (described more fully below)
which incorporate the terms of the August 5, 2004 Memoran- (Arthur Cohn, Derivatively on behalf of Nominal Defendant
dum of Understanding. Charter Communications, Inc., v. Ronald L. Nelson, Paul G.
The Consolidated Federal Class Action is entitled: Allen, Marc B. Nathanson, Nancy B. Peretsman, William
Savoy, John H. Tory, Carl E. Vogel, Larry W. Wangberg,
(In re Charter Communications, Inc. Securities Litigation,
and Charter Communications, Inc.
MDL Docket No. 1506 (All Cases), StoneRidge Investments
As noted above, Charter entered into Memoranda of
Partners, LLC, Individually and On Behalf of All Others
Understanding on August 5, 2004 setting forth agreements in
Similarly Situated, v. Charter Communications, Inc., Paul
principle regarding settlement of the Consolidated Federal
Allen, Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David
Class Action, the State Derivative Action(s) and the Federal
G. Barford, Paul E. Martin, David L. McCall, Bill Shreffler,
Derivative Action (the ‘‘Actions’’). Charter and various other
Chris Fenger, James H. Smith, III, Scientific-Atlanta, Inc.,
defendants in those actions subsequently entered into Stipula-
Motorola, Inc. and Arthur Andersen, LLP, Consolidated
tions of Settlement dated as of January 24, 2005, setting forth a
Case No. 4:02-CV-1186-CAS.
settlement of the Actions in a manner consistent with the terms
On September 12, 2002, a shareholders derivative suit (the
of the Memoranda of Understanding. The Stipulations of
‘‘State Derivative Action’’) was filed in the Circuit Court of the
Settlement, along with various supporting documentation, were
City of St. Louis, State of Missouri (the ‘‘Missouri State Court’’),
filed with the Court on February 2, 2005. The Stipulations of
against Charter and its then current directors, as well as its
Settlement provide that, in exchange for a release of all claims
former auditors. A substantively identical derivative action was
by plaintiffs against Charter and its former and present officers
later filed and consolidated into the State Derivative Action. The
and directors named in the Actions, Charter will pay to the
plaintiffs allege that the individual defendants breached their
plaintiffs a combination of cash and equity collectively valued at
fiduciary duties by failing to establish and maintain adequate
$144 million, which will include the fees and expenses of
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