Charter 2004 Annual Report Download - page 31

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
tion and subpoenas generally concerned Charter’s prior reports for the District of South Carolina in November 2001, and
with respect to its determination of the number of customers, moved to dismiss the suit in December 2001. The federal judge
and various of its accounting policies and practices including its remanded the case to the South Carolina Court of Common
capitalization of certain expenses and dealings with certain Pleas in August 2002 without ruling on the motion to dismiss.
vendors, including programmers and digital set-top terminal The plaintiffs subsequently moved for a default judgment,
suppliers. On July 27, 2004, the SEC and Charter reached a final arguing that upon return to state court, Charter Holdco should
agreement to settle the investigation. In the Settlement Agree- have, but did not file a new motion to dismiss. The state court
ment and Cease and Desist Order, Charter agreed to entry of an judge granted the plaintiff’s motion over Charter Holdco’s
administrative order prohibiting any future violations of United objection in September 2002. Charter Holdco immediately
States securities laws and requiring certain other remedial appealed that decision to the South Carolina Court of Appeals
internal practices and public disclosures. Charter neither admit- and the South Carolina Supreme Court, but those courts ruled
ted nor denied any wrongdoing, and the SEC assessed no fine that until a final judgment was entered against Charter Holdco,
against Charter. they lacked jurisdiction to hear the appeal.
In January 2003, the Court of Common Pleas granted the
Indemnification plaintiffs’ motion for class certification. In October and Novem-
Charter is generally required to indemnify each of the named ber 2003, Charter Holdco filed motions (a) asking that court to
individual defendants in connection with the matters described set aside the default judgment, and (b) seeking dismissal of
above pursuant to the terms of its bylaws and (where plaintiffs’ suit for failure to state a claim. In January 2004, the
applicable) such individual defendants’ employment agreements. Court of Common Pleas granted in part and denied in part
In accordance with these documents, in connection with the Charter Holdco’s motion to dismiss for failure to state a claim.
pending grand jury investigation, the now settled SEC investiga- It also took under advisement Charter Holdco’s motion to set
tion and the above described lawsuits, some of Charter’s current aside the default judgment. In April 2004, the parties to both the
and former directors and current and former officers have been Georgia and South Carolina Class Actions participated in a
advanced certain costs and expenses incurred in connection with mediation. The mediator made a proposal to the parties to
their defense. See ‘‘Item 13. Certain Relationships and Related settle the lawsuits. In May 2004, the parties accepted the
Transactions — Indemnification Advances’’ for greater detail. On mediator’s proposal and reached a tentative settlement, subject
February 22, 2005, Charter filed suit against four of its former to final documentation and court approval. As a result of the
officers who were indicted in the course of the grand jury tentative settlement, we recorded a special charge of $9 million
investigation. These suits seek to recover the legal fees and in our consolidated statement of operations in the first quarter
other related expenses advanced to these individuals by Charter of 2004. On July 8, 2004, the Superior Court of Athens — Clarke
for the grand jury investigation, SEC investigation and class County, Georgia granted a motion to amend the Tobar
action and related lawsuits. complaint to add Nicholls, Barber and April Jones as plaintiffs in
the Georgia Class Action and to add any potential class
Other Litigation members in South Carolina. The court also granted preliminary
In October 2001, two customers, Nikki Nicholls and Geraldine approval of the proposed settlement on that date. On August 2,
M. Barber, filed a class action suit against Charter Holdco in 2004, the parties submitted a joint request to the South Carolina
South Carolina Court of Common Pleas (the ‘‘South Carolina Court of Common Pleas to stay the South Carolina
Class Action’’), purportedly on behalf of a class of Charter Class Action pending final approval of the settlement and on
Holdco’s customers, alleging that Charter Holdco improperly August 17, 2004, that court granted the parties’ request. On
charged them a wire maintenance fee without request or November 10, 2004, the court granted final approval of the
permission. They also claimed that Charter Holdco improperly settlement, rejecting positions advanced by two objectors to the
required them to rent analog and/or digital set-top terminals settlement. On December 13, 2004 the court entered a written
even though their television sets were ‘‘cable ready.’’ A order formally approving that settlement. On January 11, 2005,
substantively identical case was filed in the Superior Court of certain class members appealed the order entered by the
Athens — Clarke County, Georgia by Emma S. Tobar on Georgia court. That appeal was dismissed on or about Febru-
March 26, 2002 (the ‘‘Georgia Class Action’’), alleging a ary 3, 2005. Additionally, one of the objectors to this settlement
nationwide class for these claims. Charter Holdco removed the recently filed a similar, but not identical, lawsuit.
South Carolina Class Action to the United States District Court
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