One of billionaire Paul Allen’s trusted top hands at his cable TV company is headed to the slammer for cooking the books.
David McCall, 48, the former senior vice president of Charter Communications, not only embarrassed his boss but also was blamed for wiping out nearly $3.9 billion from the value of Allen’s stake.
McCall, who pleaded guilty yesterday to fraud and corrupting company books over several years, faces five years in a Missouri federal pen, where inmates get free cable TV.
McCall, an eight-year veteran at Charter, is also ratting out three other top people in Allen’s management team who’ve been indicted in Charter’s scandal.
The scam helped collapse the stock and erase as much as $6 billion in overall stock value for investors in the nation’s No. 3 cable company.
Charter’s former CFO Kent Kalkwarf, former COO David Barford and former senior vice president James Smith were indicted two days ago on various charges of artificially boosting cash flows, revenue and subscriber counts. All three claimed innocence.
The bottom fell out after regulators began probing Charter’s inflated profits, including fudged cable subscriber counts.
Charter said sales were overstated by about $292 million from 2000 through 2002. Revenue will be reduced by $108 million, or 3 percent, in 2000; by $146 million, or 4 percent, in 2001; and by $38 million, or 1 percent, for the first three quarters of 2002. Cash flows were overstated by $597 million.
Allen bought Charter five years ago for $4.4 billion and took it public in 1999 at $19 a share to see it soar 40 percent in just days. He owns 54 percent of the now weakened company.
Charter gained 4 cents yesterday to $4.82 in busy trading of more than 7.7 million shares. Its value has soared six-fold since it hit bottom at 76 cents last October.
Allen had to bail out the company with a $300 million loan this spring to prevent a default on debt. Allen is preparing to sell about $1.7 billion in junk bonds in coming days to help buy back notes and pay bank debt.