Charter Communications Reaches Settlement in Class Action and Derivative Lawsuits
ST. LOUIS, Aug 5, 2004 (BUSINESS WIRE) -- With the proposed
settlement of a consolidated class action lawsuit and related
shareholder derivative actions pending against it in state and federal
courts, Charter Communications Inc. (Nasdaq: CHTR) (Charter or the
Company) will bring to a close the three major legal matters facing it
since 2002 dealing with the Company's prior business practices.
On Thursday, August 5, 2004, Charter executed memoranda of
understanding with lawyers representing the plaintiffs in 18 class
action and derivative lawsuits, effectively ending litigation pending
for two years. If the settlement is approved by the courts before
which the suits are pending, Charter will pay current and former
shareholders and their attorneys $144 million in cash and equity to
settle claims about its accounting and business practices from late
1999 through 2001. The $64 million cash component of the settlement
will be provided by Charter's insurance carriers.
On July 27, the United States Securities and Exchange Commission
(SEC) concluded its two year investigation of Charter arising out
complaints similar to those lodged in the civil lawsuits. As part of
that settlement, Charter neither admitted nor denied any wrongdoing
and the SEC assessed no fine against the Company. In the Settlement
Agreement and Cease and Desist Order, Charter agreed to the entry of
an administrative order prohibiting any future violations of United
States securities laws.
"The settlement of the securities litigation effectively closes
the books on these serious legal matters confronting the Company,"
Charter President and CEO Carl Vogel said. "We can now devote our
complete and full attention to serving customers and growing revenues.
We will also maintain our efforts to improve our debt structure in
ways that will give us increased financial and operating flexibility,"
In July 2003, the Department of Justice decided not to charge the
Company as part of an investigation into business practices at Charter
during 2000 and 2001, most of which were the focus of the civil
lawsuits that are now in the process of being settled. The
Government's investigation did result in the indictment of four former
Charter officers. Charter fully cooperated with the Department of
Justice in the inquiry and was the recipient of rare public praise by
both the United States Attorney and the chair of the Government's
Corporate Fraud Task force for its "extraordinary" cooperation. No
current officer or director of Charter is a target of the federal
The execution of the memoranda of understanding between Charter
and attorneys for both the lead class action plaintiff and for the
plaintiffs in pending shareholder derivative suits, is the first of
several procedural steps that must be taken before the lawsuits are
formally settled. The federal judge before whom the suits are pending
must give preliminary approval to the settlement after final
documentation is completed. The current and former shareholders who
are affected by the settlement -- the "class members" who bought
Charter common stock between November 1999 and August 2002 -- must
then be notified of its basic terms. Subsequently, the same federal
judge will hear objections to the settlement, if any, before final
approval is given. After final approval, the benefits of the
settlement would then be distributed to the affected class members.
As part of the settlement, the Company will also commit to
maintaining or implementing certain corporate governance measures. "We
welcome any changes that will improve our corporate governance and are
committed to operating our business consistent with the highest
ethical standards," Vogel said. "This has been a focus of mine since I
started at Charter," he said.
Both before and during the SEC investigation, Charter had
conducted an internal review of its business practices. The Department
of Justice, SEC and civil inquiries focused on business and accounting
practices in 2000 and 2001. Virtually all of the senior business
leadership during that period has been terminated or replaced.
As part of the settlement, all claims against Charter and its
former and present officers and directors will be released. The $144
million Charter will pay in cash and equity will also cover the fees
and expenses of plaintiffs' counsel. Although Charter's insurance
carriers will contribute $64 million in cash as a key component of the
settlement, Charter itself will not be required to make any cash
payments. The balance will be paid in shares of Charter Class A common
stock having an aggregate value of $40 million and ten year warrants
to purchase shares of Class A common stock having an aggregate value
of $40 million. The number of warrants to be issued will be computed
as of the day the courts give final approval of the settlements. The
settlement of the various state and federal lawsuits are conditioned
upon, among other things, the parties' approval and execution of
definitive settlement agreements and the approval of the settlements
by the respective state and federal Courts.
About Charter Communications
Charter Communications, Inc., a broadband communications company,
provides a full range of advanced broadband services to the home,
including cable television on an advanced digital video programming
platform via Charter Digital(TM) and Charter High-Speed(TM) Internet
service. Charter also provides business-to-business video, data and
Internet protocol (IP) solutions through Charter Business(TM).
Advertising sales and production services are sold under the Charter
Media(R) brand. More information about Charter can be found at
SOURCE: Charter Communications Inc.
Charter Communications Inc.
Dave Mack, 303-323-1392
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