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Originally published Friday, April 29, 2005 at 12:00 AM

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Ex-Charter exec claims Paul Allen knew of scheme

Charter Chairman Paul Allen was aware of an accounting scandal at the nation's third-largest cable-television provider, according to a former...

The Associated Press

ST. LOUIS — Charter Chairman Paul Allen was aware of an accounting scandal at the nation's third-largest cable-television provider, according to a former executive convicted in the scheme.

James "Trey" Smith III, former Charter vice president, on Wednesday filed a counterclaim against the suburban St. Louis company in a dispute over legal fees related to the accounting scandal involving the company.

Michael Nank, a spokesman for Allen, said yesterday, "Any suggestion that Paul knew of any impropriety whatsoever is utterly and completely wrong."

Smith was among four former executives sentenced last Friday in federal court in St. Louis, where he received two years of probation and was fined $175,000.

All four men pleaded guilty to one felony count of conspiracy to defraud. Allen and the company itself were not accused of wrongdoing.

In February, Charter sued all four executives to recoup legal costs. For Smith, that amounted to $1.9 million.

Smith's response claimed that Allen, the billionaire co-founder of Microsoft, and former Charter General Counsel Curtis Shaw were aware of the scheme and implicitly approved it. Smith wants the federal court to deny Charter's request that he repay $1.9 million in legal fees, and that Charter pay an additional $1 million in legal costs.

Charter spokesman David Andersen said the company's agreement with all four executives was that it would pay legal costs only if the men were found innocent.

The legal case, as well as scores of lawsuits from stockholders, stems from a scheme in which the executives instructed employees to delay disconnecting customers seeking to end their service and those failing to pay their bills until after the end of financial quarters.

The disconnect plan came early this decade as Charter was finding it difficult to meet projected subscriber goals because of the weak economy and increased competition from satellite TV companies.

Smith cited an e-mail from former Charter President and Chief Executive Officer Carl Vogel to Allen. In the e-mail on Nov. 12, 2001, Vogel wrote that "the way we will make the numbers is by carrying over some 86,000 disconnects, which I don't like but I will allow until I have better visibility to the 2002 budget."

The e-mail "establishes conclusively that Allen was aware of, and therefore implicitly (if not explicitly) approved of, the managed disconnect practices," Smith's counterclaim read.

But Anderson noted that the e-mail was among the many documents the government looked at during its investigation.

Vogel, who was not accused of wrongdoing in the accounting scandal, resigned in January.

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