Copyright 2005 Knight Ridder/Tribune Business News
Copyright 2005 St. Louis Post-Dispatch (Missouri)
St. Louis Post-Dispatch (Missouri)
September 21, 2005, Wednesday
By Jerri Stroud
From Lexis Nexis
Charter Communications Inc. is accusing a contractor in Georgia of bribing three former Charter officials as part of a scheme to garner millions of dollars in contracts for upgrading the cable operator’s network in the Gulf Coast region, according to court filings late last year and earlier this year.
Charter alleges also that the contractor did shoddy work and billed it for work that hadn’t been done.
Charter declined to answer questions about the lawsuit, which is pending in U.S. District Court in Atlanta.
In court documents, Charter says the contractor, Crown Fiber Communications Inc. of Suwanee, Ga., gave extravagant gifts to David McCall, a former senior vice president for Charter’s old eastern region; Ronald Johnson, former senior vice president of operations for the Gulf Coast region; and Richard Ford, a former vice president of technology in Georgia.
McCall was among four Charter officials who earlier this year pleaded guilty to wire fraud in a scheme that involved inflating the company’s revenue and subscriber count. He was sentenced to two years’ probation and ordered to pay a $ 200,000 fine.
McCall, Johnson and Ford received gifts such as automobiles, motorcycles, jewelry, cash and trips to NASCAR events, court documents say.
The gifts apparently were intended to reward the executives for steering business to Crown from 1998 until early 2003, Charter said. In that period, Charter was upgrading its systems nationwide, so it could offer high-speed Internet service and other products.
Charter, based in Town and Country, is the nation’s fourth-largest cable company. It has systems spread from coast to coast, with strength in Alabama, Georgia and other parts of the Southeast.
The bribery accusations are part of a countersuit Charter filed late last year after Crown Fiber sued a Charter subsidiary, claiming that it had not been paid for $ 1.5 million in work on Charter systems in Georgia.
The suit was filed in November in Gwinnett County, Ga. In December, Charter asked that the case be moved to federal court in Atlanta because of alleged violations of the federal Racketeer Influenced and Corrupt Organizations Act.
In its countersuit, Charter says Crown Fiber; its former chief executive, Billy Ray Jones; Quanta Services Inc. of Houston, which bought Crown in 1999; the former Charter employees and others developed a scheme in which contracts were awarded to Crown in violation of Charter’s normal procedures.
The documents allege that Crown charged inflated prices and did inferior work, often burying cable no more than four inches deep rather than the 12-inch depth Charter specified.
“The basic framework of the Crown Fiber scheme was simple,” Charter’s suit says. “Acting through Jones and others, Crown Fiber and Quanta bribed key Charter employees to award as much work as possible to Crown Fiber, regardless of price, thereby eliminating all other contractors in the regions under their control from competition for Charter business.”
The suit says the former Charter employees ordered subordinates to pay for “overpriced, non-existent, unnecessary and/or unauthorized work.” As a result, the bills Crown and Quanta submitted were inflated by tens of millions of dollars, the suit says.
Jones has denied the charges in the counterclaim and asked that it be dismissed for inconsistencies and lack of specifics.
He has subpoenaed other companies that do business with Charter — including ABC, Home Box Office, MTV and ESPN — in an apparent attempt to show that giving gifts to Charter employees was standard practice. Jones joined Quanta as a vice president after Quanta bought Crown Fiber.
Charter alleges also that Jones gave McCall an interest in a real estate company that bought property in Mauldin, S.C., that later was leased to Charter. Jones paid $350,000 for the property and later leased it to Charter for $117,400 a year, documents show.
When Charter bought the property for $360,000, McCall signed the contract on Charter’s behalf without disclosing his ownership stake in the real estate venture. Charter said it paid the venture $1 million in all, part of which McCall pocketed.
For his part in referring business to Crown Fiber, Johnson, the Gulf Coast operations manager, received at least $195,000 in cash and $43,500 in unsecured loans from Jones, starting in November 1998, Charter said.
Other gifts included a Mercedes-Benz automobile, liquor, crystal, diamond earrings, designer purses, a Rolex watch, leather NASCAR jackets and an antique table worth $1,000. Johnson gave the car back to Jones, but was given $30,000 after he returned the car.
According to the countersuit, Johnson also has said under oath that Jones paid for all or part of more than 20 trips, including trips to the Bahamas, Las Vegas, Florida, New Orleans and Biloxi and Tunica, Miss. He also took overnight trips by private plane to NASCAR races in several states.
Starting in late 1999, Charter said Johnson took steps to make sure that virtually all contracting business in the Gulf Coast region went to Crown Fiber. Johnson funneled so much work to Crown that it was often forced to employ subcontractors, the documents say; in some cases, Crown took over jobs from contractors that it then hired back to do the jobs, but at higher cost to Charter.
Ford, the other former Charter executive, received gifts or long-term loans of motorcycles, a pickup truck, a Corvette, a race car and trailer to haul it and a Jeep Wrangler. He also went on trips to Florida and Sturgis, S.D., Charter said.
Ford assisted Johnson in funneling work to Crown and insuring that Crown’s invoices were paid promptly, without checking whether the work had been done, how it was done or if it was billed properly, Charter said.
Crown Fiber has asked the court to rule on the case based on pleadings in the file. Charter has asked to be allowed to amend its countersuit to add more detail and specifics.
The U.S. Attorney’s office in Atlanta said no charges are pending against any of the former Charter executives or Crown Fiber officials.
