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Justices skeptical about lawsuit involving Charter cable

POSTED: October 14, 2007 5:06 a.m.

The Supreme Court reacted skeptically Tuesday to arguments that banks, lawyers, accountants and suppliers should be held liable for helping publicly held companies deceive investors.

Chief Justice John Roberts and Justice Antonin Scalia suggested that federal law imposes strict limits on shareholders who want to sue companies and firms other than the one in which the investors hold stock.

The two conservative justices subjected a lawyer for corporate investors to tough questioning during arguments as the justices try to set boundaries in stockholder lawsuits for securities fraud.

Investors in Charter Communications Inc., one of the country’s largest cable TV companies, are suing two suppliers that allegedly schemed with Charter executives to mislead stockholders about the company’s revenue growth.

Charter provides cable television, phone and Internet service to much of Hall County.

The outcome of the case will determine the fate of a separate suit by Enron shareholders who are seeking over $30 billion from banks accused of colluding with the energy company to hide its debts.

If the court rules against investors, "it will mean the end of the case" for Enron shareholders and the banks that were primarily liable, attorney Patrick Coughlin, representing Enron stockholders, said outside the Supreme Court after the arguments.

The case before the court involves Charter suppliers Scientific-Atlanta Inc. and Motorola Inc.

Earlier this year, Roberts and Justice Stephen Breyer did not participate when the court decided to hear the case. On Tuesday, Roberts was back, but Breyer was still out. As of last year, both owned stock in Cisco Systems Inc., which now owns Scientific-Atlanta.

Charter persuaded the two suppliers to buy advertising that was bankrolled with money from Charter, which paid a $20 premium on each of hundreds of thousands of cable TV set-top boxes, for a total of $17 million.

The amount of the overpayments equaled the amount the suppliers paid for the ads.

Charter reported the advertising payments as revenue, a step that helped Charter paint a rosy financial picture for the fourth quarter of 2000, a move designed to artificially inflate the stock’s price.

The case is Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. and Motorola Inc., 06-43.



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