Cablevision Systems has fired AMC etworks president Kate McEnroe and 13 others after an internal audit of its Rainbow Media division uncovered about $6.2 million in improper marketing-expense accruals.
One source said staff firings were carried out after the news release went out at about 4:30 p.m. EST.
Cablevision said in a prepared statement that it has notified the appropriate
government authorities.
The MSO said improper accruals identified to date are "insignificant" to
previously reported financial results of Cablevision and Rainbow.
Internal and external auditors, reporting to Cablevision's audit committee,
performed a five-month review covering 1999-2002.
The review found that "certain employees of the national services division
inappropriately accelerated the accrual of marketing expenses and, in some
cases, fabricated invoices. These actions had the effect of inappropriately
accelerating into one-year expenses that should properly have been accrued in
the following year."
Cablevision continued, "The internal and external auditors found no
indication of any improper revenue recognition."
The review identified $6.2 million of expenses for 2003 that were accelerated
and improperly accrued in 2002, rather than 2003.
All but $1.7 million of that amount was identified and reversed prior to the
release of the company's 2002 results, Cablevision said.
The company said it thinks improper accruals in 2000 and 2001 were similar in
size to those in 2002, and that such amounts are "insignificant with respect to
its previously issued financial statements, and its independent auditors, KPMG
[International], concur with this judgment."
Cablevision doesn't expect to restate previously issued financial statements,
it said. KPMG agreed with that assessment, the MSO added.
Internal accountants spotted the potential invoicing problem, the company
said. The review included an examination of the company's financial and
accounting records, as well as contacting more than 150 external vendors.
"The company has taken steps to improve its financial controls by requiring
an additional level of oversight of expense accruals to help prevent a
recurrence of this issue," Cablevision said.
CEO James L. Dolan said in the statement: "Cablevision and its 20,000 staff
members depend on continued investor and public trust in the clarity and
truthfulness of our financial statements. The company cannot tolerate any
improprieties related to financial matters."
He added, "As soon as our internal accountants identified this problem, the
company launched an extensive review and has taken measures to help ensure that
a problem of this type does not occur again."
