Secondary Fraud

Should a company that helps another firm defraud its investors be subject to lawsuits?

From The Washington Post
2007 The Washington Post

September 6, 2007

IN THE SUMMER of 2000, after realizing they were about to fall short of Wall Street revenue expectations, officials from Charter Communications devised a plan to beef up cash flow. The cable operator approached two of its vendors, Motorola and Scientific-Atlanta, which supplied Charter with cable boxes. Charter offered to buy hundreds of thousands of additional boxes at inflated prices if the companies used the extra money to buy advertising on Charter's cable channels. The vendors went along, agreeing to sign backdated deal documents and, in the case of Scientific-Atlanta, sending Charter a letter falsely stating that increased production costs had forced it to raise prices. The transaction was a wash for Motorola and Scientific-Atlanta, but it meant that Charter could book as revenue the $17 million the companies spent on advertising.

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