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Auditors balk at Cablevision report

The accounting scandal at Cablevision Systems Corp.’s networks unit has prompted auditors
KPMG International to refuse to sign off on the company’s quarterly report.

The accountants are awaiting the outcome of an investigation into accounting
games at the MSO’s Rainbow Programming Holdings Inc. unit, which, of course, includes a review
of KPMG’s own work.

Cablevision purged Rainbow's AMC Networks operation of 14 executives,
including president Kate McEnroe, accusing them of misstating the operation’s

On the company’s conference call, Cablevision executives were silent about
the auditing snag until asked by Bear Stearns Cos. Inc. analyst Ray Katz.

"We just were informed by KPMG in the last 24 hours, and we’re in active
discussions with them on it," vice chairman Bill Bell saud.

The company acknowledged that uncertainty over quarterly financial statements
could delay plans to refinance some debt, and analysts said it could delay the
planned spinoff of the Rainbow DBS start-up satellite operation.

But Cablevision president Jim Dolan asserted that the separation would proceed on
schedule. "There’s no change in our intention to do the spin," he added.

Financially speaking, the second quarter was not impressive. Total company
cash flow rose just 5%, and Oppenheimer & Co. media analyst Tom Eagan said that after filtering out some unusual items, it actually fell 0.4%.

Operating cash flow from the consumer-video business alone only increased
5.6% despite a 10% increase in revenues.

Ignoring some one-time costs from its fight over the New York Yankees' Yankees Entertainment & Sports
Network, cash-flow growth would have been 9.2% -- middling by cable