Adelphia Suit Accuses Deloitte of Negligence

Adelphia Communications Corp. sued its former accountants Wednesday, accusing Deloitte & Touche of failing to report “self-dealing and financial chicanery” by founder John Rigas and family members that sent the cable television company spiraling into Bankruptcy Court.

The lawsuit accuses Deloitte of professional negligence and breach of its contract.

“These wrongful acts resulted in billions of dollars in damages to the company -- damages which were preventable if Deloitte had acted consistently with its professional responsibilities as Adelphia’s outside auditor,” the lawsuit states.

Though not naming a specific damage amount, the lawsuit seeks compensation for resulting injury to the company as well as punitive damages.

Deloitte representatives did not immediately return a call Wednesday seeking comment on the lawsuit, filed in Philadelphia.

Rigas, Adelphia’s founder; his sons Timothy, 46, and Michael, 48; and two other executives were indicted by a federal grand jury in September on charges of securities fraud, bank fraud and conspiracy.

Adelphia, which has more than 5.7 million cable television subscribers, filed for Chapter 11 bankruptcy protection June 25.

The company fired Deloitte & Touche as its auditor June 9.

The lawsuit says the accounting firm should have been aware of abuses, such as the $3.1 billion in debt run up by Rigas family enterprises under loan agreements that left Adelphia liable in the event of a default.

The suit alleges that Deloitte & Touche, which also provided auditing services for private Rigas family entities, knew about the family’s dealings but failed to reveal the information.

“If the board and the audit committee had been informed of the misconduct of the Rigas family,” the lawsuit states, “they could have, and would have, acted to stop and remedy the misconduct.”