Adelphia Founder Indicted
The Rigas family created “a towering facade of false success” for Adelphia Communications and “lined their pockets with shareholder dollars,” a prosecutor said Monday in handing up a 24-count fraud indictment that seeks to recover $2.5 billion.
The action came two months after the family members were arrested at their apartment and accused of running the nation’s sixth-biggest cable TV company like a “personal piggy bank.”
The federal grand jury indictment names John Rigas, 77, who is the company’s founder and recently ousted chairman, two of his sons and two other former Adelphia executives. Based on the conspiracy, wire fraud and bank fraud counts, including 16 securities fraud charges not included in the original complaint, a judge could theoretically put each in jail for up to 250 years and fine each $19.5 million. Arraignment is to be Oct. 2 before U.S. District Judge Leonard B. Sand in Manhattan.
“The defendants used many of the most sophisticated tricks in the corporate fraud playbook,” U.S. Atty. James Comey said. He called the alleged scheme “one of the most elaborate and extensive corporate frauds” in U.S. history.
There have been plenty of contenders for that unwelcome distinction lately amid a flood of massive corporate scandals, including WorldCom and Tyco International, but the Adelphia indictment is full of colorful detail and impressive scale.
The Rigases pretended to buy 525,000 digital set-top cable boxes from Adelphia last year without intending to use them or paying the $100-million bill, the indictment charges. The purpose was to “create the illusion” that the advanced technology would boost revenue.
The family also pretended in government filings, in phony backdated documents and in promises to non-family corporate directors to pay more than $423 million for Adelphia stock that was actually financed by the company, the indictment claims. The alleged goal was to make it appear the company was reducing debt and to avoid a downgrading of its debt rating.
The indictment includes new allegations that the family members filed false documents with the U.S. Securities and Exchange Commission and that they made false bookkeeping entries.
John Rigas issued a statement that said, “The corporate and personal reputation I have worked to build over the last 50 years has been irreparably damaged. My family and I have always acted with integrity and honesty and are committed to restoring our credibility and that of Adelphia.”
The five former executives named in the indictment stepped down from their board seats and jobs in May. Adelphia, which has sued the Rigases, filed for Chapter 11 bankruptcy protection June 25, listing $18.6 billion in debt.
Besides John Rigas, who was also chief executive of Adelphia, based in Coudersport, Pa., the indictment names sons Timothy Rigas, 46, the former chief financial officer; and Michael Rigas, 48, the former executive vice president for operations, all of whom were released on a $10-million personal recognizance bond after their July 24 arrests. Also, James R. Brown, 40, the former vice president for finance, and Michael C. Mulcahey, 45, former director of internal reporting, were released on their own recognizance.
All five have denied wrongdoing through their lawyers.
