Adelphia Creditors File Suit Against Loan Providers
The unsecured creditors’ committee of cable company Adelphia Communications Corp. on Sunday sued hundreds of banks, including some top Wall Street institutions, for providing loans to the Rigas family that controlled the company, court documents said.
The suit, filed in U.S. Bankruptcy Court in the Southern District of New York, claims damages of at least $5 billion and named Bank of America Corp., Barclays, Citigroup Inc. and Wachovia Corp. among the list of defendants.
The suit alleges that the banks funded fraud committed by the Rigas family by providing loans and helped it to loot the company.
The Greenwood Village, Colo., company filed for Chapter 11 bankruptcy protection last year after the disclosure of billions of dollars of loan guarantees to off-balance-sheet entities controlled by its founders, the Rigas family.
Prosecutors have accused John Rigas and his sons, Michael and Timothy, of securing loans primarily with Adelphia assets and then using borrowed funds to buy company stock. The three have pleaded not guilty.
The unsecured creditors, consisting mainly of Adelphia’s bondholders, said in court documents that the lenders had provided the Rigas family and Adelphia subsidiaries with loans without judging the borrowers’ repaying capacity. The loan facilities were for as much as $5.6 billion.
“Neither the Rigas family nor the co-borrowing lenders created a borrowing structure that held the respective co-borrowers accountable based on appropriate borrowing capacity, actual borrowings and their balance sheets,” the suit said.
“No attempt was made to recognize -- much less respect -- the corporate separateness and disparate financial resources of the debtors and entities owned by the Rigas family,” it added.
The suit accuses the Rigas family of using the bank loans to: buy nearly $2 billion of Adelphia shares; buy for its own account cable TV systems valued at more than $700 million; construct a golf course for the family; and spend on a hockey team.
