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Adelphia Finance Official Admits Fraud, Will Help Prosecution

Nov 15, 2002 | The Washington Post

A former executive with Adelphia Communications Corp. broke ranks with the cable company's founders yesterday, pleading guilty to conspiracy and fraud charges and agreeing to testify against members of the Rigas family.

James R. Brown, Adelphia's former vice president of finance, pleaded guilty to one count each of conspiracy, bank fraud and securities fraud and faces a maximum of 45 years in prison when he is sentenced April 14 in U.S. District Court in Manhattan. Lawyers said he is likely to get a much less severe sentence in exchange for evidence against Adelphia patriarch John J. Rigas, 78, and his sons Timothy and Michael.

The three Rigases and Adelphia's former director of internal reporting, Michael C. Mulcahey, each pleaded not guilty to 24 counts of conspiracy and fraud. Prosecutors allege that the Rigases used company money to cover $250 million in personal stock losses and build a golf course, and that they failed to disclose $ 2.3 billion in loans to the family. No trial date has been set.

Brown, 40, who lives in the cable company's headquarters town of Coudersport, Pa., faced the same charges. At the hearing yesterday, he told U.S. District Judge Leonard B. Sand that he conspired with other company officials to cheat investors. He admitted overstating earnings, lying to Moody's Investors Service and several banks, and issuing misleading subscriber statistics for the nation's sixth largest cable company.

The plea agreement is a significant break for prosecutors because they now have a cooperating witness who was high in the company and could tell a jury exactly how Adelphia's financial statements were manipulated. At the same time, the deal could be a particularly heavy blow for Timothy Rigas, 46, who was Adelphia's chief financial officer and Brown's supervisor.

"Prosecutors are breathing easier now. [Brown] was a critical witness. He's the one who is in a position to know how these alleged crimes were committed," said Robert Mintz, a former federal prosecutor who now heads the white-collar defense practice for the Newark firm McCarter and English. "He can lead them to the money."

But Timothy Rigas's attorney, Paul R. Grand, said "the fact that Jim Brown has pleaded guilty may mean he's guilty but it in no sense means that my client Tim Rigas is guilty. He proclaims his innocence and will defend himself."

Mulcahey's attorney, Mark Mahoney, said the plea was not a total surprise. "We expect in cases like this that some defendants are going to plead. There's enormous pressure," Mahoney said. "We're keeping our options open."

John Rigas's attorney, Peter E. Fleming, was not available to discuss the case. Lawyers for the other defendants did not return calls. Brown's attorney, Jonathan P. Bach, and the U.S. attorney's office declined to comment.

Adelphia, which filed for Chapter 11 bankruptcy protection in June, has filed civil lawsuits against the Rigases and its former auditor, Deloitte & Touche. "Adelphia has cooperated fully with the U.S. attorney's investigation and will continue to do so while we work to recover the assets improperly taken from the company by the Rigas family," the company said in a prepared statement yesterday.

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