Adelphia Founder, 4 Execs Indicted
$2.53 Billion Sought In Forfeiture For The Alleged Fraud, Corporate LootingSep 24, 2002 | SEATTLE POST-INTELLIGENCER NEWS SERVICES
Adelphia Communications Corp. founder John Rigas, two of his sons and other former executives were indicted yesterday on charges that they built "a towering facade of false success" based on a $2.5 billion fraud.
The indictment, handed down in U.S. District Court in Manhattan, seeks $2.53 billion in forfeiture for the alleged large-scale accounting fraud and corporate looting.
U.S. Attorney James Comey called the alleged looting "one of the most elaborate and extensive corporate frauds in United States history."
The five men were formally indicted on charges they took hundreds of millions of dollars from the company to pay for personal loans, a golf course, luxury condominiums and other family ventures. The defendants' alleged scams helped drive Adelphia into bankruptcy in June.
The 24-count indictment followed through on the early-morning rousting of the Rigases from their New York apartment in late July, when they were led handcuffed past jostling television crews for booking and fingerprinting on civil and criminal complaints.
Lawyers for all five former executives have denied that their clients have committed any wrongdoing.
The charges are among the most serious brought since the government began its wave of crackdowns on corporate malfeasance at companies including Adelphia, WorldCom, Global Crossing, Enron, and Tyco International.
But the 77-year-old Rigas, who founded Adelphia in 1952 with a $300 loan and turned it into the sixth-largest U.S. cable company, 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."
Adelphia, based in Coudersport, Pa., said the "indictments will help further distance Adelphia from the wrongful conduct of the Rigas family and help advance the company's efforts to recover the assets improperly taken from Adelphia by the Rigas family and certain associates."
Adelphia said it provided much of the evidence for the government's prosecution.
It said it is also pursuing a civil racketeering lawsuit against the Rigases, charging them with turning the cable company into a family criminal enterprise.
Besides John Rigas, the indictments target two of his sons, Michael, 48, and Timothy, 46, who held various top positions at the company; James R. Brown, 40, former vice president of finance; and Michael C. Mulcahey, 45, former director of internal reporting.
The five defendants are to be arraigned in U.S. District Court in New York on Oct. 2 on charges that in each case include one count of conspiracy, two counts of bank fraud, five counts of wire fraud, and 16 counts of securities fraud.
The bank-fraud charge carries a penalty of up to 30 years' imprisonment, and conviction on the other charges could bring years in prison and fines of conceivably millions of dollars.
The indictments include charges that the Rigases used $252 million in company money to pay "margin calls," or demands for repayment on loans secured by plummeting shares of Adelphia stock. They also include allegations that the Rigases used company money to build a $13 million golf course on John Rigas' property, buy a Pennsylvania lumber operation, and rampant use of company money to pay for private family business ventures.
The Rigas empire formerly included the Buffalo Sabres of the National Hockey League.
Adelphia's cable properties include franchises in 36 Massachusetts cities and towns that serve 140,000 TV subscribers, including clusters on Cape Ann, Martha's Vineyard, southern Plymouth County and parts of Berkshire County.
Rob Wilson, a spokesman for the state Department of Telecommunications and Energy, said, "We haven't noticed any changes in Adelphia's level of service" since the June bankruptcy filing.