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Ex-Adelphia Executive Pleads Guilty

Patricia Hurtado

Nov 15, 2002 | Newsday

Former Adelphia Communications Corp. executive James R. Brown pleaded guilty to conspiracy and other charges yesterday in Manhattan Federal court and named company founder John Rigas and his sons as his co-conspirators in the massive looting of the cable firm.

In addition to pleading guilty to conspiracy, bank fraud and securities fraud, Brown, 40, also signed a Nov. 4th cooperation agreement and promised to testify as a witness for the government.

Brown is the first defendant to plead guilty and could be a formidable prosecution witness against others, who have all maintained their innocence.He served as Adelphia's vice president of finance between 1999 until his firing in May 2002.

Yesterday's proceeding progressed fairly routinely, with Brown describing a January meeting with Moody's Investor Service, where he and other executives lied about the firm's massive debt and as a result, Moody's did not downgrade Adelphia's credit rating.

He also described overstating the number of cable subscribers, knowing, "it would mislead analysts who followed the cable industry and investors."

"With the assistance and agreement of others, I helped to manipulate and overstate earnings," Brown said.

But after Assistant Manhattan U.S. Attorney Tim Coleman conferred with his lawyer, Brown added a stunning coda to his plea: "The others involved in the conduct I referred to include John Rigas, Timothy Rigas, Michael Rigas and Michael Mulcahey."

They were indicted in September along with Mulcahey, Adelphia's director of internal reporting, charged with participating in an elaborate scheme to defraud investors, creditors and the public with the Adelphia's true financial condition and performance.

As a result of rapid expansion, the company faced debt of about $6.8 billion in secured bank loans. The defendants are charged with manipulating Adelphia's books and records to create the illusion that Adelphia's financial condition and performance to conceal the firm's true status.

Both Brown and his lawyer refused comment after court. Brown remains free on his own recognizance.

If convicted after trial, Brown could have face a maximum prison term of up to 45 years. But as part of the plea agreement, prosecutors promised that if Brown cooperates, they will ask U.S. District Court Judge Leonard Sand to impose a lesser term.

Brown agreed yesterday to pay back taxes on monies he earned illegally. He also agreed to surrender property in Pennsylvania, land in Broome County, N.Y. and a 1998 BMW. Sand set a tentative sentencing date of April 14.

In other developments yesterday, Brown also agreed to a partial settlement of his U.S. Securities & Exchange Commission case. The financial penalties in that civil case have yet to be determined.

The 103-page indictment describes a catalog of lavish spending bankrolled by Adelphia funds including, a golf course, three corporate jets and two lavish Manhattan apartments all paid for by Adelphia.

The spending occurred at a time Adelphia had outstanding debt of about $6.8 billion in secured bank loans. Federal authorities have said that as a result of the misconduct Adelphia had $2.3 billion in undisclosed debt as of Dec. 31, 2001.

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