U.S. Attorney James Comey kicked off a process Monday that could lead to a trial in what he calls ”one of the most elaborate and extensive corporate frauds in United States history.”
He got formal indictments of Adelphia Communications founder John Rigas, his sons Timothy Rigas and Michael Rigas, and two other former executives on charges of disguising deteriorating finances at the No. 6 cable company while siphoning off cash for personal gain.
”The defendants used many of the most sophisticated tricks in the corporate fraud playbook,” Comey says, ”including concealing Adelphia’s billions of dollars of off-balance-sheet liabilities, using dishonest pro forma reporting and manipulating unaudited metrics such as EBITDA and subscriber growth statistics.”
The indictments on one count of conspiracy, 16 counts of securities fraud, five counts of wire fraud and two counts of bank fraud replace a criminal complaint filed in July when the defendants were arrested. They remain free on bail.
John Rigas says he’s ready to fight.
”My family and I have always acted with integrity and honesty and are committed to restoring our credibility and that of Adelphia,” he said in a statement.
His lawyer, Peter Fleming of Curtis Mallet-Prevost Colt & Mosle, says the charges alone damage the Rigases and the company. ”When the prosecution fails to prove its case, which is my expectation, who will take responsibility?”
Adelphia, however, applauded the indictments. The company, which filed for bankruptcy protection in June, says the case will ”help further distance Adelphia from the wrongful conduct of the Rigas family.” It has also sued the Rigases and others.
Adelphia’s downfall began on March 27, when it disclosed in a footnote to an earnings report that a Rigas family partnership had borrowed $2.3 billion using company assets as collateral. That stunned analysts, who believed it already had too much debt.
John Rigas says the co-borrowing agreements were ”legal and entirely proper” and says they were approved by Adelphia’s outside counsel, directors and independent auditors, as well as disclosed in public filings.
Comey says the Rigases hid the company’s problems by falsifying documents and arranging complex deals with vendors that improperly inflated Adelphia’s revenue.