Prosecutors described it as “one of the most elaborate and extensive corporate frauds” in U.S. history: Executives allegedly looting corporate accounts, building a golf course with company money and flying in corporate jets for personal business.
The allegations were included in a 24-count indictment filed Monday against the founding family and two executives of bankrupt cable company Adelphia Communications Corp.
The indictment on charges of conspiracy, securities fraud and wire fraud names Adelphia founder John J. Rigas, 77; his sons, Timothy, 46, and Michael, 48; James R. Brown, 40, former vice president of finance; and Michael C. Mulcahey, 45, former director of internal reporting.
The 103-page document charges that the Rigas family engaged in rampant self-dealing, often funneling huge sums from the company directly into their personal accounts.
John Rigas was taking so much money under the table that his son Timothy instructed Mulcahey not to allow his father to withdraw more than $1 million a month, prosecutors charge.
Members of the Rigas family received more than $50 million in unauthorized secret transfers from Adelphia, the indictment said.
The court papers also charge the Rigas family regularly used three corporate airplanes for personal use and spent $13 million in Adelphia money to build a golf course on property owned by John Rigas near the family home in Coudersport, Pennsylvania.
The defendants “exploited Adelphia’s Byzantine corporate and financial structure to create a towering facade of false success, even as Adelphia was collapsing under the weight of its staggering debt burden,” said U.S. Attorney James Comey.
Lawyers for all five former executives have denied that their clients have committed any wrongdoing.
John Rigas issued a statement Monday insisting the transactions detailed in the indictment were perfectly legal.
“The corporate and personal reputation I have worked to build over the last 50 years has been irreparably damaged,” Rigas said. “My family and I have always acted with integrity and honesty and are committed to restoring our credibility and that of Adelphia.”
The indictment, handed up in U.S. District Court in Manhattan, also seeks forfeiture of $2.53 billion for the alleged accounting fraud and corporate looting.
The indictment added new charges to allegations already filed in a complaint in July, when federal postal inspectors accused the Rigases of using the company as their “personal piggy bank.”
Rigas and his sons were arrested on July 24 at their apartment on Manhattan’s Upper East Side and have been free on $10 million bail each, secured by cash, land and other property. They each could face up to 30 years in prison if convicted of the most serious charge, bank fraud. Their arraignments were scheduled for October 2.
Adelphia, the nation’s sixth-largest cable television company, filed for Chapter 11 bankruptcy protection June 25. The Rigases stepped down from their board seats and executive posts in May.
Prosecutors also said that Adelphia employees regularly performed work for other companies owned by Rigas family members and that the companies’ bills were regularly paid out of Adelphia bank accounts.
The family’s companies included the Buffalo Sabres professional hockey team, a furniture and interior design company, a car dealership and a number of partnerships.