The massive fraud case against Adelphia Communications founder John Rigas and his family grew substantially stronger Thursday as one of his top lieutenants pleaded guilty.
James Brown, 40, former vice president of finance, agreed to help prosecutors after telling U.S. District Court in Manhattan that he conspired with the Rigases to misrepresent the No. 6 cable operator’s earnings and subscriber count going back to at least 1999.
In pleading guilty to conspiracy, securities fraud and wire fraud, Brown said that Adelphia specifically wanted to convince Moody’s Investors Service, in a January 2002 meeting, that the company was fulfilling its credit agreements ”when, in fact, it was not.”
”It’s very significant,” says white-collar crime specialist Jacob Frenkel of Smith Gambrell & Russell. ”The hardest thing for people accused of criminal conduct especially senior corporate officials is to accept criminal responsibility. Once one falls, that’s when they start to consider the benefits of a plea.”
Rigas, his sons Timothy and Michael, and former assistant treasurer Michael Mulcahy still face 24 counts of conspiracy and fraud.
Brown, who joined Adelphia in 1984, worked closely with former CFO Timothy Rigas. He and the other executives were forced out of the company in May. Adelphia filed for bankruptcy protection in June.
The company said in a statement: ”This plea further confirms what has been alleged by Adelphia in its lawsuits: The Rigases and their accomplices engaged in massive self-dealing and other wrongful conduct that severely damaged Adelphia.”
Brown’s plea also could figure in Adelphia’s recent lawsuit against former auditors Deloitte & Touche. He will be sentenced on April 14. He has already surrendered $45,000 (about 90% of his liquid assets), property in New York and Pennsylvania and a BMW.
Adelphia’s problems first came to light in March, when the company disclosed that the Rigases had used company assets as collateral for more than $3 billion in loans to a private, family-run partnership.