John J. Rigas, the founder of the Adelphia Communications cable television empire, two of his sons, and two former top Adelphia executives were formally indicted yesterday on charges they looted hundreds of millions of dollars from the company to pay for personal loans, a golf course, luxury condominiums, and other family ventures.
The indictments followed through on the dramatic 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.
The charges against the Rigases and their associates 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.
The 24-count indictment handed up by a Manhattan grand jury includes the original charges related to what one federal agent called the Rigases turning Adelphia into ”their personal piggy bank.” It includes new securities fraud and conspiracy charges, and prosecutors are seeking to seize $2.5 billion in ”ill-gotten” assets from the defendants, whose alleged scams helped drive Adelphia into bankruptcy in June.
James Comey, the US attorney for New York City, said: ”The scheme charged in the indictment is one of the most elaborate and extensive corporate frauds in US history. The defendants used many of the most sophisticated tricks in the corporate-fraud playbook.”
But the 77-year-old Rigas, who founded Adelphia in 1952 with a $300 loan and turned it into the sixth-largest US 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 US 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 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, as well as allegations they used company money to build a $13 million golf course on John Rigas’s 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 hockey team.
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. Wilson said the DTE was monitoring the situation.
John Rigas’s lawyer, Peter Fleming, said, ”Starting with nothing, John Rigas built a major American corporation which has now suffered serious damage through these accusations and charges. When the prosecution fails to prove its case, who will take responsibility?”
Lawyers for Rigas’s sons also said they will be found innocent. Timothy Rigas’s lawyer, Paul Grand, said, ”We are confident that there has been no fraud or abuse of position,” while Michael Rigas’s lawyer, Andrew Levander, blasted the indictment as ”overblown and misguided.”