Former Adelphia executive James Brown pleaded guilty Thursday to securities fraud, naming his Rigas family co-defendants as members of a conspiracy to plunder the now-bankrupt cable company while lying to investors.
Brown, the former vice president of finance at Adelphia Communications Corp., signed a cooperation agreement with prosecutors as he promised to testify against the family members after the scandal cost investors billions of dollars.
“With the assistance and agreement of others, I helped to manipulate and overstate earnings,” he said during the proceeding in U.S. District Court in Manhattan.
As part of the scheme, he and other executives lied to Moody’s Investors Service about the company’s massive off-the-books debts during a January 2002 meeting, Brown said. The deception convinced Moody’s not to downgrade Adelphia’s credit rating.
The 40-year-old former executive also told Judge Leonard Sand he knew Adelphia’s fabricated figures for cable subscribers “would mislead analysts who followed the cable industry and investors.”
At the very end of his plea, Brown said that “John Rigas, Tim Rigas, Michael Rigas, and Michael Mulcahey, among others,” participated in the scheme to cook the books.
All of the men named have been charged, and all have pleaded innocent.
A lawyer for John Rigas and a family spokesman did not immediately return calls for comment.
The 78-year-old patriarch founded Adelphia, and ran it with his sons Timothy and Michael until the accounting scandal erupted.
Brown had a close personal and professional relationship with Tim Rigas, and worked on much of the financial reporting now at issue in the criminal case, said sources familiar with the probe.
Brown also admitted to bank fraud and conspiracy to commit securities fraud. The bank fraud charge carries up to 30 years in prison, but Brown hopes his cooperation will earn him a far more lenient sentence, which is scheduled for April 14.
A 102-page indictment charges the five executives allegedly looted corporate accounts, built a golf course with company money and used corporate jets for personal business while saddling the company with massive debts and lying to investors.
Officials believe the executives looted the firm of hundreds of millions of dollars.
Prosecutors are seeking forfeiture from the five men of more than $2.5 billion for the alleged fraud and corporate looting.
Former Securities and Exchange Commission lawyer Seth Taube, now in private practice, said Brown would make an ideal witness against the Rigas family.
“Brown is in the best position to testify against the family,” Taube said. “It’s very rare that a family member will turn on another family member, so the government is apparently picking the highest guy they can find other than a relative to testify against the Rigas family to make their case.”