Founder and former head of bankrupt cable TV company Adelphia, two of his sons arrested
Wednesday, July 24th 2002, 12:00 am
By: News On 6
NEW YORK (AP) _ The founder of cable television giant Adelphia Communications Corp. was arrested Wednesday along with two of his sons, accused of looting the now-bankrupt company and using it as their ``personal piggy bank.''
Founder and former chairman and CEO John Rigas, 77, was arrested on conspiracy charges along with Timothy Rigas, a former company chief financial officer, and Michael Rigas, another former company executive.
In addition to the criminal charges, the federal Securities and Exchange Commission brought a civil lawsuit Wednesday in U.S. District Court in Manhattan, echoing the accusations made by federal prosecutors. It called the case ``one of the most extensive financial frauds ever to take place at a public company'' and sought restitution, fines and to bar the defendants from ever heading a company.
Two other men, James R. Brown, the former vice president of finance, and Michael C. Mulcahey, the former director of internal reporting, were arrested at their homes in Couldersport, Pa., where the company is based, said Herb Haddad, a spokesman for U.S. Attorney James B. Comey.
In papers filed in federal court, U.S. Postal Inspector Thomas F.X. Feeney said investigators believe that the Rigases ``looted Adelphia on a massive scale, using the company as the Rigas family's personal piggy bank, at the expense of public investors and creditors.''
Feeney said the defendants ``perpetrated an elaborate and multifaceted scheme to defraud stockholders and creditors of Adelphia, and the public.''
He said Adelphia was controlled by John Rigas and members of his family, who owned a majority of the company shares and controlled a majority of seats on the company's board of directors.
Feeney accused family members of using a ``variety of deceptive and misleading accounting practices'' and manipulating the books ``to create the illusion that Adelphia's financial condition and performance were substantially more favorable than they in fact were.''
Attorneys for the Rigases did not immediately return a call for comment.
Adelphia, the nation's sixth-largest cable company with 5.7 million subscribers in more than 30 states, filed for bankruptcy protection last month. The move followed months of turmoil after the company revealed billions of dollars in off-balance-sheet debt _ much of it owed by the founding family.
The Rigases resigned their executive positions with the company in May. Later that month, the family agreed to turn over $1 billion in assets to help cover loans, to turn over $567 million in cash flow from other cable companies the family owns, and to pledge all stock held by the family as collateral. Adelphia estimates it is liable for $3.1 billion in family debts.
Adelphia said the Rigas family used the company's cash or assets to help it buy and operate the Buffalo Sabres NHL team, expand personal cable company holdings, acquire timberland and invest in a golf course, and that many of the deals weren't approved by the board. The company said it was investigating the family's use of company jet airplanes, condominiums and apartments.