The complaint, unsealed in a Manhattan federal court, accused three members of the Rigas family of using Adelphia as the family’s “personal piggy bank at the expense of public investors and creditors.”
Rigas, 77, and his sons, Timothy Rigas, a former chief financial officer, and Michael Rigas, a former executive vice president, were arrested in New York this morning and will appear in a federal court in Manhattan today.
Attorneys for the Rigases have not released any comments or statements.
Two other former Adelphia officials, James R. Brown, 40, former vice president of finance and Michael Mulcahey, 45, former director of international reporting, were arrested at their homes in Couldersport, Penn., where the company is based, on the same charges. Brown and Mulcahey were to be arraigned in a federal court in Williamsport, Pa. later Monday.
Deputy Attorney General Larry Thompson, head of the president’s new Corporate Fraud Task Force, told reporters the executives made false statements to their lenders and improperly borrowed over $2 billion from Adelphia without reporting it to the SEC.
According to the indictment, members of the Rigas family used millions in company funds to pay for private luxury condos, a $13 million golf course on John Rigas’ personal property and the family’s investment losses, while misleading investors about the company’s financial condition.
Two federal grand juries, one in New York and the other in Pennsylvania, indicted each executive on one count of conspiracy, one count of securities fraud, four counts of wire fraud and two counts of bank fraud. Each defendant faces a possible 100-year prison term and millions of dollars in fines if convicted on all counts.
Meanwhile, the Securities and Exchange Commission today filed a civil lawsuit against the five men as well as James Rigas, another son of the former CEO and also a former Adelphia executive. The SEC suit alleges the Adelphia officials deceived shareholders by improperly allocating $2.3 billion in corporate bank debt in off-balance sheet affiliates.
The SEC also charged the company with releasing falsified financial statements and assisting in the Rigases unlawful dealings.
SEC Director of Enforcement Stephen Cutler called the Adelphia case “an egregious multifaceted fraud on the company’s investors.”
Adelphia, the country’s sixth-largest cable provider, filed for bankruptcy protection last month after disclosing it understated its debt by billions of dollars, much of it owed by the Rigas family.
John Rigas, who founded Adelphia over 50 years ago, and his two sons had resigned under pressure shortly before the company declared bankruptcy.