Two months after their high-profile arrest, five former Adelphia Communications Corp. executives last week were indicted by a federal grand jury, which described the fraud allegedly perpetrated by three members of the Rigas family and two other former officers as one of the most elaborate in U.S. corporate history.
Last Monday, the grand jury from the Southern District of New York in Manhattan handed down indictments for former Adelphia chairman John Rigas and his sons, former chief financial officer Timothy and executive vice president of operations Michael Rigas. They were charged with 24 counts of conspiracy, securities fraud, wire fraud and bank fraud.
Also named in the indictments were former vice president of finance James Brown and former assistant treasurer Michael Mulcahey.
An arraignment is scheduled for Oct. 2 before Judge Leonard B. Sand.
The U.S. Attorney originally expected to hand down the indictments on Aug. 23 — 30 days after the executives were first charged — but asked for an extension until Sept. 23.
While the delay caused some to speculate that federal prosecutors were trying to negotiate a plea with the defendants, that turned out not to be the case.
Specifically, all five defendants were charged with one count of conspiracy, 16 counts of securities fraud, five counts of wire fraud and two counts of bank fraud. If convicted on all counts, each of the defendants could face a total of 250 years in prison and $19.5 million in fines. But the maximum jail time each defendant would likely face would be between 15 and 20 years.
John, Timothy and Michael Rigas are free on $10 million bail. Brown and Mulcahey were released on their own recognizance.
In a statement, U.S. Attorney James Comey called the fraud committed by the defendants one of the most elaborate in U.S. history.
"The Rigas defendants and their co-conspirators exploited Adelphia's byzantine corporate and financial structure to create a towering facade of false success, even as Adelphia was collapsing under the weight of its staggering debt burden and the defendants' failing management of the company, and the Rigas family lined their own pockets with shareholder dollars," Comey said in the statement.
The investigation is continuing, Comey added.
Adelphia praised the indictments.
"[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," the MSO said.
The indictments mirror the U.S. Attorney's July 24 complaint against the five executives, with some additional tidbits. For example, while the July complaint accused the Rigases of taking $52 million in unauthorized cash advances, the indictment adds a little more detail.
According to the indictment, John Rigas took $46.5 million, Tim Rigas took $1.05 million, Mike Rigas took $1 million and other Rigas family members took $3.8 million.
But the bulk of the indictments rehash what has become an old story for the Rigas family: They're charged with systematically doctoring company books to meet Wall Street targets, using company coffers for personal gain and inflating cash-flow and subscriber numbers.
The indictment also claims the Rigases used $252 million dollars in Adelphia funds to meet margin calls on family-owned stock in the MSO.
In their first direct response to the charges since being arrested by U.S. Postal Inspectors on July 24, two members of the Rigas family said they did nothing wrong.
"As the legal process unfolds and the facts are presented clearly and accurately, I am confident that a far different story will emerge than the one that has been reported to date," John Rigas said in a statement. "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."
Paul Grand, one of Tim Rigas's attorneys, also denied the allegations in a statement.
"Today's indictment is a grave mistake, the result of a post-Enron [Corp. accounting scandal] rush to judgment," Grand said in the statement. "Contrary to the allegations in the indictment, Tim Rigas did not misuse his position or loot the company, nor did he participate in any intentional falsification of the company's publicly reported financial data.
"In short, we are confident that there has been no fraud or abuse of position," Grand added. "Regrettably, it will take a long and costly trial to demonstrate the innocence of Tim Rigas, his father and brother and their co-defendants."
Adelphia first ran into trouble in March, when it revealed it had $2.3 billion in off-balance sheet debt. That debt later ballooned to $3.1 billion, and a series of self-dealing arrangements made by the Rigas family were uncovered — including the use of company funds to build a championship golf course, purchase real estate and buy stock.
The Coudersport, Pa.-based MSO was forced to file for Chapter 11 bankruptcy protection on June 25, about a month after the Rigases, Brown and Mulcahey resigned from their positions.
In the statement, John Rigas claimed that the co-borrowing agreements were "legal and entirely proper," and were approved by Adelphia's outside directors.
The criminal charges are not the Rigas family's only worries. The Securities and Exchange Commission has also filed suit against the family for fraud; Adelphia has a pending civil suit against the family members; and more than 44 individual civil suits have been filed against the former executives.