Deadline Approaches for Adelphia 5's Indictments

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Federal prosecutors were scrambling to meet a Sept. 23 deadline for indictments to be handed down for five former executives of Adelphia Communications Corp., and those documents could include new charges against at least one of the defendants.

The U.S. Attorneys' Office in Manhattan had until Sept. 23 to produce grand jury indictments against former Adelphia chairman John Rigas and his sons, former chief financial officer Timothy Rigas and former executive vice president Michael Rigas.

The Rigases, former vice president of finance James Brown and former assistant treasurer Michael Mulcahey were arrested by U.S. Postal Inspectors on July 24 on charges of conspiracy, bank, mail and wire fraud.

If found guilty, the defendants face jail terms of between 15 years and 20 years each for each count, according to federal sentencing guidelines.

According to documents filed with the U.S. Bankruptcy Court last week an additional charge — obstruction of justice — could be added to the list for at least one defendant.

In a motion that's part of a separate civil suit filed by Adelphia against the Rigases, assistant U.S. Attorney Timothy Coleman said grand juries in Pennsylvania and New York were continuing to investigate charges of conspiracy, securities fraud, bank fraud and wire fraud against the five former Adelphia executives. Additional charges, including obstruction of justice, could be filed against "one or more of the criminal defendants, and/or others," Coleman added.

The filing was made to try to persuade the court to move the civil case from bankrupcty court to federal district court.

Tax probe in PA.

The documents also state that the Pennsylvania grand jury is looking into possible tax violations by the Rigases, as are New York prosecutors.

Federal grand juries in New York and Pennsylvania have had since May to come up with indictments against the five former Adelphia executives, but have come up short so far.

In its complaint, the U.S. Attorneys Office accused the Rigases of using Adelphia as their own personal piggy bank, looting hundreds of millions of dollars from the company for posh vacation condominiums, African safaris and a championship golf course near the MSO's Coudersport, Pa., headquarters.

The former executives are also accused of doctoring Adelphia's books, presenting bogus financial figures to the investment community and inflating subscriber totals.

Absent the indictments, federal prosecutors would be forced to present their evidence in detail before a U.S. District Court Magistrate on Sept. 23. But according to a source familiar with the situation, the indictments were expected to be filed on Monday.

"They [the U.S. Attorney] have to do something by Monday; documents have to be filed," the source said. "They intend to file something."

Jeremy Temkin, Tim Rigas's attorney, agreed.

"My expectation is [the indictments will be handed down on] Monday," Temkin said.

Originally, federal prosecutors were supposed to present indictments at a hearing on Aug. 23, but they asked for and received an extension. If the defendants aren't indicted by Sept. 23, it's possible that prosecutors could ask for another extension.

Temkin said he intends to go to trial once the indictments are made.

Insurance claims

The Rigases's legal bills are already piling up. Last week, the family asked the U.S. Bankruptcy Court for the Southern District of New York for permission to use $50 million from three company-issued insurance policies to help cover their legal fees.

While no amount was stipulated in the bankruptcy court petition, it stated that the Rigases could incur "attorneys' fees and costs of several million dollars" to defend the suits.

The insurance money would be used to cover legal costs for the more than 40 civil suits filed against the Rigases, not for the criminal suit.

In the petition, the Rigases claim that the insurance policies allow for payment of legal costs on behalf of directors and officers of Adelphia.

The largest policy — $25 million from Associated Electric & Gas Insurance Service Ltd. — states that Adelphia directors and officers are entitled to "any and all sums which they shall become legally obligated to pay as ultimate net loss for which the company has not provided reimbursement, by reason of any wrongful act which takes place during the coverage period and is actually or allegedly caused."

According to the petition, the Rigases have made several requests to AEGIS for the payments, but have been rebuffed. According to an Aug. 20 letter AEGIS sent to the Rigases, the insurance company said there are still questions regarding whether it is legally permitted to make the payments without permission from the bankruptcy court.

Adelphia has said it would try to block any attempt by the Rigases to tap in to that insurance policy.

Despite the Rigases' legal woes, Adelphia appears to be performing well. In June, Adelphia reported a $101.8 million net loss on $281.9 million in revenue, according to documents filed with the bankruptcy court. Operating income for the month of June was $24.4 million.

For July, the company reported a $72.4 million net loss on $269.9 million in revenue. Operating income was $21.7 million.

Using those two months as a basis, annualized revenue would be $3.3 billion (not including results from its Adelphia Business Solutions subsidiary), a 5.6 percent increase over actual 2001 revenue of $3.1 billion.

As of July 31, the company and its subsidiaries had $52.8 billion in consolidated assets and $48.8 billion in consolidated liabilities, according to the filings.

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