Just months after being sentenced to lengthy prison terms stemming from one of the more egregious examples of corporate greed in recent years, Adelphia Communications Corp. founder John Rigas and his son, former chief financial officer Timothy Rigas, have been indicted on charges that they failed to pay more than $137 million in federal taxes.
According to the indictment -- filed in U.S. District Court for the Middle District of Pennsylvania in Williamsport, Pa., Thursday and unsealed Friday -- the Rigases created a complex network of family-owned partnerships to use $1.9 billion in Adelphia funds to buy cable systems and Adelphia stocks and bonds and for their personal use.
The Rigases each were indicted on one count of conspiracy to defraud and six counts of tax evasion.
The indictment stated that from 1998-2000, John Rigas failed to report $143 million in income and Timothy Rigas failed to report $239 million. The indictment also claimed that both Rigases also helped family members Michael Rigas, James Rigas and Ellen Rigas to avoid paying $179 million in taxes during the same period. Michael, James and Ellen Rigas were not indicted.
For example, in 1998, the Internal Revenue Service claimed, John Rigas reported taxable income of $830,776 and paid taxes of $326,099 when his actual income for that year was $62.4 million (with a corresponding tax bill of $24.2 million). Timothy Rigas, the IRS claimed, reported taxable income of negative $6.6 million and paid no taxes when his actual income was $50.8 million, on which he owed $20.01 million in taxes.
In 1999, the IRS claimed, John Rigas filed tax returns stating that his income for that year was negative $44,155 and paid taxes of $4,872, when his actual income was $39.7 million and he owed $15.7 million in taxes. That same year, Timothy Rigas claimed negative $10.4 million in taxable income (and paid no taxes) when his actual income was $78.5 million (with a tax bill of $31 million).
John and Timothy Rigas were convicted in July 2004 on 18 counts of fraud and conspiracy relating to their participation in a widespread accounting scandal that sent Adelphia into bankruptcy in 2002.
As part of that scandal, the Rigases hid more than $2 billion in Adelphia debt and siphoned hundreds of millions of dollars from the MSO for their own personal use.
John Rigas was sentenced to 15 years in prison and Timothy Rigas received a 20-year sentence in June. The two men are free pending appeal.