The Securities and Exchange Commission today filed charges against Adelphia Communications Corp.; its founder John J. Rigas; his three sons, Timothy J. Rigas, Michael J. Rigas, and James P. Rigas; and two senior executives at Adelphia, James R. Brown, and Michael C. Mulcahey, in one of the most extensive financial frauds ever to take place at a public company.
In its complaint, the Commission charges that Adelphia, at the direction of the individual defendants: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operations statistics and inflated earnings to meet Wall Street's expectations; and (3) concealed rampant self-dealing by the Rigas Family, including the undisclosed use of corporate funds for Rigas Family stock purchases and the acquisition of luxury condominiums in New York and elsewhere. Also today, the United States Attorney's Office for the Southern District of New York filed related criminal charges against several of the same defendants.
In its lawsuit, filed in federal court in Manhattan, the Commission alleges that the defendants violated the antifraud, periodic reporting, record keeping, and internal controls provisions of the federal securities laws. Adelphia is the sixth largest cable television provider in the United States and, through various subsidiaries, provides cable television and local telephone service to customers in 32 states and Puerto Rico.
The Commission seeks a judgment ordering the defendants to account for and disgorge all ill-gotten gains, including all compensation received by the individual defendants during the fraud, all property unlawfully taken from Adelphia by the individual defendants through undisclosed related-party transactions, and any severance payments related to the individual defendants' resignations from the company. The Commission also seeks civil penalties from each...