LAWFUEL – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, announced that JOHN J. RIGAS, the
founder and former Chairman and Chief Executive Officer of
Adelphia Communications Corporation (“Adelphia”), and his son,
TIMOTHY J. RIGAS, Adelphia’s former Chief Financial Officer, were
re-sentenced yesterday by written opinion to 12 and 17 years in
prison, respectively, in connection with their participation in a
scheme to defraud investors, creditors and the public concerning
the financial condition and operating performance of Adelphia.
JOHN J. RIGAS, 83, and TIMOTHY J. RIGAS, 52, were found guilty by
a jury in July 2004, after a five-month trial before United
States District Judge LEONARD B. SAND — who imposed yesterday’s
sentences and originally sentenced the defendants to 15 and 20
years in prison, respectively. On May 24, 2007, the United
States Court of Appeals for the Second Circuit affirmed the
defendants’ convictions on all counts except one count of bank
fraud, and directed that the defendants be re-sentenced. In
reducing the defendants’ sentences by three years, Judge SAND
indicated that “a minimal adjustment is appropriate” in light of
the reversal of one of the bank fraud convictions. Judge SAND
stated that the reversal: “in no meaningful way altered the
seriousness of defendants’ crimes, nor the suffering which their
conduct inflicted on so many people.” The defendants are
currently serving their sentences.
According to the superseding Indictment filed in
Manhattan federal court and the evidence at trial:
From approximately 1999 through May 2002, JOHN J.
RIGAS, TIMOTHY J. RIGAS, and others defrauded Adelphia’s
creditors and investors by, among other things, making false and
misleading statements concerning the company’s purported
deleveraging through a variety of securities transactions; its
“off-balance-sheet” debt; Adelphia’s compliance with various
covenants and financial ratios required under its loan agreements
and the indentures related to its bonds and other debt
securities; the unauthorized and unreimbursed use of Adelphia’s
funds and assets by the Rigas family; and the company’s operating
performance — as reflected in such metrics as its EBITDA
(earnings before interest, taxes, depreciation and amortization),
basic cable subscriber growth and plant rebuild progress.
Adelphia was one of the most heavily indebted companies
in the cable television industry, in part as a result of its
rapid expansion through a series of highly leveraged acquisitions
of other cable companies.
Adelphia faced intense pressure from
investors, lenders, securities analysts and credit rating
agencies to generate high levels of earnings to service its
staggering debt load and to reduce its leverage, but Adelphia
consistently failed to meet these expectations. In order to
conceal that failure and avoid such consequences as a decline in
Adelphia’s stock price, inability to access the capital markets,
and default on its debts, JOHN J. RIGAS, TIMOTHY J. RIGAS, and
others perpetrated a scheme to create the false appearance that
Adelphia’s operating performance was consistently in line with
Wall Street’s expectations, and that Adelphia was systematically
deleveraging through, among other means, sales of equity
securities to the Rigas family.
The Rigas family also used billions of dollars in
Adelphia’s funds and assets for their own benefit. Among other
things, JOHN J. RIGAS, TIMOTHY J. RIGAS, and others caused
Adelphia to pay more than $250 million in connection with
personal loans to the Rigas family. From approximately 1999
through April 2002, JOHN J. RIGAS, TIMOTHY J. RIGAS, and others
took unauthorized and undisclosed cash advances from Adelphia,
totalling more than $50 million. In addition, the Rigas family
spent approximately $13 million in corporate funds to construct a
golf course located on land primarily owned by them. Such uses
of Adelphia’s funds and assets by the Rigas family were not
presented to or authorized by Adelphia’s Board of Directors, and
were not disclosed to the non-family members of the board or to
the public.
In his written opinion, Judge SAND ordered that, other
than the prison terms and the reduction of the special
assessments by $100 for each defendant, all other terms and
conditions of the original sentences remain unchanged.
The investigation and prosecution of the Adelphia fraud
resulted in criminal forfeiture to the United States of over $700
million.
That money will be distributed to the victims of the
fraud pursuant to the Attorney General’s discretionary authority
to restore forfeited property to victims in accordance with
Department of Justice regulations. The United States Securities
and Exchange Commission (“SEC”) will also be seeking authority
from the United States District Court — which is overseeing its
civil enforcement actions arising out of the Adelphia fraud — to
combine the funds it has recovered in those actions with the
forfeited funds for distribution to the victims.
Mr. GARCIA, a member of the President’s Corporate Fraud
Task Force, praised the investigative work of the United States
Postal Inspection Service and thanked the SEC for its assistance
in this matter.
Assistant United States Attorneys WILLIAM F. JOHNSON,
BARBARA A. WARD, and SHARON COHEN LEVIN are in charge of the
prosecution.
08-158 ###
