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Wednesday, 24 July, 2002, 18:32 GMT 19:32 UK
Adelphia execs arrested for fraud
John Rigas, the founder of cable television giant Adelphia Communications, is driven into federal court in Manhattan
Founder John Rigas was arrested for securities fraud
Five former officials of bankrupt cable-television firm Adelphia Communications have been arrested and charged with conspiracy to commit fraud, resulting from the firm's financial mis-dealings.


In less than four years... they stole hundreds of millions of dollars and through their fraud and caused losses to investors of more than $60bn

Larry Thompson, assistant attorney general
Founder John Rigas and two of his sons were taken into custody by US postal service police early on Wednesday in Manhattan.

Two other former executives, James Brown and Michael Mulcahey were also arrested in Pennsylvania, where Adelphia's headquarters are located.

The five officials held key posts at the firm, the nation's sixth largest cable-TV outfit.

John Rigas, 77, served as chairman and CEO until his retirement on 15 May, while one son, Timothy, served as chief financial officer and another, Michael, as vice-president of operations.

'Millions stolen'

US officials from the Department of Justice (DoJ) and the Securities and Exchange Commission (SEC), speaking in Washington, said the actions of the former Adelphia officers led to tens of billions of dollars in losses to investors.

US officials filed a complaint in the Southern District of New York following an intensive three-and-a-half month investigation by the US attorney's office and the US postal inspection service, said deputy attorney general Larry Thompson.

Deputy Attorney General Larry Thompson
Thompson: Rigases engaged in "brazen theft"
The complaint alleges that members of the Rigas family, who ran the corporation, systematically looted the corporation.

"In less than four years... they stole hundreds of millions of dollars and through their fraud and caused losses to investors of more than $60bn," Mr Thompson said.

The DoJ also alleged the defendants intentionally submitted false information to lenders and made false statements to the public in order to maintain their failing company's stock price.

The defendants concealed $2.3bn in loans, and misrepresented the company's financial performance and number of cable subscribers, the DoJ complaint said.

The DoJ said the Rigases engaged in "brazen thefts" that included $252m to cover investments in the family's own brokerage accounts and used fraudulent documents and accounting tricks to obtain $420m in Adelphia stock.

Mr Thompson also said John Rigas lent himself $66m from company funds without making required disclosures and spent $13m on a golf course on his own land.

Task-force effort

John Rigas is led from New Yorks main post office building by US postal inspector police.
Rigas is accused of using his firm as a piggy bank
Stephen Culter, director of enforcement at the SEC, accused Adelphia executives of "having perpetuated an egregious, multi-faceted fraud on the company's investors."

He said Adelphia officials "oversaw a massive effort to disguise and distort the companies financial picture and to engage in rampant self-dealing that enriched the Rigases at the expense of the shareholders they were supposed to be serving."

The SEC is seeking reimbursement of all funds and compensation from the former Adelphia executives listed in its complaint.

In addition, it seeks to bar any of the officials from serving as officers or directors at any US corporation as well as civil penalties that include the firm itself for its lack of cooperation during the investigation.

The federal indictments are the first since President George W Bush's corporate task force was formed two weeks ago, which seeks to coordinate efforts of various federal law-enforcement agencies to stamp out corporate fraud.

Bankrupt firm

Adelphia filed for bankruptcy in June, following disclosure the firm engaged in dubious multi-billion deals leading to two grand jury probes and an investigation by the US Securities and Exchange Commission (SEC).

Future offices of Adelphia Communications in Coudersport, Pennsylvania
Adelphia's future offices remain vacant
Adelphia's problems began in March when it admitted having guaranteed $2.3bn dollars in loans to the Rigas family, which then controlled the company.

The firm was founded in 1972 by John Rigas, who had transformed his cinema company to take advantage of the fledgling cable TV business.

Since March, a series of questionable transactions between the family and the company have emerged.

As a result, all Rigas family members resigned from management positions and the Adelphia board of directors in May.

Adelphia, one of the largest issuers of junk bonds, is but one of a string of US firms under investigation for accounting irregularities that began last autumn when energy-trading giant Enron admitted it overstated profits by $600m.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Patrick O'Connell
"It is alleged that named executives exaggerated the company's performance"
See also:

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