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Thursday, 7 November, 2002, 12:32 GMT
Cable flop sues former auditor
Adelphia
Adelphia is accusing Deloitte & Touche of negligence
Bankrupt US cable TV firm Adelphia is suing Deloitte & Touche, its former auditor, accusing it of negligence for failing to spot the problems that brought the company down.

Deloitte, the lawsuit has argued, should have known - or knew and covered up - that co-founder and ex-chief executive John Rigas and two of his sons were allegedly shifting money around without permission.

"This is an action against Deloitte for professional negligence, breach of contract, fraud and other wrongful conduct arising out of Deloitte's role in one of the most egregious instances of corporate self-dealing and financial chicanery in United States corporate history," the suit said.

Mr Rigas and his sons have been indicted on criminal fraud charges, accused of effectively using the firm as a private bank, without the knowledge of the shareholders.

Deloitte's defence

For its part, Deloitte said it was a victim of deception just as much as Adelphia's shareholders, and that it would be able to answer any accusations more fully once it had examined the lawsuit.

It also said it would seek damages or other reparations from whichever members of Adelphia's management proved to be complicit in any wrongdoing.

For the moment, the company's bankruptcy protects it from such actions, however.

Deloitte said it had told Adelphia's audit committee that there was a long list of issues to resolve before it could report on the financial statements.

Part of a trend

Suing former auditors has become a popular pastime among scandal-hit companies, as bankruptcy administrators struggle to collect as much cash as possible, and regulators hunt down the guilty parties.

Last week, federal bank regulators sued Ernst & Young for more than $2bn (1.3bn), alleging fraud and negligence in the audit of failed Superior Bank.

Enron, the messiest company failure so far, has joined its creditors in a lawsuit against Andersen, its former auditor.

See also:

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