Adelphia Communications founder John Rigas, two of his sons and two former execs of the bankrupt cabler were formally indicted in NewYork on multiple counts of fraud.
The men were arrested in July and charged by criminal complaint with looting Adelphia of hundreds of million of dollars. John Rigas was handcuffed and dragged from a Manhattan apartment then in a televised perp walk.
The indictment, which seeks at least $2.5 billion in damages, charged John, sons Timothy Rigas and Michael Rigas and former officers James Brown and Michael Mulcahey with elaborately defrauding Adelphia creditors and investors from 1999 through 2002.
It claims the highly-indebted cable company doctored its numbers to meet Wall Street’s expectations and boost its stock — even as top execs and family members siphoned hundreds of million of dollars in loans and cash advances from Adelphia’s coffers for building golf courses and other pet projects..
As its finances deteriorated, the company insisted publicly that it was reducing its debt, pointing to stock purchases by the Rigas family, the indictment says, alleging that much of the cash for the share purchases came from loans to the Rigases improperly backed by Adelphia and without the approval of its board.
Sometimes the Rigases failed to pay entirely. In early 2002, Tim Rigas and Mulcahey allegedly “urged Adelphia employees to create fictitious, backdated documents purporting to show that the Rigas family had paid more than $423 million for Adelphia securities” — cash that had never materialized.
The indictment claims the company misrepresented its basic cable subscriber count, its rebuild and capital spending and its compliance with debt covenants.
When suspect off-balance sheet loans first became an issue last spring, the shares collapsed from $20 in late March to $6 in late April. It continued to drop and was delisted after the company filed for Chapter 11.