Offers to pay $725 million
Adelphia Communications, the fifth-largest U.S. cable television operator, has offered to pay $725 million to settle federal fraud investigations to clear an obstacle to the company’s efforts to exit bankruptcy.
Settlement, if approved, would be the second largest of its type in U.S. history, approaching the record $750 million WorldCom agreed to pay in 2003.
Talks are ongoing, and the offer covers both Securities and Exchange Commission and Justice Dept. proceedings, the company said Thursday in a regulatory filing.
A settlement would bring chief executive William Schleyer a step closer to reshaping the company after the ninth-largest bankruptcy in U.S. history. A deal also may help him complete a sale of the cable systems to raise money to repay creditors. Comcast and Time Warner jointly bid more than $17 billion in January.
Adelphia, which has 5 million customers in 31 states, said in December said that lawyers for the SEC told the company they may seek “billions of dollars” in penalties and that the Justice Dept. may pursue additional fines.
The SEC alleged in 2002 that the company, then headed by founder John Rigas, fraudulently concealed $2.3 billion in bank debts. Rigas, 80, and son Timothy, 48, were convicted in July of conspiracy and fraud for looting Adelphia and lying about its finances prior to the bankruptcy filing.
Adelphia restated financial results last year and said the Rigas family had caused the company’s bankruptcy by issuing misleading statements and increasing debt. Rigas family members held all of the senior executive positions at Adelphia prior to May 2002 and accounted for five of the nine board members.
John Rigas and Timothy Rigas, who face sentencing April 18 on fraud and conspiracy charges, this month lost their bid for a new trial. Adelphia also has asked the bankruptcy judge to force the family to repay $3.2 billion.
The Rigases also are defendants in more than 40 suits by investors alleging accounting fraud.
In another court action Thursday, U.S. Bankruptcy Judge Robert Gerber ruled that the Rigases can access a portion of the $10 million they requested to pay defense costs.
The Rigas family asked the court to allow it to draw $10.2 million from 11 cable companies managed by Adelphia and owned by the family. Adelphia opposed the request, arguing that the frozen funds should be set aside for creditors. Gerber ruled the Rigases can obtain funds from two of the 11 companies as long as the firms have enough cash and don’t tap Adelphia’s funds.