and ex-CEO Rigas to settle fraud case. Rigas already facing 15 years in prison.
Corp. ("Adelphia") will pay approximately $715 million to settle ''one
of the most extensive financial fraud ever to take place at a public company,"
according to a statement issued by the Securities and Exchange Commission.
John Rigas along with his son Timothy (ex-CFO), will forfeit a total of $1.5 billion
in assets to create a fund to compensate victims of ''one of the most extensive
financial fraud ever to take place at a public company.''
Both were declared guilty of conspiracy, securities fraud and bank fraud in connection
with their hiding more than $2.3 billion in debt at Adelphia, deceiving investors
and using company funds for personal gain. Father and son are now facing 25 -
30 year prison sentences.
Another son, Michael Rigas, a former Vice President,
was acquitted of conspiracy and wire fraud charges. He is however, facing a retrial
on 17 counts of securities fraud and bank fraud on which the jury couldn't come
to a verdict. In addition, former Adelphia assistant treasurer Michael Mulcahey
was found not guilty of conspiracy and securities fraud.
Rigas family, which founded the now-bankrupt cable giant, will forfeit 95 percent
of its assets totaling more than $1.5 billion under a settlement
with the U.S. Attorney's office for the Southern District of New York and the
SEC. Those assets including cable systems valued at $700 million to $900
million and bonds valued at $567 million will be turned over to Adelphia.
Upon emerging from bankruptcy, the company will then pay $715 million to create
a fund to compensate victims of the fraud, according to the commission. In addition,
the Rigas family members agreed to a lifetime ban on serving as officer or directors
in any public company.
family members not implicated in the fraud, will keep two Pennsylvania cable systems,which
are valued at $7.5 million to $10 million. This was offered by government officials
as an incentive to the Rigas family to settle and provide a livelihood for family
members not involved with the investigation.
The settlement, subject to
court approval, avoids criminal charges for the company. It also paves the way
for a buyout offer from a partnership between Time Warner Inc. and Comcast Corporation.
Adelphia has tentatively accepted the offer to come out of bankruptcy.
is still seeking more than $3.2 billion from the Rigases, who withdrew funds from
the company coffers as if it were an Automatic Teller Machine ("ATM").
The SEC is expected today to file civil charges against Deloitte & Touche,
Adelphia's auditor, for failing to uncover the fraud.
the forfeiture of $1.5 billion from the Rigas duo sounds like a lot of money,
please keep in mind that the total fraud was closer to 4 times that amount. What's
so difficult about paying back 25% of what you "stole" in the first
place. Perhaps prosecutors should learn to be more aggressive in going after assets
much like their counterparts at the Internal Revenue Service ("IRS").
The IRS is notorious to trying to collect in full all past due amounts plus interest.
Nothing speeds up negotiations faster than $50 million in annual interest penalties.
Updates after June 20, 2005:
John Rigas and his son Timothy, received prison sentences of 15 years and 20 years,
respectively. Why the elder Rigas, (80 years old), received a lesser sentence
is beyond me. Both Rigas' were of equal guilt at the same trial so why should
the judge shave 5 years off a prison sentence just because he's older? At his
age, it's essentially life in prison but if the judge wanted to deter future corporate
executives from committing fraud, he should not have shown preferential treatment
to John Rigas.
2005 Nelson Chin.
inquire about consulting or speaking engagements, e-mail: Nelson