SEC AND U.S. ATTORNEY SETTLE MASSIVE FINANCIAL FRAUD CASE AGAINST ADELPHIA AND RIGAS FAMILY FOR $715 MILLION
FOR IMMEDIATE RELEASE
Washington, D.C., April 25, 2005 -- The Securities and Exchange Commission today announced that it and the United States Attorney's Office for the Southern District of New York (USAO) reached an agreement to settle a civil enforcement action and resolve criminal charges against Adelphia Communications Corporation, its founder John J. Rigas, and his three sons, Timothy J. Rigas, Michael J. Rigas and James P. Rigas, in one of the most extensive financial frauds ever to take place at a public company.
In its complaint, the Commission charged that Adelphia, at the direction of the individual defendants: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operating statistics and inflated earnings to meet Wall Street estimates; and (3) concealed rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds for purchases of Adelphia stock and luxury condominiums. The USAO also announced that it had entered into a Non-Prosecution Agreement with Adelphia and had settled forfeiture claims against Rigas family members.
Under the settlement agreement, which is subject to the approval of the District and Bankruptcy Courts for the Southern District of New York, the Rigas family members will forfeit in excess of $1.5 billion in assets that they derived from the fraud, including the Rigas family's interests in certain cable properties. Upon the forfeiture of these assets, Adelphia will obtain title to those cable properties and will pay $715 million into a victim fund to be established in the District Court in accordance with the Non-Prosecution Agreement. Under the Non-Prosecution Agreement, payment to the victim fund must occur at or around the time of Adelphia's emergence from chapter 11.
Also under the settlement agreement, Adelphia and the Rigas family members agree to entry of permanent injunctions enjoining them from the antifraud, periodic reporting, and record keeping and internal control provisions of the federal securities laws. The individual Rigas family members further agree to orders barring them from acting as officers or directors of a public company.
Adelphia, the sixth largest cable television provider in the United States, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on June 25, 2002.
Mark K. Schonfeld, Director of the SEC's Northeast Regional Office, said, "This settlement agreement presents a strong, coordinated approach by the SEC and the U.S. Attorney's Office to resolving one of the most complicated and egregious financial frauds committed at a public company. The settlement provides an expedient and effective way to provide victims of Adelphia's fraud with a substantial recovery while at the same time enabling Adelphia to emerge from Chapter 11 bankruptcy."
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York in this matter.
Mark K. Schonfeld
Director, Northeast Regional Office
Helene T. Glotzer
Associate Director, Northeast Regional Office
Assistant Director, Northeast Regional Office
Senior Trial Counsel, Northeast Regional Office