Adelphia Settlement

By: Cydney Posner

The SEC today announced that it and the U.S. Attorney's Office for the SDNY had reached an agreement to "settle a civil enforcement action and resolve criminal charges against Adelphia Communications, its founder John J. Rigas, and his three sons... in one of the most extensive financial frauds ever to take place at a public company." 

See: Press Release

The settlement agreement is subject to the approval of the District and Bankruptcy Courts for the SDNY.

The SEC charged that Adelphia, at the direction of the individual defendants, excluded billions of dollars in liabilities from its balance sheets, falsified operating statistics, inflated earnings to meet Wall Street expectations and concealed "rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds for purchases of Adelphia stock and luxury condominiums." The US Attorney's Office also announced that it had entered into a Non-Prosecution Agreement with Adelphia and had settled forfeiture claims against Rigas family members. Founder John Rigas and his son Timothy were convicted of conspiracy and fraud last summer and are awaiting sentencing.

The Rigas family members will forfeit in excess of $1.5 billion in assets that they derived from the fraud. Adelphia will then take title to the cable properties included among those assets and will pay $715 million into a victims' fund. According to press reports, the two Rigases, along with some members of their family who were not charged criminally, will forfeit ownership of more than 95 percent of the family's assets, including most of its cable television systems, real estate worth about $10 million and about $567 million in Adelphia securities. U.S. Attorney General Alberto Gonzales said the forfeiture is the largest by individuals in any corporate fraud case.

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