Adelphia to pay $715M in fraud case; Owners of bankrupt cable company to give up 95 percent of assets in largest forfeiture ever by individuals
Copyright 2005 Newsday, Inc.
Newsday (New York)
April 26, 2005 Tuesday
From Lexis Nexis
Washington - Adelphia Communications Corp. yesterday agreed to pay $715 million under a deal with the U.S. government that avoids criminal charges for accounting fraud against the now-bankrupt cable operator.
The Rigas family, which founded the company, will forfeit more than 95 percent of its assets as part of settlement agreements reached with the U.S. Justice Department and the Securities and Exchange Commission.
In an agreement signed by six Rigas family members, the family agreed to forfeit privately owned cable systems worth between $700 million and $900 million; all Adelphia securities owned by the family, valued at about $567 million; and parcels of real estate worth about $10 million.
Some of the forfeited items - the cable subscribers, securities and some of the property - will be returned to Adelphia, which will pay $715 million in cash and stock to a fund designed to help investors who lost billions of dollars when the company collapsed in 2002.
To avoid criminal prosecution, Adelphia also agreed to help the Justice Department with its investigations.
"Today is a day of restitution for the victims of corporate corruption," Attorney General Alberto Gonzales told a news conference. "In total, this represents the largest forfeiture ever made by individuals in a corporate fraud matter.
"These agreements will help to maximize the returns to investors in Adelphia's ongoing bankruptcy proceeding and will provide compensation to victims who would otherwise recover little or nothing in the bankruptcy," he said.
The SEC accused the company of excluding billions of dollars in liabilities from its balance sheets, falsifying operating statistics and inflating earnings to meet Wall Street expectations.
Gonzales said the Rigas founders used company money to buy real estate and other assets for the Rigas family, and had the company issue hundreds of millions of dollars' worth of securities to the family without paying for them.
The securities regulator said the assets the Rigas family will forfeit exceed $1.5 billion in value. The Rigas family lawyer was not immediately available for comment.