A federal judge set bail at $10 million each for Adelphia Communications
Corp. founder John Rigas and his sons, Michael and Timothy, following their arrest on
charges that they used the company as a "personal piggy bank."
The Rigases and two other former Adelphia executives
were arrested on bank and
securities fraud charges
Wednesday morning, although they have not yet been
indicted.
All face lengthy prison terms and fines.
The Rigases were led away in handcuffs from an Adelphia-owned apartment that
is occupied by John Rigas' daughter, Ellen Venetis.
"The investigation has revealed probable cause to believe that John J. Rigas,
the defendant, together with members of his family, has looted Adelphia on a
massive scale, using the company as the Rigas family's personal piggy bank, at
the expense of public investors and creditors," said the complaint filed by the
U.S. Attorney's office.
"This case presents a deeply troubling picture of greed and deception at a
large, publicly held company," said Stephen Cutler, director of enforcement at
the Securities and Exchange Commission.
The Rigases were arraigned at the U.S. District Court for the Southern
District of New York in Manhattan.
Vice president of finance James Brown and director of internal reporting
Michael Mulcahey were arrested in their homes in Coudersport, Pa., and
arraigned in Pennsylvania.
The five executives plus another Rigas son, James, face civil charges filed
by the SEC.
The SEC, which closely tracks the U.S. Attorney General's criminal case, is
charging the executives with a long list of civil infractions, including hiding
liabilities in the books of off-balance-sheet affiliates and falsifying
operations statistics, exaggerating subscriber counts and inflating corporate
earnings to meet Wall Street's expectations.
The government is also investigating the Rigas family for "concealed rampant
self-dealing," including buying luxury condominiums in New York, New Mexico and
Colorado; spending nearly $13 million on a golf course on John Rigas' personal
property; purchasing timber rights to land in Pennsylvania; paying off hundreds
of millions of dollars in personal margin calls; and using Adelphia money to
fund undisclosed stock purchases.
Cutler estimated that these expenses alone top $1 billion.
The SEC is also filing civil charges against Coudersport, Pa.-based Adelphia --
a step the SEC rarely takes -- for failing to cooperate with the investigation and
allowing the "fraud to continue until the Rigas family lost control over the
company's conduct."
Both cases said the Rigas family continued its conduct even after March 27,
when Adelphia admitted it had excluded nearly $2.3 billion from its
balance sheet.
The executives were arrested at their homes in New York and Pennsylvania to
avoid their flight and for other unnamed reasons, officials
said.
