- The Washington Times - Thursday, July 25, 2002

NEW YORK (AP) Federal authorities yesterday arrested the founder of Adelphia Communications Corp. and two sons on charges they looted the now-bankrupt cable company and used it as their "personal piggy bank."

John Rigas, 78, Adelphia's founder and former chairman and chief executive officer, and his sons Timothy, 46, and Michael 48, were accused of stealing hundreds of millions of dollars from the nation's sixth-largest cable company and causing losses to investors of more than $60 billion.

Two other former executives James R. Brown, 40, the former vice president of finance, and Michael C. Mulcahey, 48, the former director of internal reporting were arrested in Pennsylvania.

The arrests followed two other major corporate prosecutions announced recently in Manhattan, against former executives at Tyco International Ltd. and ImClone Systems Inc.

William Kezer, head of the U.S. Postal Inspection Service in New York, which made the arrests, said they were "a clear message to corporate wrongdoers that handcuffs and a jail cell await those who violate the trust placed in them."

In addition to the criminal charges filed in U.S. District Court in Manhattan, the Securities and Exchange Commission brought a civil lawsuit in the same court, asserting the Rigases carried out "one of the most extensive financial frauds ever to take place at a public company."

U.S. Magistrate Judge Gabriel Gorenstein freed the Rigases on $10 million bail apiece, secured by cash $1 million for John Rigas and $500,000 for each son plus land and other property.

Prosecutors argued for the high bail, saying they fear the men may flee. Defense lawyers dismissed the argument.

"There is no risk of flight in this case," said Jeremy Temkin, an attorney for Timothy Rigas.

Peter Fleming, an attorney for John Rigas, called his client "an extremely decent man."

" He has never sold a share of Adelphia stock and, therefore, never profited from the sale of Adelphia stock," Mr. Fleming said.

An attorney for Michael Rigas declined to comment after the afternoon hearing in U.S. District Court in Manhattan.

Adelphia, based in Coudersport, Pa., filed for bankruptcy protection in June after months of turmoil amid the company's admission of billions of dollars in off-balance-sheet debt much of it owed by the founding family.

The scandal has wiped out Adelphia shareholders. The company's stock has fallen from a peak of $86 in May 1999 to 15 cents in over-the-counter trading yesterday.

The SEC said Adelphia fraudulently excluded billions of dollars in liabilities from its financial statements, falsified statistics, inflated earnings to meet Wall Street's expectations and concealed "rampant self-dealing by the Rigas family."

It sought restitution, fines and a prohibition on the defendants ever again heading a company.

Deputy Attorney General Larry Thompson said the defendants "victimized Adelphia shareholders through a wide variety of quite frankly brazen thefts."

He said Adelphia falsified its number of subscribers and generated fake management fees while the family borrowed more than $2 billion from the company without reporting it to the SEC.

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