Cable pioneer John Rigas and two of his sons were arrested Wednesday and accused of looting Adelphia Communications Corp. and treating it as their "personal piggy bank," the latest development in one of the largest accounting scandals to rock Wall Street.
Authorities arrested Rigas, the 77-year-old founder of Adelphia, and his sons Timothy, 46, and Michael, 48, in New York. They also arrested two other former executives in Pennsylvania and charged all five with several counts of securities, wire and bank fraud.
Among the allegations are that Rigas and his former Adelphia executives hid $2.3 billion in personal loans guaranteed by the company and inflated corporate earnings and the number of cable subscribers. The 68-page criminal complaint details rampant self-dealing by the Rigases, who allegedly used corporate funds to start construction of a $50-million golf course on family land, buy luxury condominiums in New York, Colorado and Mexico, and take an African safari vacation.
"The scheme charged in the complaint is one of the largest and most egregious frauds ever perpetrated on investors and creditors," said James Comey, the U.S. attorney in New York.
U.S. Postal Inspector Thomas F.X. Feeney said the Rigases took money from Adelphia "on a massive scale, using the company as the Rigas family's personal piggy bank at the expense of public investors and creditors."
Federal prosecutors said they declined the Rigases' offer to turn themselves in. Instead, U.S. postal inspectors, involved in the case because of the wire-fraud charges, arrested the three Rigases at 6 a.m. at the apartment of Ellen Rigas, John's daughter, on Manhattan's Upper East Side.
The luxury apartment is owned by the cable company and was used free by Ellen and her husband from 1998 until May, according to the criminal suit.
Adelphia, the nation's sixth-biggest cable company and the largest provider in Southern California, filed for bankruptcy protection last month amid a cash crisis. The accounting scandal came to light in late March.
The five defendants, who resigned from Adelphia under pressure in May, each could face millions of dollars in fines and up to 20 years in prison as a result of the criminal and civil fraud charges brought in separate lawsuits Wednesday by the Securities and Exchange Commission and the Justice Department.
