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John Rigas Is Sentenced to 15 Years

The Adelphia founder and his son receive some of the harshest prison terms in corporate cases.

June 21, 2005|Thomas S. Mulligan and Walter Hamilton | Times Staff Writers

NEW YORK — In a sign that corporate wrongdoers can't expect leniency in the post-Enron environment, a federal judge Monday sentenced 80-year-old John J. Rigas to 15 years in prison for looting the cable company he founded, Adelphia Communications Corp.

Rigas' son Timothy, Adelphia's former chief financial officer, was sentenced to 20 years.

They were among the harshest sentences yet in the crackdown on corporate crime that followed the 2001 collapse of energy-trading giant Enron Corp.

Although the prison time for John Rigas was lighter than the 20 years suggested under federal sentencing guidelines, U.S. District Judge Leonard Sand acknowledged that it in effect means a life term for the Adelphia patriarch, who suffers from bladder cancer and heart problems.

A jury last year convicted the two men of stealing $100 million from Adelphia for personal luxuries such as jet trips and golf club memberships and lying to investors about company finances.

Another son and former Adelphia executive, Michael Rigas, awaits retrial in October after jurors failed to agree on fraud charges against him. The fourth defendant in the case, former Adelphia Assistant Treasurer Michael Mulcahey, was acquitted of any wrongdoing.

Adelphia's plunge into bankruptcy in 2002 wiped out the savings of many smaller shareholders, especially employees and other investors around the company's former rural hometown of Coudersport, Pa.

John Rigas, frail and hard of hearing, asked for leniency in a 20-minute address in the packed Lower Manhattan courtroom.

"If I did anything wrong, I apologize," he told the judge. "I did the best I can to correct it. If that means I have to go to prison, it's not where I ever expected to be in my life. Nor do I believe it's where I should be because of what happened. It's in your hands, and in God's hands."

Sand chided both defendants for refusing to acknowledge their wrongdoing. He called the elder Rigas "a man who long ago set Adelphia on a track of lying, of cheating, of defrauding."

But Sand also raised the possibility that Rigas, after serving two years, could be released early if prison officials determined he had less than three months to live.

"One shrinks from, no matter how horrendous the crime, the prospect of someone dying in a prison hospital," Sand said.

Even Timothy Rigas' sentence was at the lower end of the federal guidelines. The judge could have imposed life sentences for conspiracy, bank fraud and securities fraud.

Timothy Rigas, 49, addressed the court briefly as his father looked on with red-rimmed eyes. He said much of the activity for which he was convicted had been reviewed and approved by company lawyers and accountants.

"Our intentions were good, the results not so," the younger Rigas said.

"The jury found your intentions were to defraud," Sand retorted.

Sentencing was delayed for nearly a year after the conviction to give the government time to craft a regulatory settlement under which the Rigases recently agreed to forfeit $1.5 billion.

Adelphia, the largest cable provider in Southern California, has relocated to Greenwood Village, Colo., under new management. Time Warner Inc. and Comcast Corp. have a pending deal to acquire it for $17.6 billion.

The lengthy prison terms ought to be a deterrent to executives who might be tempted to fudge the books, according to lawyers not involved in the case.

"When a well-respected New York federal court judge imposes a 15-year sentence on an 80-year-old corporate executive, that sends a powerful message," said Jacob Frenkel, a defense lawyer at Shulman Rogers Gandal Pordy & Ecker in Rockville, Md. "That means you may die in jail for committing corporate fraud."

Unless the elder Rigas becomes ill, the rules of the federal sentencing system mean that both men are likely to serve the bulk of their terms, lawyers said. The men can reduce their sentences by about 15% through good behavior, experts said, but there is no parole in the federal prison system.

The harshest corporate-fraud sentence post-Enron is believed to be the 24-year term meted out last year to former accounting executive Jamie Olis, convicted of helping to cook the books at Dynegy Inc.

Former federal prosecutor Kirby Behre, an expert in federal sentencing rules at law firm Paul Hastings in Washington, said judges followed sentencing guidelines about 85% of the time.

Even so, the terms given to the Rigases should be unsettling to other convicted corporate criminals who face sentencing in coming weeks, said lawyer Roscoe C. Howard Jr. of Sheppard, Mullin, Richter & Hampton in Washington. Other judges, he said, probably won't want to appear lenient given the stiff punishment in this case.

"A sentence like this reminds everybody that there will be hell to pay if you're caught and convicted," Howard added.

Bernard J. Ebbers, who was convicted of orchestrating the massive WorldCom Inc. accounting fraud, is set to be sentenced in federal court July 13. L. Dennis Kozlowski and Mark Swartz, who were convicted last week of looting Tyco International Ltd. are scheduled for sentencing Aug. 2.

The Rigases are scheduled to surrender for incarceration Sept. 19. Their attorneys said they would file motions to allow them to remain free on bail pending appeal of their convictions, but chief prosecutor Richard Owens said he would oppose the request.

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