Adelphia Communications

CREATED AND FOUNDED by John J. Rigas, Adelphia Communications grew in the 1990s to become one of the largest cable media providers in the United States. Because of its size, investors and shareholders were shocked when they learned that the company filed for bankruptcy in June 2002. However, headquartered in Coudersport, Pennsylvania, a small rural community that Rigas called home, Adelphia Communications was not immune from white-collar crime. Federal investigators arrested Rigas, and his two sons, Michael and Timothy, on July 24, 2002, and paraded the group in handcuffs before the media.

At 77 years old, Rigas did not appear to be a typical criminal. The accusations levied against him, his sons, and two other employees, were far from typical. The group was accused of concealing $2.3 billion in debt from investigators and shareholders, and hiding their deals that were motivated purely out of self-interest rather than corporate interest. Estimates suggest that their illicit actions netted them $1 billion which they used to support their lavish lifestyles. According to federal prosecutors, the defendants misused the money as personal loans and cash advances, and even built a $13 million professional golf course with the misappropriated funds.

Rigas, his sons, and the two employees involved in the scheme, former Vice President of Finance James R. Brown and former Director of Internal Reporting Michael C. Mulcahey, were indicted in October 2002. United States Attorney James B. Comey described the scheme as “one of the most elaborate and extensive corporate frauds in United States history.” They also faced stiff civil charges for their misdeeds.

If convicted of the criminal charges, each defendant could be sentenced to up to 250 years in prison, fines up to $20 million, and forfeiture of [Page 8]$2.5 billion. To some observers, Rigas was used as the poster boy of what the government can do to white-collar offenders. Many of those who live in the Coudersport community continue to stand behind Rigas. Nevertheless, Rigas was convicted in July 2004 of conspiracy, bank fraud, and securities fraud.