Adelphia Story: Indictments Handed Out in Fraud Case

Five former top executives of Adelphia Communications Corp. -- including several high-ranking employees in the cable company's finance department -- were indicted on Monday on charges they stole hundreds of millions of dollars from the company.

According to wire service accounts, John Rigas, the 78-year-old founder of the cable giant, was indicted, along with his sons Timothy and Michael, for allegedly perpetrating securities fraud, wire fraud and bank fraud. Timothy J. Rigas formerly served as Adelphia's chief financial officer, while Michael J. Rigas was the company's vice president of operation. Both executives resigned near the end of May, as did the elder Rigas. Adelphia filed for Chapter 11 bankruptcy protection on June 25.

In addition to the charges against the Rigas family members, the Manhattan federal court also indicted James R. Brown, former vice president of finance at Adelphia, and Michael C. Mulcahey, the onetime director of internal reporting at the company.

The former Adelphia executives were arrested on July 25. Attorneys for the five defendants deny their clients committed any wrongdoing.

Adelphia's current management has also filed a lawsuit against the three Rigas family members. That suit claims the three conspired to use company money for their own gain. Specifically, the company suit asserts that off-the-book transactions and self-dealing by the Rigas family led to damages and loss of market capitalization of about $1 billion. Adelphia management is seeking triple damages.

To date, Rigas family members have been hit with about 40 civil suits, not to mention today's criminal indictments. Last week, John Rigas and three of his sons went to court to convince a judge that they're entitled to payments under Adelphia's director and officer liability insurance.

So far, the primary provider of the D&O insurance Associated Electric & Gas Insurance Service Ltd., has failed to make any payments to the Rigas family members. According to a report on Dow Jones Newswires, Associated Electric indicated it has "serious doubts" whether the Rigas defense costs would be covered even if the bankruptcy stay on D&O payments is lifted.

Indeed, Associated Electric reportedly claims that much of the alleged wrongdoing conducted by Adelphia's former top managers appears to have occurred before the Dec. 31, 2000 inception of the insurance policy and a Jan. 23, 2001 signing of the policy by the elder Rigas.

The bankruptcy court is expected to rule on the Rigas family members' request on Oct. 8.