Deloitte to Pay $167.5M in Adelphia Case

Officials at the trust formed after Adelphia went bankrupt claim the settlement with Deloitte & Touche is among the largest between a public accoun...
Sarah JohnsonAugust 6, 2007

Deloitte & Touche has agreed to pay $167.5 million to settle a case with a trust that was formed after Adelphia Communications Corp. collapsed in 2002. The news comes just as former Adelphia CFO Timothy Rigas and his father, Adelphia founder John Rigas, head to federal prison.

The Adelphia Recovery Trust announced the settlement agreement late on Friday, claiming that it is “among the largest settlements ever reached between a public accounting firm and its audit client.” The trust’s allegations against Adelphia’s former lenders and others accused of taking part in financial fraud remain unsettled.

According to the trust, Deloitte will put the money into an interest-bearing escrow account. The settlement awaits approval by U.S. Bankruptcy Judge Robert Gerber.

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A Deloitte spokesman confirmed to that the accounting firm has settled the case but believes it would have prevailed had the case continued. “As part of the settlement, Deloitte & Touche denies any wrongdoing,” the firm said in a prepared statement, adding that Deloitte “believes … that it was in the best interests of the firm and its clients to settle this action rather than to continue to face the burden, expense, and uncertainty of further litigation.”

Deloitte served as Adelphi’s audit firm from the mid-1980s to May 14, 2002, when Deloitte suspended its work on the audit for the year ended December 31, 2001, saying Adelphia’s books and records had been falsified.

The Rigases were convicted in 2004 on several counts, including securities fraud, bank fraud, and conspiracy to commit bank fraud at what had been the fifth-largest cable company before its collapse. Prosecutors claimed that the two executives hid nearly $2.3 billion in Adelphia debt from stockholders to mask the company’s unhealthy financial status.

Starting Monday, Timothy Rigas will serve 20 years in prison, and his father will serve 15. In an interview with USA Today published over the weekend, 82-year-old John Rigas said fraud did not occur at Adelphia. He went on to say the government’s case against him was based on the business environment at the time, amid other corporate scandals like Enron, WorldCom, and Tyco. “It was a case of being in the wrong place at the wrong time,” Rigas said. “If this had happened a year before, there wouldn’t have been any headlines.”

More than two years ago, Deloitte settled charges with the Securities and Exchange Commission, which claimed the accounting firm had “failed to detect a massive fraud perpetrated by Adelphia and certain members of the Rigas family” in its fiscal 2000 audit. Deloitte paid $50 million to settle the case.