Adelphia Communications Corp. offered to pay $725 million to resolve U.S. criminal and civil fraud investigations, which would be the second-largest settlement of its type in U.S. history.
Adelphia, the No. 5 U.S. cable-television operator, is negotiating with the Justice Department and Securities and Exchange Commission, the company said in a regulatory filing yesterday. The SEC has sued Adelphia and founder John J. Rigas, 80, who faces dozens of years in prison for looting the company and lying about its finances before it filed for bankruptcy protection in June 2002.
The Securities and Exchange Commission has sued Adelphia and its founder, John J. Rigas, who faces dozens of years in prison for looting the company.
(David Karp -- Bloomberg News)
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The offer, if approved, would approach the $750 million settlement that WorldCom Inc. agreed to pay in 2003. A settlement would bring chief executive William T. Schleyer closer to reshaping the company and may help him complete a sale to repay creditors. Comcast Corp. and Time Warner Inc., the two biggest U.S. cable-TV companies, in January jointly bid more than $17 billion for Adelphia's assets.
Adelphia, which has 5 million customers in 31 states, said in December that the company offered $300 million to resolve the SEC and Justice Department investigation. The SEC suit accused Adelphia and several Rigas family members of hiding $2.3 billion in debt.
The company has been cooperating with U.S. authorities since the Rigases left the company in May 2002 and seeks to avoid indictment. Adelphia's regulatory filing said indictment of the company, based in Greenwood Village, Colo., remains a possibility.
Adelphia's new offer includes a $125 million "interest" in a trust that would collect proceeds from lawsuits filed by the company over liability for its bankruptcy. The company is seeking to recover $3.2 billion from the Rigas family.
Creditors in the bankruptcy have filed legal papers claiming they are entitled to priority over the SEC in any recovery. The company's filing yesterday did not detail how regulators would use the settlement fund.
John Nester, an SEC spokesman, declined to comment on Adelphia's proposed settlement. Assistant U.S. Attorney Richard D. Owens, who led the prosecution of Rigas, also declined to comment.
The SEC alleged in 2002 that the company fraudulently concealed $2.3 billion in bank debt. Rigas and his son Timothy J. Rigas, 48, were convicted in July of conspiracy and fraud for looting Adelphia and lying about its finances. A mistrial was declared in the case against Michael J. Rigas, 51, who faces a new trial.
John and Timothy Rigas are scheduled to be sentenced on April 18. Prosecutors told U.S. District Judge Leonard B. Sand last week that they are negotiating an agreement in which the Rigases would forfeit private cable companies they own and that Adelphia operates.
John and Timothy Rigas used Adelphia to fund $50 million in cash advances, buy $1.6 billion in securities and repay $252 million in margin loans, prosecutors told jurors in their four-month criminal trial.
Adelphia last year restated financial results and said the Rigas family had caused the company's bankruptcy by issuing misleading statements and increasing debt. Rigas family members held all of the senior executive positions at Adelphia before May 2002 and accounted for five of the nine board members.
The Rigases also are defendants in more than 40 suits brought by investors alleging accounting fraud.
