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CNN Live Today

Five Cable Executive Hauled to Jail This Morning

Aired July 24, 2002 - 13:08   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Five cable executive were hauled to jail this morning in connection with one of the latest corporate scandals.

The Justice Department accuses the five as using Adelphia Communications as their personal piggy bank.

With more on that story, Fred Katayama of CNN Financial News.

It's just not stopping, Fred, one after another.

FRED KATAYAMA, CNN CORRESPONDENT: One after another indeed, Kyra.

Well, postal inspector arrested John Rigas, the founder of Adelphia Communications, and his two sons, Timothy and Michael. Also arrested were two senior executives, Vice President James Brown and the director of internal reporting, Michael Multahey (ph).

Now They will be arraigned in roughly about an hour from now. They will be arraigned on charges of conspiracy to commit bank, wire and securities fraud. The DoJ, the Department of Justice, calls this a case of greed and deception, a case of betrayal of shareholders by executives.

Here's what Assistant Attorney General Larry Thompson told the press earlier today.

(BEGIN VIDEO CLIP)

LARRY THOMPSON, DEP. ATTORNEY GENERAL: In less than four years, the complaint alleges, they stole hundreds of millions of dollars, and through their fraud caused losses to investors of more than $60 billion dollars.

(END VIDEO CLIP)

KATAYAMA: Now specifically, the five are charged with inflating the company's earnings in order to meet Wall Street's expectations from 1998 to 2001. They're also charged with understating the debt of the company by more than $2 billion, and exaggerating the number of cable subscribers the company had in order to make the company's financial health look stronger than it really was. Also, the families accused of shifted $12 million in Adelphia's corporate funds in order to build their golf course on family-owned land.

The Department of Justice, in its indictment, said that basically the five executive looted Adelphia on a massive scale, using the company as a Rigas family's personal piggy bank.

Now separately, the Securities & Exchange Commission filed a civil suit, basically against the same five members, and as well as one other son in the Rigas family, James Rigas. The charges are similar, except the SEC seeks to make all the defendants give back their ill-gotten gains as well as all compensation earned during the period of the fraud.

This is really a steep fall from grace for the founder of Adelphia, John Rigas, the son of Greek immigrants. He founded this company by starting a theater -- with a small little theater and a cable company in the northern part of Pennsylvania, in a small town a hamlet, called Powder's Court (ph), with only $300. today, he and his family members stand to be arraigned in roughly an hour from now.

Kyra, back to you.

PHILLIPS: Fred Katayama, thank you.

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