Bail Set For Adelphia Execs

This image made from television broadcast by Iran's Press TV, Wednesday, July 15, 2009, they say shows a deep trench into an agricultural field caused by the impact of a crashed Iranain passenger plane, a Russian-made Caspian Airlines jet, that crashed Wednesday in northwest Iran, killing all 168 people on board, state media reported.
AP Photo/Press TV
A U.S. judge set bail at $10 million each for former Adelphia Communications Corp. Chief Executive John Rigas and two of his sons.

They have been charged with fraud in a complaint that says they looted the cable company.

U.S. Magistrate Judge Gabriel Gorenstein approved $10 million personal recognizance bail packages for each of the Rigas defendants secured by cash and property. The package will be co-signed by Doris Rigas, who is John's wife and the mother of the other two defendants.

The three former executives of bankrupt cable television provider Adelphia Communications Corp. were arrested on conspiracy charges alleging they used their company as their "personal piggy bank."

Company founder and former chairman and CEO John Rigas, 77, was arrested Wednesday along with his sons, Timothy, a former company chief financial officer, and Michael, another former company executive.

Two other men were arrested at their homes in Couderspert, Penn., said Herb Haddad, a spokesman for U.S. Attorney James B. Comey.

In a Washington news conference, Deputy Attorney General Larry Thompson said the Rigas family and others "systematically looted the corporation.

"The defendants intentionally submitted false information to lenders and made false statements to the public in order to maintain their failing company's stock price," he added.

Said Stephen Cutler of the Securities and Exchange Commission at the same event, "This case exemplifies the Commission's — and the federal government's — determination to react quickly and forcefully to financial fraud at public companies, and our desire to ensure that officials who perpetrate such fraud will not profit from the behavior and will never again have the opportunity to misuse their positions as corporate officers and directors."

CBS News Correspondent Stephanie Lambidakis reports the Department of Justice is anxious to showcase its crackdown on corporate fraud, which is why it's trumpeting the arrests and treating the Rigases as common criminals.

In addition to the criminal charges, the Securities and Exchange Commission brought a civil lawsuit in U.S. District Court in Manhattan, calling the case "one of the most extensive financial frauds ever to take place at a public company."

The SEC said the company fraudulently excluded billions of dollars in liabilities from its financial statements, falsified statistics, inflated its earnings to meet Wall Street's expectations and concealed "rampant self-dealing by the Rigas family."

It sought restitution, fines and to bar the defendants from ever heading a company.

In papers filed in federal court in Manhattan, U.S. Postal Inspector Thomas F.X. Feeney said the investigation had revealed probable cause to believe that Rigas "together with members of his family, has looted Adelphia on a massive scale, using the company as the Rigas Family's personal piggy bank, at the expense of public investors and creditors."

Feeney said the defendants "perpetrated an elaborate and multifaceted scheme to defraud stockholders and creditors of Adelphia, and the public."

He said Adelphia, one of the largest cable television operators in the country, was controlled by John Rigas and members of his family, who owned a majority of the company shares and controlled a majority of seats on the company's Board of Directors.

Feeney accused the family of using a "variety of deceptive and misleading accounting practices" to cheat investors.

He said they "manipulated the books and records of Adelphia to create the illusion that Adelphia's financial condition and performance were substantially more favorable than they in fact were."

Adelphia, the nation's sixth-largest cable company, filed for bankruptcy protection last month following months of turmoil after the company revealed billions of dollars in off-balance-sheet debt, much of it owed by the founding family.

The Securities and Exchange Commission is investigating the company's accounting. Federal grand juries in New York and central Pennsylvania are probing the company's finances.

The Rigases resigned their executive positions with the Coudersport, Pa.-based company in May. Later that month, the family agreed to turn over $1 billion in assets to help cover loans, to turn over $567 million in cash flow from other cable companies the family owns, and to pledge all stock held by the family as collateral. Adelphia estimates it is liable for $3.1 billion in family debts.

Adelphia said the Rigas family used the company's cash or assets to help it buy and operate the Sabres, expand personal cable company holdings, acquire timberland and invest in a golf course, and that many of the deals weren't approved by the board. The company said it was investigating the family's use of company jet airplanes, condominiums and apartments.