Bloomberg News

Adelphia’s Rigases Lose Bid to Dismiss Criminal Tax Case

June 15, 2011

(Updates with lawyer’s comment in ninth paragraph.)

June 15 (Bloomberg) -- Adelphia Communications Corp. founder John Rigas and his son Timothy, who are in prison for securities fraud, failed to persuade a U.S. judge to dismiss a pending criminal tax case against them.

John Rigas, 86, is serving 12 years and Timothy Rigas, 55, 17 years for looting the cable company and lying about its finances. After a federal jury in New York convicted them in 2004, U.S. prosecutors in Pennsylvania charged the two with conspiring to dodge taxes on $1.9 billion they stole from Adelphia, a cable-television company that collapsed in 2002.

The Rigases asked a judge to dismiss the tax charges, claiming prosecutors in the New York case interfered with their rights to legal counsel and a fair trial by threatening Adelphia with indictment if it supported them, including by advancing legal fees. U.S. District Judge John E. Jones III in Harrisburg, Pennsylvania, said yesterday that those actions were irrelevant because they occurred before the New York fraud case.

“When the Rigases were indicted in the instant tax evasion prosecution, they had already been convicted of federal securities fraud violations,” he wrote. “That Adelphia did not provide them at that point with legal fees to defend themselves in the instant indictment is nothing short of typical business practice.”

The judge referred to a 2006 ruling by U.S. District Judge Lewis Kaplan in Manhattan, who dismissed an indictment against former senior partners at accounting firm KPMG LLP.

KPMG Ruling

Kaplan ruled that KPMG refused to pay the defendants’ legal expenses “because the government held the proverbial gun to its head,” Jones found. “Had that pressure not been brought to bear, KPMG would have paid these defendants’ legal expenses,” Jones said.

Prosecutors don’t dispute that before the New York case, authorities “met with high-ranking Adelphia officials and, in rather short order, the Rigases were compelled to resign from their positions within the company,” Jones wrote.

Still, he said, the Rigases “have made absolutely no allegation or argument that prosecutors in any way interfered with their Fifth and Sixth Amendment rights in this prosecution.”

An attorney for the Rigases, Lawrence McMichael, said he was disappointed by the ruling. He intends to file a similar motion in federal court in New York, he said.

New York Next

“The essence of the judge’s ruling is that we have to raise this in New York and not here,” he said.

McMichael questioned the wisdom of prosecuting the Rigases again. “Obviously, the government is worried about John Rigas being on the loose at age 95,” he said.

The Pennsylvania case, laid out in a 2005 indictment, charges the two men with conspiring to defraud the U.S. of more than $300 million in tax revenue by diverting $1.9 billion from Adelphia for use by Rigas family members. It charges that John Rigas evaded $51 million in income taxes for 1998 to 2000 and that Timothy Rigas evaded $85 million.

The Rigases founded Adelphia in Coudersport, Pennsylvania, and built it into the fifth-largest U.S. cable-TV provider. It filed for bankruptcy in 2002. Adelphia’s assets were sold to Time Warner Inc. and Comcast Corp.

The Rigases were convicted of securities fraud and bank fraud, as well as conspiring to commit securities fraud, bank fraud, falsify books and records and make false statements to the Securities and Exchange Commission. They are in a federal prison in Butner, North Carolina.

The case is U.S. v. Rigas, 05-cr-402, U.S. District Court, Middle District of Pennsylvania (Harrisburg).

--Editors: Andrew Dunn, Stephen Farr

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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