Bloomberg News

Adelphia’s John and Tim Rigas Win Dismissal of U.S. Tax Case

January 26, 2012

(Updates in third paragraph with excerpt from ruling.)

Jan. 26 (Bloomberg) -- A federal judge dismissed a six- year-old tax indictment of Adelphia Communications Corp. founder John Rigas and his son Timothy, who are already in prison for looting the company.

U.S. District Judge John E. Jones III tossed out a 2005 indictment today, one day after U.S. prosecutors said they wanted to call off the fight. John Rigas, 86, is serving 12 years and is projected to get out at age 92. Timothy Rigas, 55, is serving 17 years. They were convicted in 2004 in federal court in New York.

“This endeavor is a highly questionable use of the increasingly scarce resources of the federal government,” Jones wrote in federal court in Williamsport, Pennsylvania.

“What sort of punishment could we possible mete out that makes sense?,” Jones wrote. “As Kenny Rogers sang in his hit song The Gambler, ‘You got to know when to hold ‘em, know when to fold ‘em.’ Today, the government has appropriately decided to fold ‘em, and has blessedly elected to end this aspect of the unfortunate Rigas saga.’’

The Rigases were convicted in 2004 for looting Adelphia and lying about finances at the company, which was once the fifth- largest U.S. cable TV provider.

U.S. prosecutors in Pennsylvania charged the men with conspiring to cheat the Internal Revenue Service out of $483 million in taxes on $1.8 billion they stole. They also faced eight counts of tax evasion. John Rigas was accused of failing to pay $109.2 million and Timothy Rigas with dodging $174.8 million.

‘We’re Pleased’

‘‘This case never should have been brought,’’ said Rigas attorney Lawrence McMichael. ‘‘We’re pleased that the government decided to drop it.’’

On Jan. 18, Jones dismissed the conspiracy count after the U.S. Court of Appeals in Philadelphia ordered him in October 2009 to review the charge to determine whether it amounted to prosecution for the same crime twice.

In tossing the count, Jones said that prosecuting the Rigases for conspiracy would amount to double jeopardy because the government had no evidence that the scheme in the Pennsylvania case was different from that in the New York case.

Jones today dismissed the tax-evasion charges.

‘‘While sufficient evidence exists to obtain a conviction on the remaining tax evasion counts, the convictions likely will not result in substantial, additional prison time,’’ U.S. Attorney Peter Smith said in a motion yesterday. Prosecutors also face ‘‘significant limitations’’ on collecting restitution, he said.

Case Re-Examined

In light of the judge’s Jan. 18 ruling, Smith and the tax division of the Justice Department re-examined the case, according to the government’s motion. Prosecutors decided to drop their prosecution while the Internal Revenue Service pursues a civil administrative case, the government said.

The tax agency agreed the case can better be handled through administrative and civil processes, according to the filing.

‘‘In the absence of a substantial federal interest further prosecution will not be a prudent expenditure of limited prosecutorial resources,” it said.

Adelphia collapsed in 2002 and its assets were sold to Time Warner Inc. and Comcast Corp.

The Rigases, who entered a federal prison in North Carolina in August 2007, were transferred last year to the Allenwood Federal Correctional Institution in White Deer, Pennsylvania. The Allenwood facility is close to their home in Coudersport, Pennsylvania.

The Rigases were convicted in federal court in New York 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.

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

--Editor: 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.


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus