NEW YORK (CNN/Money) -
Five former executives of Adelphia Communications Corp. were indicted Monday on fraud charges, setting the stage for John J. Rigas and two of his sons to stand trial for allegedly looting the bankrupt cable operator.
The indictment, handed up in Manhattan federal court, named Rigas and sons Timothy and Michael, as well two other former executives: James R. Brown, former vice president of finance; and Michael C. Mulcahey, former director of internal reporting.
Charges include conspiracy, securities fraud and wire fraud.
|John Rigas after he was arrested in July.
The indictment is the latest turn in a series of corporate scandals that began last year with Enron and accelerated with WorldCom, which revealed that it inflated profits by hiding billions of dollars in costs on the same day Adelphia went bankrupt: June 25.
The Rigas' were arrested in July and charged with looting the Coudersport, Pa.-based cable TV company of hundreds of millions of dollars to pay for luxury condos and a golf course, and to cover personal investment losses.
John Rigas, 77, who founded the company in 1952 with a $300 check, resigned in May, the same month that Timothy, 46, the former CFO, and Michael Rigas, 48, the former executive vice president of operations, left the company.
The three members of the Rigas family have been free on $10 million in bail and have denied the charges.
On Monday, the attorney for John Rigas Sr., Peter Fleming, said his client will plead not guilty.
"Starting with nothing, John Rigas built a major American corporation which has now suffered serious damage through these accusations and charges," Fleming said. "When the prosecution fails to make its case, which is my expectation, who will take responsibility?"
Lawyers for Tim Rigas and Michael Rigas also denied the charges, Reuters reported. Attorneys for the other two men, Brown and Mulcahey, have refuted the accusations of wrongdoing.
No arraignment date has been set.
Adelphia, which is suing the former executives, said the indictments may help the No. 6 cable company recover assets "improperly taken by the Rigas family and certain associates."
The accusations echo those made against Dennis Kozlowski, the former head of Tyco International (TYC: Research, Estimates), who was indicted Sept. 12 along with two other ex-Tyco executives on charges of orchestrating a web of deals that looted the company of at least $600 million. Kozlowski pleaded not guilty and is free on bail.
Monday's charges include one count of conspiracy, 16 counts of securities fraud, five counts of wire fraud, and two counts bank fraud.
The indictment charges that the Rigas family used billions of dollars in Adelphia's funds and assets for their own benefit, allegedly taking more than $50 million in undisclosed cash advances from Adelphia. The indictment seeks forfeiture of at least $2.5 billion.
The United States Attorney for the Southern District of New York, James B. Comey, charged that the men misrepresented Adelphia's financial condition between 1999 and 2002, in part by hiding debt off the company's balance sheet.
They are also accused of overestimating the number of Adelphia's subscribers and misleading credit rating agency Moody's Investors Service.
If convicted, each of the defendants faces up to 5 years in prison and a $250,000 fine on each of the conspiracy and wire fraud counts, the U.S. attorney's office said. The securities fraud count carries a maximum sentence of 10 years and a $1 million fine. And they face up to 30 years and a $1 million fine on each of the bank fraud counts.
In a statement, Comey called the alleged scheme "one of the most elaborate and extensive corporate frauds in United States history."
"The Rigas defendants and their co-conspirators exploited Adelphia's byzantine corporate and financial structure to create a towering facade of false success, even as Adelphia was collapsing under the weight of its staggering debt burden and the defendants' failing management of the company, while the Rigas family lined their pockets with shareholder dollars," Comey said.
-- Reuters contributed to this report