2002 internal corruption scandal
On March 27, 2002, Adelphia officials announced that $2.3 billion in unrecorded debt was collected via co-borrowings between Adelphia and other Rigas family entities under the family's private trust, Highland Holdings. Legally, the Rigas entities should have paid the debt. However, if they were not able to, the company would be held accountable. An investigation was launched and later revealed that the Rigas family used the funds to illegitimately purchase personal luxuries. The alleged purchases included Christmas trees, 17 company cars and 3,600 acres of timberland purchased for $26 million for their home yard. Rigas resigned from his position as CEO in May 2002 after being indicted for bank fraud, wire fraud, and securities fraud. The Securities and Exchange Commission (SEC) described the scandal as "one of the most extensive financial frauds ever to take place at a public company."
Trial
A trial for the case was launched. Federal prosecutors proved that the Rigases used complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing $100 million for themselves. In June 2005, John and Timothy Rigas were found guilty for "looting and debt-hiding". John Rigas was sentenced to 15 years in prison, while Timothy received a sentence of 20 years. In 2007, both men were ordered to report to Butner Federal Correctional Complex. On December 14, 2015, Rigas' lawyers announced that he was terminally ill with bladder cancer and had between one and six months to live. Rigas was diagnosed with cancer prior to his conviction and, under his sentencing, could seek compassionate release if he had less than three months to live. Judge Kimba Wood issued an order allowing for Rigas's release on February 19, 2016. Rigas survived for five more years after his release; he died September 30, 2021, age 96.
The New York Times noted that this differed considerably from other accounting scandals like Enron and Worldcom, saying, "the one trait that distinguishes the Rigases from virtually every other culprit on Wall Street is that they didn't sell their stock. The evidence suggests less that they intended to defraud than that they intended to hide inconvenient facts until they could be righted. This is also, of course, against the law; it's just a more tragic crime than ordinary looting."
