The Securities and Exchange Commission (SEC) filed charges yesterday against Adelphia Communications Corporation, its founder, his three sons, and two senior executives. Earlier in the day, the founder and two sons were led from a Manhattan apartment building in handcuffs.
The SEC's complaint charges that Adelphia fraudulently excluded billions of dollar of liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates. It also charges that the defendants inflated earnings to meet Wall Street's expectations and concealed rampant self-dealing by the founder's family, including the undisclosed use of company funds for personal stock purchases and the acquisition of luxury condominiums in New York and elsewhere.
The SEC filed a lawsuit in federal court in Manhattan, alleging violations of the anti-fraud, periodic reporting, record keeping, and internal controls provisions of the federal securities laws.
"This case presents a deeply troubling picture of greed and deception at a large, publicly-held company," said SEC Director of Enforcement Stephen Cutler. "The Commission and criminal authorities have responded to this egregious conduct with swift, strong and coordinated enforcement action and prosecutions."
The founder and two sons were arrested and handcuffed by U.S. postal inspectors, who arrived at the family's New York condominium at 6 am. The father, age 78, and the sons were taken to a Manhattan post office for fingerprints and mug shots, then driven downtown for a court hearing. They were freed on $10 million bond each.
Adelphia is the sixth largest cable television provider in the United States.