Draft Remarks of Attorney General Alberto Gonzales
Adelphia Victims Press Conference
Good afternoon. I am joined today by Deputy Attorney General Jim Comey, who also serves as Chairman of the President’s Corporate Fraud Task Force; by David Kelley, the United States Attorney for the Southern District of New York; by Linda Thomsen Deputy Director of Enforcement for the Securities and Exchange Commission; and by Lee Heath, the Chief Postal Inspector from the U.S. Postal Service. We are here today to announce an unprecedented act of justice and restitution for the men and women, families and stockholders who lost billions of dollars as the result of the accounting fraud schemes and looting of Adelphia Communications Corporation.
As many of you know, on July 8, 2004, Adelphia’s founder, Chairman and CEO, John J. Rigas, and his son, CFO Timothy J. Rigas, were convicted on conspiracy, securities fraud and bank fraud charges. The evidence at trial showed that the defendants engaged in a long-running criminal scheme to misrepresent Adelphia's financial condition and its performance, in order to meet Wall Street's expectations. The evidence also showed that the defendants systematically looted the corporation's assets for their own benefit, using the company's money to buy real estate and other assets for the Rigas Family, and causing the company to issue hundreds of millions of dollars worth of securities to the Rigas Family, for which the company was never paid. John and Timothy Rigas each face up to 215 years in prison for their actions.
Today, the Justice Department has taken additional action to ensure that the defendants are forced to help compensate the victims for their loss.
First, the Justice Department has reached an agreement with John Rigas that obligates all members of the Rigas family to forfeit to the United States in excess of 95 percent of all the family’s assets. These assets include privately owned cable systems worth between 700 and 900 million dollars; all Adelphia securities owned by the Rigas family and its affiliated entities, valued at approximately 567 million dollars; and real estate holdings valued at approximately ten million dollars. In total, this represents the largest forfeiture ever made by individuals in a corporate fraud matter.
Second, today I am announcing the creation of the Adelphia Victim Compensation Fund to compensate the victims who lost money as the result of fraud at Adelphia. Under the terms of a second agreement reached in this matter, Adelphia Corporation will not be prosecuted for the actions of its executives but will incur two obligations: To continue to cooperate with the government – and to contribute 715 million dollars to this new fund.
President Bush created the Corporate Fraud Task Force in July, 2002 with the goal of providing justice for American investors and restoring integrity to the American marketplace. It was a major victory for the task force and for honesty and accountability in corporate America when John Rigas and Timothy Rigas were found guilty by a jury last summer .
Last summer, when these convictions were announced, it was a day of justice for corrupt corporate executives.
Today is a day of restitution for the victims of corporate corruption.
The President’s Corporate Fraud Task Force will continue to work to ensure justice for the workers and shareholders who lost billions of dollars to this fraud. We will also continue to work with those corporate leaders and CEOs whose exemplary ethical standards and transparent business models have built our economy and instilled trust in investors worldwide.
Our decision not to charge Adelphia Corporation recognizes that the corporation was also a victim of its executives’ crimes, that it cooperated fully in the investigation, and that it took significant remedial measures. And it is important to note that the agreements announced today achieve a more favorable result for victims of fraud at Adelphia then could have been achieved had forfeiture proceedings been pursued only against John and Tim Rigas, the two defendants convicted to date in the criminal case. Today’s agreement obligates all members of the Rigas family who were joint owners with John and Tim Rigas to forfeit their assets. These agreements will help to maximize the returns to investors in Adelphia’s ongoing bankruptcy proceeding, and will provide compensation to victims who would otherwise recover little or nothing in the bankruptcy.
The Adelphia Victims Compensation fund will be jointly administered by the Department of Justice and the United States Securities and Exchange Commission. As the agreements announced today are subject to court review and approval, distributions from the Victims Compensation must await approval of the agreements. In the interim, a Fund administrator will be appointed and details for a process by which victims can submit claims for their losses will be developed and announced. The U.S. Attorney’s Office for the Southern District of New York has established a page on its website where updated information will be posted.
I thank the Department of Justice prosecutors and investigators who have worked on this case, the Securities and Exchange Commission, and the US Postal Service.
We are now happy to take your questions.