U.S. Department of Justice

Thomas A. Marino
United States Attorney
Middle District of Pennsylvania

Please respond to:    HARRISBURG

October 7, 2005

NEWS RELEASE

Federal officials announced today that two former Adelphia executives have been indicted and charged with participating in an alleged $300,000,000 tax evasion scheme, one of the largest personal income tax evasion cases in the history of federal tax law enforcement.

Thomas A. Marino, United States Attorney for the Middle District of Pennsylvania and Peter Alvarado, Special Agent in Charge, Philadelphia Field Office, Criminal Investigation Division, Internal Revenue Service today announced the return of a federal grand jury indictment charging JOHN J. RIGAS and TIMOTHY J. RIGAS with tax evasion and conspiracy to defraud the United States. JOHN J. RIGAS is the founder and former Chief Executive Officer of Adelphia Communications Corporation (“Adelphia”) and his son, TIMOTHY J. RIGAS, is the former Chief Financial Officer of Adelphia.

The federal grand jury in Williamsport, Pennsylvania charged the RIGAS’ with conspiring to evade in excess of $300 million in federal income taxes from 1989 through the date of the indictment. The grand jury charged that the defendants diverted $1.85 billion in funds from Adelphia for their own personal use and benefit and then caused the diverted funds to be entered as inter-company accounts receivable and loans between Adelphia and Rigas family owned partnerships and corporations, in order to make the diversion of funds look legitimate to the public and outside auditors. According to the indictment, by systematically diverting funds and falsely and fraudulently characterizing the diverted funds as loans and inter-company receivables in the Adelphia accounting system, the conspirators evaded and caused other family members to fail to report more than $1.9 billion on federal tax returns.

The indictment charges that for the period including 1998 through 2000, JOHN J. RIGAS and TIMOTHY J. RIGAS willfully failed to report as income on individual federal income tax returns approximately $143 million received by JOHN J. RIGAS and approximately $239 million received by TIMOTHY J. RIGAS from funds diverted from Adelphia, resulting in a tax loss to the United States of $52.9 million for JOHN J. RIGAS and more than $84 million for TIMOTHY J. RIGAS. In addition, the indictment alleges that for the same time period JOHN J. RIGAS and TIMOTHY J. RIGAS willfully caused the failure to report as income on individual federal income tax returns approximately $239 million for Michael Rigas, $218 million for James Rigas, and $40 million for Ellen Rigas, resulting in a tax loss to the United States of $87 million for Michael Rigas, $77 million for James Rigas, and $15 million for Ellen Rigas. Altogether, the taxes which the defendants are alleged to have evaded exceed $300,000,000, making this case one of the largest personal income tax evasion prosecutions on record according to IRS officials.

The grand jury indictment specifically charges JOHN J. RIGAS, age 80, and TIMOTHY J. RIGAS, age 49, with one count of conspiracy to defraud the United States and further charges each defendant with separate tax evasion violations for the years 1998, 1999, and 2000. If convicted of these charges, the defendants each face a maximum five year term of imprisonment and a maximum fine of $250,000 on each count of the indictment, and a total maximum term of imprisonment of 20 years and a maximum fine of $1 million on all counts.

In announcing these charges, Peter S. Alvarado, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division, Philadelphia Field Office stated: “The indictment charging John Rigas and Timothy Rigas on federal income tax violations demonstrates that corporate executives are held to the same standard as any American citizen when having to pay their federal income taxes. They are not above the law. Corporate fraud is an enforcement priority for the Internal Revenue Service, Criminal Investigation Division. Accordingly, we will continue our investigative efforts to discourage this type of activity by corporations and their executives.”

Mr. Marino emphasized that the indictment represents the combined efforts of prosecutors in his office and the Tax Division, and investigators in the Criminal Investigation Division, Internal Revenue Service. In announcing these charges, Mr. Marino stated: “The actions taken today represent the latest chapter in the longstanding commitment of the Department of Justice, and the Internal Revenue Service to ensure that corporate executives comply with one of the most basic duties of citizenship-payment of taxes. These charges reflect the commitment of the law enforcement community to investigate and pursue allegations of wrongdoing, wherever they may occur, whether it be on our city streets or in our corporate suites.” Mr. Marino also expressed his thanks for the assistance provided by the United States Attorney’s Office in the Southern District of New York.

This indictment was secured under the auspices of the Corporate Fraud Task Force chaired by the Deputy Attorney General. The task force was created by President Bush in July 2002 to oversee and direct federal law enforcement actions against corporate corruption. The Department of Justice and the Corporate Fraud Task Force have brought charges against more than 200 individuals to date, including executives and employees at Rite Aid Corporation, WorldCom, Enron, Imclone, Qwest Communications, HealthSouth and others.

******
An Indictment or Information is not evidence of guilt but simply a description of the charge made by the Grand Jury and/or United States Attorney against a defendant. A charged Defendant is presumed innocent until a jury returns a unanimous finding that the United States has proven the defendant’s guilt beyond a reasonable doubt or until the defendant has pled guilty to the charges.