A Pittsburgh-based law firm has agreed to pay $60 million to settle claims in the bankruptcy of its former client, Adelphia Communications Corp. Buchanan Ingersoll & Rooney, a firm with about 415 lawyers, and its insurers will pay an initial $20 million to the Adelphia Recovery Trust, which is pursuing claims on behalf of creditors. The firm and its insurers will also pay $40 million to be distributed in a binding mediation proceeding among the trust and other parties with claims against Buchanan, according to court papers filed in the Southern District Bankruptcy Court. The trust will seek a substantial portion, if not all, of the $40 million.
The Pennsylvania-based cable TV company filed for bankruptcy in 2002 after disclosing $2.3 billion in off-balance sheet debt. John Rigas, the founder, president and CEO of the company, and his son Timothy were subsequently convicted of bank fraud and securities fraud in an accounting scandal. John is serving a 12-year-prison sentence and Timothy 17 years. Buchanan served as Adelphia’s primary outside legal counsel for a number of years, including in transactions involving the company and the Rigas family, according to court documents. “Several of those transactions are alleged to have enabled the Rigas Family to loot tens and even hundreds of millions of dollars from the debtors,” according to the motion for an order approving the settlement filed last week.
Since Adelphia’s bankruptcy filing, groups of holders of securities in Adelphia Communications have sued the firm in various courts, the motion says. As part of the settlement, the trust and Buchanan agree to mutual releases from claims. Both the firm and the trust denied wrongdoing, saying the settlement was motivated by a desire to avoid the expense and burden of litigation. The settlement is subject to the approval of Bankruptcy Judge Robert Gerber. Tracie Giozzi, a spokeswoman for the law firm, said, “Agreeing to settle the matter allows us to focus on our clients and our goals. We are pleased to put this behind us.” The trust is represented by David Friedman, a partner at Kasowitz, Benson, Torres & Friedman.