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NEW YORK — Adelphia Communications Corp. founder John Rigas and his son Timothy Rigas were convicted of securities fraud and bank fraud Thursday for the multibillion-dollar scandal that landed their company in bankruptcy. A federal jury in Manhattan found the 79-year-old John Rigas and his son guilty of 15 counts of securities fraud and two counts of bank fraud, as well as a single count of conspiracy to commit securities fraud, make false filings and statements to the Securities and Exchange Commission and commit bank fraud — all in connection with hiding $2.3 billion in company debt from investors and federal regulators, and looting the company for personal gain. The Southern District of New York jury acquitted former Adelphia assistant treasurer Michael Mulcahey of every count in the indictment. It remained undecided on son Michael Rigas on every count but one. The jury cleared him of conspiracy but told the judge it was unable to reach a verdict on the remaining 22 counts in the indictment and will continue to deliberate. All defendants were acquitted on the indictment’s five counts of wire fraud. The decisions came during the fifth month of trial and at the close of the eighth day of deliberations. A note from the jury indicating that it was having trouble reaching a unanimous decision on all counts prompted Judge Leonard Sand to meet with attorneys, a meeting that produced agreement on accepting a partial verdict. In addition to allegations that the Rigas family treated Adelphia as their private piggy bank, the securities fraud counts covered misleading statements and lies about the health of the company in relation to a common stock offering and money borrowed by the company. All four defendants were charged with 23 counts of using company funds to pay for personal expenses, inflating revenue figures and masking more than $2 billion in debt. The primary charge arose from a co-borrowing agreement in which Adelphia’s assets were used as collateral for loans made to the Rigases. Prosecutors claimed that the investing public was left in the dark about these obligations and were deliberately lied to in securities filings and public statements about the full extent of the company’s liabilities. When news of the co-borrowing arrangements reached the investing public in early 2002, the nation’s fifth-largest cable company quickly fell into bankruptcy. It later moved its headquarters from a tiny hamlet in Pennsylvania to a suburb of Denver. The company, still under bankruptcy, may be put up for sale. The verdicts were the latest in an impressive string of victories in white-collar prosecutions by the Southern District U.S. attorney’s Securities and Commodities Fraud Unit. The day after the Rigas trial on March 1, the government secured a guilty plea from former WorldCom Inc. Chief Financial Officer Scott Sullivan and the indictment of CEO Bernard Ebbers in the largest accounting scandal in U.S. history. On March 5, a Southern District jury convicted Martha Stewart and broker Peter Bacanovic of conspiracy, making false statements and obstruction in the ImClone Systems Inc. stock trading cover-up. And on May 3, following a retrial, former Credit Suisse First Boston star banker Frank Quattrone was convicted of obstruction of justice. Mulcahey was the only defendant to testify in what was otherwise a short defense. Orchestrated by Buffalo attorney Mark Mahoney of Harrington & Mahoney, Mulcahey’s defense rested on the distinction that he was neither a large shareholder nor a senior executive of Adelphia. Sitting outside the Rigas inner circle, Mulcahey lacked the financial interest and the means to coordinate a fraud of such titanic proportions, his attorney told jurors. Michael Bobelian and Mark Hamblett are reporters with the New York Law Journal , a Recorder affiliate.

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