Creditors in scandal-hit US cable firm Adelphia Communications are suing several banks for allegedly aiding the firm’s ransack.
Adelphia’s former controlling clan, the Rigas family, was last year accused of “one of the most elaborate and extensive corporate frauds in United States history” [WAMN: 24-Sep-02]. It is claimed the Rigases looted over $3 billion (€2.6bn; £1.8bn) from the company, using the ill-gotten gains to buy stock in their company and among other things, construct a private golf course.
Now angry creditors are taking dozens of banks (including J P Morgan and Citigroup) to court, arguing that they helped the family commit such fraud. They are seeking damages of $5bn.
The creditors’ accusations surround complex loans known as co-borrowing agreements. These allowed the Rigases to get their hands on cash using Adelphia assets as collateral.
“The primary purpose and the plain effect of each of the co-borrowing facilities … was to use the debtors’ assets to give the Rigas family access to billions of dollars that only the debtors would have the wherewithal to repay,” alleges the suit.
Creditors claim the banks making the loans had access to confidential information in which they would have seen what the Rigases were up to.
Continued the suit: “[The banks] knew that the Rigas family used the proceeds of the co-borrowing facilities and other loans made available to them to enrich themselves at the debtors’ expense and to maintain voting control of Adelphia.”
Data sourced from: New York Times; additional content by WARC staff