NEW YORK — More than 20 banks have agreed to pay $175 million to settle a lawsuit over claims they structured financial deals that allegedly helped members of the Rigas family loot Adelphia Communications Corp., according to court documents.
The settlement, if it receives court approval, will resolve allegations by the Adelphia Recovery Trust, which was established as part of Adelphia's bankruptcy, according to a motion filed earlier this week in U.S. District Court in Manhattan. The company collapsed into bankruptcy in 2002.
It was the country's fifth-largest cable company before the exposure of an accounting fraud scandal that federal prosecutors claimed hid almost $2.3 billion in debt through so-called co-borrowing agreements. Prosecutors from the U.S. Attorney's office in Manhattan have called it one of the most extensive financial frauds on record.
The lawsuit alleged the banks conceived and structured the coborrowing agreements and knew their purpose was to provide the Rigas family with unlimited access to loans for their personal benefit that Adelphia would be obligated to repay.
The settling banks include units of Citigroup Inc., Bank of America Corp. and J.P. Morgan Chase & Co.
The banks didn't admit wrongdoing as part of the proposed settlement and continue to deny the allegations.
J.P. Morgan, Citigroup and Bank of America declined comment Friday.
In 2004, Adelphia founder John Rigas and Timothy Rigas, his son and Adelphia's one-time chief financial officer, were convicted of pocketing more than $100 million from Adelphia for their own personal use and misleading investors about the company's finances and performance, including more than $2 billion in debt.
John Rigas is serving a sentence of 12 years in prison, while Timothy Rigas is serving a 17-year sentence.
Another son, Michael Rigas, served 10 months of home confinement after admitting in 2005 that he filed a Form 13D with the U.S. Securities and Exchange Commission that falsely stated he had conducted an inquiry into the source of funds used for a purchase of Adelphia shares in late 1999. The certification was kept in Adelphia's records.