New York (May 6, 2004) – Testifying in Federal District Court yesterday, a former vice president of finance for Adelphia Communications described how the now-bankrupt cable company’s top officers were provided with reports that compared the company’s published – and largely fictional -- financial results with its actual financial condition.
The former VP, James R. Brown, said that the false public statements were called “Jim Brown numbers,” while the real figures were distributed internally so that the company could continue to operate.
Brown, who pled guilty to fraud charges in late 2002, is testifying as part of plea bargain to reduce his sentence. Prosecutors aim to use his testimony to convict Adelphia founder John J. Rigas, his sons Michael and Timothy, and former assistant treasurer Michael Mulcahey of fraud. (Another executive, director of accounting Timothy A. Werth, pled guilty to fraud earlier.)
According to Brown, former chief financial officer Timothy Rigas called for the distribution of the real numbers: “He said, ‘We don’t want to fool ourselves.’”
While Brown did testify that John Rigas was uncomfortable with the false reporting – at one point, Brown said, the Rigas patriarch told him, “We need to get away from this accounting magic” – he said that company executives felt the inflated numbers were necessary to conceal Adelphia’s true performance, which might have caused the company to be found in default of credit agreements.
Brown was expected to testify for two more days.
-- WebCPA staff
