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Questions Surround Deloitte Rigas Suit

Adelphia’s former heirs issued a statement late Thursday claiming vindication after accounting giant Deloitte & Touche apparently dropped fraud charges levied against the Rigas family stemming from the massive accounting fraud at the company in 2002.

But in its own statement issued shortly after the Rigas press release, Deloitte claims that the case wasn’t dropped -- the accounting firm just decided it would be better tried in a New York court.

“Deloitte & Touche has no intention of dropping its claims against the Rigas family,” company director of national public relations Deborah Harrington said in a statement. “Instead, as the Rigases were told, Deloitte & Touche intends to file its claims against them in a proceeding pending in New York.”

According to a statement by the Rigas family, Deloitte dropped all of the claims against the Rigases on Wednesday.

Adelphia was rocked by a major accounting scandal in 2002 , which led to the convictions of former Adelphia chairman John Rigas and his son former chief financial officer Timothy Rigas on 18 counts of fraud and conspiracy. Timothy Rigas was sentenced to 20 years in prison and John Rigas was sentenced to 15 years. Both men reported to Butner Federal Correctional Institute in North Carolina earlier this month to begin serving out their sentences.

Deloitte sued the Rigases in 2003 in Philadelphia alleging fraud and negligent misrepresentation stemming from the accounting scandal. According to the Rigas statement, last week, a judge in the Philadelphia action dismissed the negligent misrepresentation claim against the family. Two of the Deloitte claims – for fraud and contribution, basically claiming that the Rigas family is liable to “contribute” all or part of the $433 million in settlements Deloitte has had to pay as a result of its relationship with Adelphia – were scheduled for jury selection on Sept. 7, with a trial slated for Sept. 10.

In a letter to the Philadelphia court dated Aug. 22, Max Shulman, an attorney representing Deloitte, stated that the accounting firm would discontinue all charges against the Rigases without prejudice, adding that the company planned to filed counterclaims and third party claims against the family in a pending federal action in U.S. District Court for the Southern District of New York.

Rigas attorney Lawrence McMichael said that Deloitte’s claims are wrong on two counts. One, the Pennsylvania court will not allow that case to be retried in another court – McMichael cited Pennsylvania law which states that “A discontinuance will be stricken off under the discontinuance rule where its purpose is to harass the defendant through the commencement of another suit in a different…court on the same cause of action.”

Secondly, McMichael stated that the New York suit is actually an amalgamation of about 50 cases related to Adelphia, which hasn’t been acted on in years.

“So far, only one thing has happened in that case, that is we filed a complaint,” McMichael said. “Deloitte has not responded to the complaint, there have bee no motions, no discovery. It’s been dormant for years.”

In a statement, former Adelphia executive James Rigas – who was never charged with any crime – blamed the accounting firm’s misrepresentations as one of the reasons his father and brother did not get a fair trial.

“The Rigas family is anxious for the truth to be told in a court and ready and willing to try this case,” Rigas said in the statement. “Having spent four years defending against Deloitte’s baseless claims, we believe we are entitled to a full trial where the public will finally see what happened at Adelphia.”

Rigas just may get that chance. McMichael said that the family intends to petition the Pennsylvania court next week to push the matter towards trial.

Harrington disputed the Rigas statement, calling it “a knowing distortion of the facts.”

“The Rigas family’s false comments do not alter the fact that members of the Rigas family were found criminally responsible for the fraud perpetrated at Adelphia, a fraud which in large part was directed at Deloitte & Touche,” Harrington said in the statement.