NEW YORK – Adelphia Communications Corp. (search) is close to agreeing to pay about $725 million to U.S. authorities to settle claims stemming from its accounting and management scandal, a source familiar with the matter said on Thursday.
Such a settlement, with the Justice Department (search) and the Securities and Exchange Commission (search), would be one of the largest penalties of recent times, just below the $750 million settlement that WorldCom Inc. (search) made with the SEC in 2003.
"Adelphia is engaged in constructive discussions with the government," the company said in a statement. "Although the terms of any settlement are still under discussion, we hope that through continued efforts on both sides we will reach a mutually satisfactory resolution."
Investors lost billions of dollars when the cable company collapsed in 2002 amid claims that the company's founding Rigas family siphoned millions of dollars of Adelphia funds for personal use and misrepresented its financial condition.
The scandal forced Adelphia to seek Chapter 11 bankruptcy protection in 2002. Last summer John Rigas (search), Adelphia's founder, and his son Timothy, Adelphia's former chief financial officer, were convicted of fraud and conspiracy. They are awaiting sentencing.
Adelphia last August asked the Rigas family to pay back $3.23 billion it says the family owes.
The company, which serves about 5 million subscribers in clusters across U.S. regions in the Northeast, Florida, Virginia, Colorado and California, is on the verge of selling itself in an auction process that could conclude as early as next week, according to another source familiar with the matter.
The winning bidders are expected to be a joint effort by Comcast Corp. (CMCSA) and Time Warner Inc.(TWX), which itself agreed to pay the SEC $300 million to settle accounting fraud charges at its online unit.
Adelphia executives have said they hoped to announce a deal before the end of the first quarter, but considered it a goal, not a deadline.
Wall Street expects the company to fetch up to $18 billion in a sale.