Adelphia Communications Corporation is a cable television company in the United States that has close business ties to Adelphia Business Solutions, Inc. ("Adelphia Solutions").
The original Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by issuing materially false and misleading statements and omitting material information regarding the Company and its business operations. For example, as alleged in the Complaint, Defendants concealed borrowings and understated the Company's debt levels and failed to adequately disclose the existence of billions of dollars of off-balance sheet debt. Upon disclosure of these risks, the Company's stock declined from $20.39 per share on March 26, 2002, to $13.12 per share on April 1, 2002.
Several similar purported class action lawsuits have also been filed in federal courts in Pennsylvania, New York, South Carolina and New Jersey, and in state courts in New York, Pennsylvania, California and Texas. The SEC has also filed a civil enforcement action.
In late 2003, certain actions regarding Adelphia Solutions securities, originally filed in the Eastern District of Pennsylvania, were transferred to the Southern District of New York and became part of the Multidistrict Litigation, MDL 1529. The Complaint in those filings alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between January 6, 2000 and March 27, 2002, thereby artificially inflating the price of Adelphia Solutions securities. The Complaint alleges that, among other things, throughout the Class Period, Adelphia Solutions engaged in deceptive sales practices which artificially inflated the reported number of telecommunications lines that it sold. In addition, the Complaint alleges that Defendants improperly caused Adelphia Solutions to pay the overhead expenses of Adelphia Communications, a company controlled by Defendants which maintained important business ties with Adelphia Solutions and on which Adelphia Solutions depended. Furthermore, according to the Complaint, Defendants failed to disclose that Adelphia Communications had in excess of $2 billion in off-balance sheet liabilities. On March 1, 2002, Adelphia Solutions announced that it will default on interest payments on certain secured notes. Subsequently, on March 27, 2002, Defendants disclosed that Adelphia Communications, along with another entity controlled by Defendants, was liable for $2.3 billion of previously undisclosed debt. On that same day, Adelphia Solutions filed for bankruptcy.
On May 23, 2006, the parties entered into a Stipulation and Agreement of Settlement with the Deloitte & Touche Defendants. On June 7, 2006, the parties entered into a Stipulation and Agreement of Settlement with the Bank Defendants. The Court granted preliminary approval of both settlements on June 15. On November 20, the Court granted final approval of the Settlement, including an award of Attorneys’ Fees and Expenses, and entered Final Judgment.
According to a press release dated October 15, 2006, the U.S. District Court for the Southern District of New York denied shareholders' motion for summary judgment in a securities fraud class action, finding that the shareholders may use the directors' criminal convictions to plead civil fraud, but must show that the convictions met all elements of securities fraud violations. Shareholders sued Adelphia Communications and several individual directors for securities fraud, alleging violations of § § 10(b), 18 and 20(a) of the Securities and Exchange Act of 1934, and § § s 11 and 15 of the Securities Act of 1933. The shareholders claimed that Adelphia and its directors knowingly concealed billions of dollars of debt in SEC filings, causing its stock to be falsely inflated. The individuals were criminally convicted of fraud by the SEC. The Plaintiffs sought to use the criminal convictions as evidence that the individuals violated § 10(b) of the Exchange Act, § 11 of the Act and various common law fraud allegations. The Plaintiffs moved for partial summary judgment on these claims.
