A Bad Day for Corporate Crooks

The Supreme Court today turned down a petition by John Rigas and his son, Timothy Rigas, seeking review of their convictions on accounting fraud.

That means John, 83, and Timothy, 51, will have ample time to bond during their lengthy sentences — John got 15 years and Timothy got 20 — at the low-security prison at Butner in North Carolina.

As it happens, Conrad Black also checked into prison today, having been denied bail while he appeals his conviction and six-and-a-half year sentence.

See Portfolio.com's handy guide on where corporate criminals are serving time.

The Rigases remained free on bail until May 2007, when the U.S. Court of Appeals for the Second Circuit rejected a host of challenges to their convictions. Among them, the assertion that the prosecution presented an overly simplified case to the jury, and that it was flawed because it did not rely on violations of Generally Accepted Accounting Principles.

Even by Enron-era standards, the the Rigas family's actions in defrauding Adelphia Communications, the cable company founded by the elder Rigas, were pretty outlandish.

A few of the chestnuts include the $3 billion loan obtained from commercial banks, used in part by the family as a virtual A.T.M. to fund everything from their Buffalo Sabres professional hockey team, to a movie produced by a Rigas' daughter, to an unfinished golf course that was Timothy's favorite project.

Prosecutors claimed John Rigas once spent $6,000 to fly two Christmas trees to New York. Adelphia collapsed into bankruptcy in 2002.

Barring a miracle, John Rigas, a cancer survivor, may never make it home. "They got harsh sentences, but that doesn't bother the Supreme Court at all," said John C. Coffee Jr., a securities law professor at Columbia University School of Law.

The Supreme Court also declined to review the convictions of Bernard Ebbers, former chief executive of WorldCom for his a $11-billion accounting fraud scheme, following the Second Circuit's denial of his appeal.

These kinds of cases "present a factually messy argument" unlikely to be taken up for review by the high court, says Coffee. "It's the kind of factual issue where I don't think courts feel they can do a better job than juries."

All of which spells trouble for the five former insurance executives convicted last Monday by a federal jury in Hartford, Connecticut, for their role in a scheme to prop up the balance sheet of American International Group.

The criminal charges against the defendants in that case, if added up, could mean sentences of hundreds of years. Their appeals will also go to the Second Circuit, and they must be hoping that the third time will be the charm, because the high court probably won't be delving into the complexities of sham transactions in reinsurance.

"It's not an efficient use of the Supreme Court's time to resolve only one case," says Coffee.

by Karen Donovan