Deloitte Faces Suits, SEC Investigation

Deloitte & Touche is facing a torrent of lawsuits from Adelphia Communications Corp. shareholders who say the accounting firm should have known about the cable company’s undisclosed debt, lawyers said Wednesday.

Deloitte also is being investigated by the Securities and Exchange Commission, the New York Times said.

At least two of the more than a dozen shareholder lawsuits filed against Adelphia list New York-based Deloitte as a co-defendant. The SEC has started an inquiry into Deloitte’s role as Adelphia’s auditor, the Times reported Wednesday.

The SEC and grand juries in two states are investigating Adelphia’s more than $3 billion in loans to partnerships controlled by the family of company founder John Rigas.

The revelations have decimated the company’s stock, which continued to plunge Wednesday, falling 84 cents to a record low of $1.16 on Nasdaq.

“Deloitte signed off on financial statements that did not reflect the condition of the company,” said Fred Isquith, a New York lawyer who represents shareholders in one of the suits. “Deloitte’s opinion was reckless.”

Deloitte spokeswoman Deborah Harrington and Adelphia spokeswoman Karen Chrosniak didn’t return calls.

Deloitte was paid $3.4 million in fees by Adelphia in 2000, including $1.3 million for audit work. Adelphia delayed filing its 2001 annual report to investigate the loans.

Partnerships controlled by Rigas and other members of the founding family received $3.1 billion in loans that were backed by the firm and not disclosed to shareholders until March. The funds were used, in part, to purchase Adelphia securities.

“It is the responsibility of the auditor to stop people from using public companies as their own bank account,” said Wayne Shaw, a professor of accounting at Southern Methodist University.