Adelphia News Updates

FinanceProfessor.com Bringing the real world to the classroom and vice versa!

The Seattle Times reported that the Rigases seemed to like Adelphia 's real estate. In fact so much so that Adelphia often purchased properties for the Rigases and even paid to have them remodeled. Including one time in order to celebrate a wedding.

What do you mean I can not sell the same asset twice? According to reports today, that is what the Riagses did. For instance, from the Wichita Eagle (Kansas.com): "Businesses owned by the Rigas family sold real estate to Adelphia Communications Corp., the cable company founded by John Rigas, but the family never gave the company title to the land and then resold the land to others years later, a former Adelphia employee testified."

Nashville City Paper: Golf was a favorite past time:
The ex-Adelphians are accused of spending $700,000 of the company’s money so Timothy Rigas could join a John’s Island, S.C., golf club. and when
"Playing on someone else’s courses wasn’t enough. The prosecution says the defendants spent $13 million in company funds to design their own golf course."

"A federal judge ruled yesterday that Adelphia Communications must release an additional $12.8 million to the Rigas family to pay for their criminal defense, in addition to the $15 million the company released to the family in August before the trial began."

The case against the Rigases continued as a key prosecution witness took the stand. Lemoyne Zacheral the former VP of Finance had some of the most persuasive arguments yet that the Rigases knew they should not have been using the firm as their own "piggy bank" and that the line of separation between firm and family had to be created. While not stictly part of the case as these events occured in the mid and early 1990s, the judge admitted them into testimony as showing the family knew the problems and did not stop them.

From the Olean Times Herald: "In light of that, he said, the wire transfers of cash out of the company were not in the company’s best interest. He also said they were not in the best interest of stockholders and had not been approved by the board of directors.“I don’t think it was appropriate to be withdrawing those funds for personal use,” Zacherl said. Zacherl said he met with both Tim and John Rigas on a number of occasions telling them the transactions “were not appropriate and they should stop.” " That looks bad for the Rigases.

"Seeking to prove their allegation that the Rigases treated Adelphia as a ``personal piggy bank,'' prosecutors presented an unsigned letter dated October 1999 addressed to St. Bonaventure's president of university advancement that committed $1 million to the Rigas Family Theater."
Additionally from the Atlanta Journal-Constitution: "Two years earlier, former Adelphia financial chief Timothy Rigas authorized the company to make monthly payments of $17,682.54 for a 30-year mortgage on his condominium in Beaver Creek, Colo., Pekarski said.
Greenwood Village, Colo.-based Adelphia also covered bills for the personal credit cards of John Rigas and Timothy Rigas, she said."

My comment: the naming of Adelphia Court does seem to be an appropriate use of the funds. It was not for the Rigases. The theater however?!?! Also it appears that some of these expenses may have later been repaid to the firm.

Some of the other things that were reportedly paid for by Adelphia? According to the Olean Times Herald, slippers, golf socks, and Time Life CDs. However, there is some uncertainity as to whether the Rigases refunded at least some of these purchases.

"Lawyers for the government had painted the Rigas family as having abused the corporate jets, especially Timothy Rigas, who it said used the company Gulfstream to squire actress Peta Wilson to the Caribbean and for golf junkets to Hilton Head, South Carolina"

"HOLLYWOOD actress Peta Wilson told federal jurors yesterday that she took at least nine flights on Adelphia Communications planes, including trips to Jamaica and Los Angeles with former finance chief Timothy Rigas" Herald Sun

March 11--Don't they have Christmas trees in NYC? Suuposedly the Rigases used company planes to fly two different trees to NYC (estimated cost over $20,000). Also much has been made of the meetings in Cancun. I really am not sure what to make of that. At some point travel is ok, and if, as it appears< most of the time was devoted to work, then I so not see a problem. (at least not nearly as big of problem as other problems on teh balance sheet etc). Atlanta Journal-Constitution

In his opening remarks, an assistant United States attorney, Richard Owens, compared the men's role in Adelphia to a family-run Ponzi-like scheme in which they repeatedly misled investors by falsifying records and hid from public view tens of millions of dollars in loans to the family for which the cable company was liable.

"It's a case about lies and greed, about financial fraud," said Mr. Owens, who is chief of the securities fraud unit in the United States attorney's office in Manhattan."

Peter Fleming Jr., John Rigas's lead defense attorney, told the jury that Rigas, who founded the company in 1952, never sold a single share of Adelphia stock and always intended to pay back money he had borrowed. Fleming also said that, unlike recent corporate failures such as Enron Corp., Adelphia continues to operate, although it has been under bankruptcy protection since June 2002.

"This was a case where Adelphia, supposedly looted by these defendants, prospers with a bright future while John Rigas, in his 80th year, has lost all he built, including his wealth"

John Rigas, the 79-year-old family patriarch, and his sons Timothy and Michael each face a minimum of 15 to 20 years in prison if convicted. Also standing trial is Michael Mulcahey, former director of internal reporting for Adelphia.

The family has denied the charges, arguing the loans were legitimate and were taken out on the recommendation of their auditor and investment bankers.

FinanceProfessor.com