Adelphia's Rigas, Prison-Bound at 82, `Made Mistakes' (Update1)
By David Voreacos
John Rigas, founder of Adelphia Communications Corp.
Jan. 5 (Bloomberg) -- John Rigas, the founder of bankrupt Adelphia Communications Corp., was sipping coffee this week at the Maple Tree restaurant in Coudersport, Pennsylvania, when the owner's mother approached to wish him Happy New Year.
``It's so good to see you,'' said Alex Smith. She skirted the main issue preoccupying Rigas, 82. While media moguls his age rest on their laurels, Rigas is facing a 15-year prison sentence. He and his son Timothy await a ruling on the appeal of their 2004 convictions for looting the cable television company and lying about its finances.
``You can't sleep well when so many bad things happened to you and your family,'' said Rigas in one of three interviews with Bloomberg News in the last two months. ``My brain isn't working as well as it should. Fear creeps in. Stress creeps in. You imagine a whole lot of things. I can't imagine this happened to us. I made mistakes, but not illegal mistakes.''
Rigas is the oldest chief executive officer to be convicted in the corporate scandals that began with the collapse of Enron Corp. in 2001. His crimes were committed family-style. Timothy faces 20 years in prison. He was convicted with his father of conspiracy, securities fraud, and bank fraud. Jurors in New York deadlocked on another son, Michael, who avoided prison by pleading guilty to a lesser charge.
For a decade, prosecutors said, the Rigases used Adelphia as a personal piggybank to buy company stock and debt, steal cash advances, pay for residences around the country, and fund Timothy Rigas's passion for golf.
If John Rigas goes to prison, he will be among the oldest of 163,491 federal inmates. Former Enron CEO Jeffrey Skilling, 53, began his 24-year prison term at a prison in Waseca, Minnesota, on Dec. 13. Bernard Ebbers, 65, who ran WorldCom Inc., started his 25-year term on Sept. 26 in Oakdale, Louisiana, not far from his Mississippi home. Rigas said he hasn't taken any steps to ready himself for the ordeal.
``There's no way to prepare in my mind for anything like that, especially when you know you're innocent,'' said Rigas, who is free on bail. He didn't testify at his trial and maintains he was a victim of prosecutors bent on showing they were tough on corporate crime after the Enron debacle.
``Here were these Joe Palookas from a small town, nobody knew them,'' Rigas said. ``Make an example of them. They were after white-collar crime. I think we became victims of that.
``I've been painted this horrible man clear across the country,'' Rigas said. ``Why would anybody have any sympathy for John Rigas or the family with what they've read and heard?''
One of the prosecutors, Christopher Clark, said the Justice Department never pressured him to show it was tough on corporate crime or the Rigases in particular.
``The actions that were taken by the prosecutors were based on the outrageousness of the Rigas criminal conduct and the overwhelming evidence of their guilt,'' said Clark, now in private practice at LeBoeuf Lamb Greene & MacRae in New York.
The Rigas legal travails aren't over. John and Timothy Rigas are scheduled for a federal trial on tax evasion and conspiracy charges, starting May 3 in Williamsport, Pennsylvania. The Rigases also are defending civil lawsuits filed by Adelphia, its shareholders, and its former auditors, Deloitte & Touche.
The rise and fall of John Rigas is rooted in Coudersport, a town of 2,600 in the Allegheny Mountains. He bought the movie theater there in 1951 and started a cable television business a year later, persuaded by a movie film salesman.
As operations grew, he formed a labyrinth of companies, some of which remained closely held by the family, while others became Adelphia when it went public in 1986. His three sons spent two decades in the business. By 1999, the family fortune reached $1.5 billion. Adelphia had become the nation's fifth-biggest cable company, with 5.5 million subscribers in 2002.
The Rigases retained voting control over Adelphia stock and family members held a majority of board seats. Adelphia collected management fees for running the Rigas companies and shared a cash management system with them.
Adelphia began tumbling down on March 27, 2002, when it disclosed that the Rigas family owed $2.3 billion in off-balance sheet debt on bank loans taken jointly with the company. Within weeks of the March disclosure, the Rigases resigned, Adelphia filed for bankruptcy, and John was arrested with two of his three sons, Timothy, 50, and Michael, 53.
Prosecutors said the cash management system created a source of illicit funds for John Rigas. It was one of many ways in which he blurred the lines between Adelphia and more than a dozen private companies based in Georgia, Florida, Pennsylvania, and California.
At his five-month trial in New York, prosecutors depicted Rigas as a greedy manipulator desperate for cash. They said the family looted Adelphia to buy $1.6 billion in Adelphia securities, and that he stole $51 million in cash advances. Timothy Rigas limited those advances to $1 million a month beyond his father's annual salary of about $1 million, one witness said.
The Rigases, the evidence showed, spent $26.5 million in company money to buy timberland near their home and $13 million to build an Adelphia golf course on land owned by the company and the Rigases near Coudersport. Adelphia paid for antiques, family residences, a Rigas personal trainer, and a film documentary by John Rigas's daughter, witnesses said.
Jurors convicted John and Timothy Rigas on July 8, 2004, deadlocking a day later on charges against Michael. At the sentencing in June 2005, U.S. District Judge Leonard Sand said John Rigas ``long ago set Adelphia on a track of lying, of cheating, of defrauding.''
Rigas said the family fortune is now largely gone, wiped out in the bankruptcy or forfeited to a restitution fund for investors. Rigas helps his three sons -- Timothy, Michael, and James -- run Zito Media, a cable company with 7,000 subscribers.
He still owns Coudersport Theater, a 300-seat cinema showing ``Casino Royale'' this week. Rigas also owns Wending Creek, a commercial farm that sells Christmas trees, maple syrup, honey, and hay.
``Here we are 54 years later, and I've got the Coudersport Theater and the Coudersport cable company,'' said Rigas with a rueful smile. ``That's real progress.'' Timothy Rigas's golf game has suffered, too, his father said. ``We've all given it up,'' he said. ``We're not in the mood for golf or anything.''
John Rigas, who still wears a black Greek fisherman's cap emblazoned with the Adelphia logo, remains a fixture in Coudersport. He attends concerts and dinners. Last week, he went to three funerals.
``He's always been a staunch believer in Coudersport and the qualities of a small town,'' said David Hauber, 65, a local jewelry store owner who worked at the Rigas theater 50 years ago. ``I still consider him a friend, and there are a number of people in town who do.''
Jimmie Bruzzi, who owns a dry-cleaning business in town, considers Rigas a ``wonderful man'' who did ``a lot of good for a lot of people.
``The ones that are blaming the Rigases feel it was greed or self-indulgence,'' said Bruzzi, 57. ``That's what I get from customers and former employees. Then others still feel there was nothing done wrong to warrant all that has transpired since.''
Rigas lives in a brown brick ranch house outside of town with Doris, 79, his wife of 54 years. They have four bedrooms, four fireplaces, an outdoor pool, a basketball court, and a pond. Baker Creek runs through the property, which abuts forest and farmland. Two sons, Michael and Timothy, still live with them.
``They weren't ashamed of saying they were living in the same house with their parents,'' Rigas said. ``Nor did they feel they had to have that kind of independence.''
Timothy helps his girlfriend raise their infant daughter, Hallie, who is John's sixth grandchild.
``I must say that it's helped him and the whole family,'' John Rigas said. ``She's healthy, happy, laughs a lot, smiles a lot. So it's encouraging. Maybe she'll bring us some luck.''
The third son, James, lives nearby with his wife and four children. Their daughter, Ellen, lives in New York City.
John Rigas had heart surgery in 1999 and visits doctors for bladder cancer that has been under control for several years. Judge Sand said he can leave prison after serving at least two years if doctors say he has less than three months to live.
Rigas was powerless to prevent the dismantling of Adelphia and the prosperity it brought to rural Potter County, Pennsylvania, about 280 miles west of Manhattan. Within months of the June 2002 bankruptcy, new managers moved the headquarters to Greenwood Village, Colorado.
In July, Comcast Corp. and Time Warner Inc. bought the cable properties for $17.6 billion. Time Warner Cable announced Dec. 6 that it intends to fire 500 call center employees in Coudersport. On Jan. 3, a U.S. bankruptcy judge approved the company's plan to emerge from bankruptcy.
``Everything that has happened with Adelphia since the moment the implosion began has been catastrophic for our community,'' said David Acker, CEO of Charles Cole Memorial Hospital in Coudersport, who testified as a defense witness.
Rigas said the company's advisers abandoned him before and after the bankruptcy. He said he never intended to defraud the company and the cash advances were loans he planned to repay. He said he relied on auditors at Deloitte & Touche and lawyers at Buchanan Ingersoll, a Pittsburgh firm known since July 2006 as Buchanan Ingersoll & Rooney.
``We were a victim because Buchanan Ingersoll stepped away,'' he said. ``We were a victim because a couple, three key senior people turned on us. We were a victim because the government needed an example that they were tough on white-collar crime.''
James Brown, a former chief financial officer at Adelphia who pleaded guilty and testified as a prosecution witness, lied to jurors to lessen his possible prison term, Rigas said. ``Any suggestion that Mr. Brown did not provide truthful testimony has no basis,'' said Brown's attorney, Jonathan Bach of Cooley Godward Kronish in New York.
The Rigases, who spent $40 million on their legal defense, called no witnesses from Deloitte or Buchanan Ingersoll at the trial. Deloitte later agreed to pay $50 million to settle a civil lawsuit by the U.S. Securities and Exchange Commission and $210 million to settle with Adelphia investors.
Deloitte, Adelphia and the Rigases face a civil trial this year in state court in Philadelphia over who bears responsibility for the fraud. Investors also are suing Buchanan.
The tragedy in the case, Sand said at the sentencing, was that the Rigas fraud could have been prevented if the accountants and lawyers had blown the whistle.
``Regrettably for everyone, this was not stopped over 10 years ago, but continued and got more brazen,'' he said. ``There are no heroes here. There was no one who came forward and said, `This is wrong, I won't be a part of it.'''
Buchanan provided ``sound, professional and accurate'' advice to the Rigases, who misled the firm, said spokeswoman Lori Lecker. The Rigases ``had every opportunity'' at their trial to show they got incorrect advice from advisers, and they failed to do so, she said.
``The reality is that they were found guilty of their own misconduct,'' Lecker said. Deloitte spokeswoman Deborah Harrington declined to comment.
In the argument before the U.S. 2nd Circuit Court of Appeals, Rigas's lawyers told a three-judge panel on June 14 that the conviction must be overturned because prosecutors failed to call an accounting expert to explain the co-borrowing debt. The National Association of Criminal Defense Lawyers agreed and filed its support for a new trial.
Hope for Appeal
Prosecutors said jurors did not need an expert to understand that the Rigases falsely said they used their own money to buy $1.6 billion of the company's stock and debt. Jurors also did not need an expert to understand that the family failed to disclose that they owed $2.3 billion on the co-borrowing loans, prosecutors said.
John Rigas said he does not fully grasp the co-borrowing loans. Timothy Rigas, who sat in on part of an interview with his father, defended the loans. Buchanan lawyers drafted them ``with full knowledge that money was going to be used by the Rigases for a variety of reasons,'' Timothy said.
John Rigas said he is hoping for the best on the appeal.
``I've been disappointed in the past,'' he said. ``I never thought we would get indicted. I never thought we would be convicted.''
He said he is grateful that two of his sons will still be home to help his wife if he loses.
``If it does happen, I just hope I'm strong enough to accept it and move on and not make it hard on the family,'' he said. ``Thank God that Michael and James will still be here.''
He said he hopes that ``ultimately justice will prevail and we'll get a favorable ruling, but maybe that's wishful thinking. Maybe I'm not facing reality.''
To contact the reporter on this story: David Voreacos in U.S. District Court in New York at and email@example.com , or
Last Updated: January 5, 2007 09:57 EST