Adelphia Communications was believed to be the only cable and digital broadcast company in the U.S. refusing to offer adult entertainment – as long as John Rigas and his sons owned and ran the company, even if it cost them profit. The company lost a lot more under the Rigas ownership, though, as was learned in a three-month trial that has now ended with Rigas and one of his two sons convicted of conspiracy for looting Adelphia, while hiding a reported $2.3 billion in debt, and duping investors.
The elder Rigas was forced to step down as Adelphia's chief executive in 2002, when accusations arose that he and his sons borrowed a reported $2.3 billion from the company in off-balance-sheet moves and spent company monies lavishly, allegedly in one case for a $12 million golf course. Adelphia also reportedly canceled Rigas' $4.2 million severance package when the accusations arose.
Rigas and his son, Timothy, were convicted of 15 securities fraud charges, bank fraud, conspiracy, and other charges, while a second son, Michael, was acquitted of conspiracy even as the jury could not decide on remaining charges against him, according to a published report. John and Timothy Rigas face 30 years in prison each on the most serious charge of bank fraud. The Rigases were acquitted of wire fraud, however, and former Adelphia treasurer Michael Mulcahey was acquitted of all charges he faced in the case.
The jury was said to be split on several charges in the case, and Judge Leonard Sand had told them a partial verdict was acceptable to him, after they took eight days on decisions following a trial that lasted three months. Sand is expected to instruct the jury on the remaining undecided charges, however, ordering them home for the day with orders to not pay attention to media coverage of the partial verdicts.
Prosecutors told the court the Rigases used their company as their own private automated teller machine to finance $50 million in cash advances, buy $1.6 billion in securities, and repay stock margin loans of $252 million. The defense argued that the Rigases were "aggressive" but not illegal in their accounting practices, and that the elder Rigas "was investing in his company's future" when he ran up the company-backed debt.
While the Rigases controlled Adelphia, which the John Rigas founded in 1950, the company had a strict policy against allowing porn to be carried on its systems and stations. Early in 2003, however, Adelphia's change in policy under new ownership provoked the Waverly City Council in Ohio to urge constituents to protest the company's plan to broadcast pay-per-view adult programming to local Adelphia subscribers.
In 2000, when the Omni Hotel chain took porn out of its rooms, Adelphia executive Paul Heimel told a newspaper the chain's "small town values," which Adelphia shared, prompted that move. "They don't believe in chasing the almighty buck at the sacrifice of your personal values," Heimel said approvingly, adding that when Adelphia took over from a previous cable operator and pulled the porn, they got and withstood angry complaints from customers. "We have taken a hit," he said then – two years before the Rigases were forced out over causing a far bigger hit than losing porn subscribers ever could have cost them.
Adelphia filed for Chapter 11 bankruptcy protection in 2002 so they could arrange for a $1.5 billion financing package. After the Rigases were forced out, William Schleyer was named chief executive and Ronald Cooper chief operating officer, and a new, independent board of directors was in place by mid-2003. But in April 2004, Adelphia said it was looking into the possible sale of the company as part of the Chapter 11 process.
Industry analysts at the time said that move could impact the U.S. cable industry dramatically. "It would redistribute ownership of almost 10 million homes passed by Adelphia's cable networks, more than 5 million basic cable subscribers, and approximately 1 million high-speed Internet customers, to one or more potential buyers," said Gartner Research. "Adelphia's board and management are attempting to emerge from bankruptcy intact," Gartnet continued, but also warned there could be a bidding war for the company's "considerable assets."
