News

Rigas, Son Guilty

7/11/2004 8:00 PM Eastern

It took John Rigas 50 years to build up Adelphia Communications Corp. into one of the largest MSOs in the country. It took federal prosecutors a little more than four months to take him down.

After enduring a four-month trial and nearly eight days of jury deliberation, Rigas and his son, former chief financial officer Timothy Rigas, were found guilty of 18 counts of securities fraud, bank fraud and conspiracy. They face as many as 30 years in prison for the bank fraud convictions.

The Verdicts Are In...
Charge John Rigas Tim Rigas Mike Rigas Mike Mulcahey
Conspiracy (One count) Guilty Guilty Not Guilty Not Guilty
Securities Fraud (15 counts) Guilty Guilty Mistrial Not Guilty
Wire Fraud (Five counts) Not Guilty Not Guilty Not Guilty Not Guilty
Bank Fraud (Two counts) Guilty Guilty Mistrial Not Guilty

Jurors were undecided on former Adelphia executive vice president of operations Michael Rigas's fate. The jury found Michael Rigas not guilty of five counts of wire fraud and one count of conspiracy. They failed to reach a unanimous verdict on Michael Rigas's guilt or innocence regarding 15 counts of securities fraud and two counts of bank fraud.

Michael Mulcahey, the former Adelphia assistant treasurer, was acquitted on all counts.

Jurors returned last Friday to receive instructions from U.S. District Court Judge Leonard Sand regarding the remaining verdicts for Michael Rigas.

When they remained deadlocked Friday at about 3 p.m., Sand declared a mistrial on those 17 charges against Michael Rigas.

Jurors appeared to be extremely attentive during the course of the long and complicated trial — several jurors were constantly taking notes during testimony — and had asked for more than 100 exhibits and trial transcript pages during their deliberations, which began on June 28.

But at around 3 p.m. last Thursday, jurors sent a note to the court indicating they had hit a snag: “We are having difficulty coming to a decision on certain counts. How do we communicate our issues without revealing where we are in the process?”

Sand replied that while a full verdict was preferred, he would accept a partial verdict. He also gave them the option of not rendering a partial verdict and advising the court as to which issues and counts were troubling them.

The jurors replied quickly: “We are prepared to give our decision on the unanimous counts now.”

As the jury filed in at around 3:50 p.m., John Rigas, who had been a virtual chatterbox with reporters and attendees during breaks in the four-month trial, sat motionless. As jury forewoman Aretha Mack ticked off a litany of guilty verdicts, Tim Rigas, 48, who had presented a stoic front during much of the trial, seemed slightly stunned.

STUNNED REACTIONS

It took the 79-year-old John Rigas more than 20 minutes to rise from his seat, eventually leaving hand in hand with his visibly shaken wife, Doris, and trailed by his daughter Ellen and tearful personal assistant Shirlee Leete, a longtime family friend.

The partial verdict marked an end to a nearly two-year odyssey for the Rigases, starting with their indictment on conspiracy, securities fraud, wire fraud and bank fraud charges in September 2002. The Rigases were accused of using hundreds of millions of dollars of Adelphia funds for their own personal use and for taking out $2.3 billion in loans — for which the MSO was liable — to buy Adelphia stock.

Through the course of the trial, which started on March 1, prosecutors had painted a picture of runaway greed on behalf of the Rigases. Government lawyers claimed family members used Adelphia as their personal ATM and piggy bank.

Mulcahey, who as assistant treasurer signed off on many of the transactions the government claims were illegal, was nicknamed Mike “OK to Pay” Mulcahey, for his almost cavalier approval of the transactions.

Prosecutors harped on evidence that showed the Rigases used Adelphia funds to pay for Christmas trees for Ellen Rigas's New York apartment and for luxury condominiums and golf club memberships. John Rigas was accused of withdrawing as much as $1 million a month from Adelphia accounts for personal use, and once forced his personal accountant to take a $20,000 loan from one of Adelphia's programming subsidiaries, Empire Sports Network, and forward it to him because he needed the cash.

Other instances were more petty — Tim Rigas charging 100 pairs of slippers, worth about $268, to the Adelphia account and John Rigas charging Adelphia for his memberships in various record clubs.

Tim Rigas was also accused of using the corporate jet to fly his female golf pro on vacations and to pick up former La Femme Nikita TV star Peta Wilson for dinner dates.

But for the most part, jurors had to sit through mind-numbing testimony regarding accounting practices, bank loan covenants and securities deals.

The government's case stumbled early on after its second witness — former Adelphia board member Dennis Coyle — had admitted he was wrong when he said that certain leverage ratios in co-borrowing agreements were out of whack.

Coyle's discredited testimony was a blow to the government's case, but it quickly got back on track. Federal prosecutors also appeared to hit a home run with the testimony of former Adelphia vice president of finance James Brown.

Brown was originally indicted with the Rigases and Mulcahey in September 2002, but pleaded guilty to three counts of fraud and agreed to testify for the government in return for a more lenient sentence.

While Brown admitted right from the start that he was a skilled liar, his 14 days of testimony placed the Rigases at the heart of the fraud. Among Brown's more damaging statements was that Adelphia had kept two sets of books — one with real numbers and one with fabricated financial results that were shown to the public — and that he and Tim Rigas met regularly to discuss how to cook Adelphia's books.

REPAYMENT STRATEGY

Defense attorneys stuck to a strategy that the Rigases had intended to repay the loans, and had the wherewithal to do so before Adelphia was plunged into Chapter 11 bankruptcy in June 2002.

John Rigas took the tack that he had relied on Adelphia's attorneys and auditors to make sure things were on the up and up. His lawyer also claimed that John Rigas, who has bladder cancer, had relied on others to oversee the business for him.

Michael Rigas's attorney, Andrew Levander, had taken an unusual path during opening statements at the trial in March: Mike Rigas wasn't smart enough to defraud investors.

Depicting Michael Rigas as a hard-working operations manager, he nonetheless drove home the point that Rigas was not the sharpest pencil in the pack.

“He was not the quickest wit in his class or the best student, but he worked hard,” Levander said in his opening statement.

While that may have appeared to be a little bit of a stretch at first — Mike Rigas is a graduate of Harvard Law School — jurors seemed to buy it, at least for the time being. Throughout the trial, Levander presented evidence showing that Michael Rigas was regularly ridiculed by employees — one e-mail between two members of Adelphia's finance department called him clueless.

And he hammered home the point that Michael Rigas drove a beat-up, 10-year-old Toyota (his father had 22 cars) and showed jurors piles of canceled checks showing that Rigas had reimbursed Adelphia for personal expenses as large as a trip to Paris and as small as $3.45 for postage.

Michael Rigas, 50, declined comment. His lawyer Kevin O'Brien said he expected no re-trial.

John Rigas and his lawyer Peter Fleming declined comment Thursday.

[Friday morning, Dow Jones News Service reported Rigas and Fleming spoke briefly outside the courtroom, with Rigas saying “I never thought would end up the way it did” and that he was feeling “pretty shaky.” Fleming said he's considering an appeal, Dow Jones said.]

APPEAL HINT

Timothy Rigas declined to comment Thursday, but his lawyer, Paul Grand, hinted at an appeal.

“We hope we get a better result in the other court,” Grand said.

Mark Mahoney, the attorney for 46-year-old Michael Mulcahey, was in obviously good spirits, but expressed concern for the Rigases.

“This is wonderful for my client, but it is sort of bittersweet because of the convictions of the others,” Mahoney said. “For him [Mulcahey], I couldn't be happier.”

Mahoney said during an interview with reporters that the facts that Mulcahey testified in his own defense and had little motive to violate the law might have swayed the jury his way.

“He testified and the jury got a chance to size him up,” Mahoney said.

Jury members declined to comment to reporters afterward.

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