News

Defense: Rigases Were 'Clueless'

3/07/2004 7:00 PM Eastern

During every Adelphia Communications Corp. board meeting former director Dennis Coyle attended from 1998 to 2002, the term "fiduciary duty" never came up, Coyle testified last week at the trial of Adelphia founder John Rigas, his sons Michael and Timothy and former assistant treasurer Michael Mulcahey.

The line of questioning Assistant U.S. Attorney Richard Owens pursued during three days of questioning Coyle last week played to the heart of the government's allegations that the Rigas family ignored responsibilities to shareholders and treated company funds as if they were their own.

Defense lawyers, in contrast, asserted that the Rigases did nothing wrong — everything was approved by Adelphia's lawyers and board of directors, they claim.

They've also characterized their clients as unaware of much of the financial dealings of the corporation — and a little slow-witted, to boot.

According to defense attorneys, the Rigases were often overwhelmed by their jobs as Adelphia grew from 340,000 customers in 1986 to nearly 6 million in 2001.

Andrew Levander, Michael Rigas's attorney, said in his opening statement that his client was often ridiculed by other employees who called him "clueless, a failure and harmless."

During his questioning of Coyle, Owens elicited testimony that pinpointed former CFO Tim Rigas as playing a key role in proposing the co-borrowing agreements Adelphia obtained with subsidiaries controlled by the Rigas family, as well as in private stock sales that Coyle said the Rigases pursued in order to prevent dilution of their holdings.

Coyle testified Tim Rigas told the Adelphia board the co-borrowing agreements would make it easier for Adelphia and Rigas-controlled subsidiaries to borrow money from the banks.

"One benefit was it eliminated the situation where Adelphia and the [Rigas] managed entities are competing for lines of credit," Coyle said Tim Rigas told the board.

John Rigas also worried during board meetings that additional public stock offerings would dilute the company's holdings, and Tim Rigas would detail how the family could solve the problem.

"All right, we're going to sell this many shares. What is that going to do to our total ownership interest and voting shares?" Coyle quoted John Rigas as asking during meetings. "Tim would run through calculations on what needed to be done."

Coyle testified that the board approved $2.284 billion in co-borrowing agreements to entities controlled by the Rigas family, but didn't know the money was used by the family to buy stock in Adelphia.

The board of directors never gave approval for the Rigas family to use company funds to build a golf course or buy timber rights, Coyle said.

"Definitely not. That's not their business. Their business is the construction and operation of cable systems," Coyle said.

Tim Rigas's lawyer, Paul Grand, said during opening arguments that the former CFO was busy taking up the slack for his father, who had backed away from running day-to-day operations because of his health.

Tim Rigas, Grand said, had little time for finance matters, which were increasingly becoming the domain of the government's star witness, former vice president of finance James Brown.

"By 2000, in all but name, Tim Rigas was effectively the acting CEO [of Adelphia]," Grand said. "He had 17 units reporting to him. With all of those departments came more and more people vying for his attention and his time."

"With all of his responsibilities, what he could spare for any one of these matters was short, quick, subject to distraction and perhaps inadequate," Grand said.

PROSECUTION CASE

Owens told the jury that John Rigas stole $40 million from the company between 1998 and 2002. He said Rigas routinely took money from Adelphia for personal expenses, including such minor expenditures as membership in the Columbia House record club.

Tim Rigas was no different, Owens said, buying condos in Colorado with company money and using the Adelphia jet to go on golf trips and to impress an actress — he allegedly dispatched the Gulfstream III to the Caribbean pick up former La Femme Nikita
star Peta Wilson.

Wilson will soon be called as a witness for the prosecution, a source said Friday.

Other witnesses expected to be called to testify soon include George Cretekos, the flight administrator who oversaw the Adelphia-owned jets; Adelphia accounts payable staffer Linda Pekarski; Charlie Raptis, vice president of facilities and support services at Adelphia; and Lisa Scally, a golf instructor whom Tim Rigas allegedly flew on a corporate jet to Hilton Head, S.C.

Owens claimed the Rigases' greed knew no bounds. After staying at a hotel, Tim Rigas instructed his assistant to buy a pair of bedroom slippers he liked. When the assistant said that they were only sold in 100-pair lots, he told her to buy them.

Total cost: about $268.

John Rigas also routinely charged the company for massages, and on several occasions instructed personal accountant Chris Thurner to submit phony bills to Adelphia for company use of his condo in Cancun, Mexico. Total proceeds: about $2,000 to $3,000 for each bill, Owens said.

And when John Rigas's daughter Ellen Rigas Venetis (who has not been charged with any crime) wanted a Christmas tree from Coudersport, Pa. — Adelphia's former headquarters and the Rigas family's hometown — delivered to her Manhattan apartment, it was flown in the company plane.

When Ellen said the tree was too small, the plane was dispatched to Coudersport for a larger one. Total cost: $10,000 to $20,000.

"That Christmas tree wasn't the only Christmas tree Adelphia bought for the Rigases," Owens said.

SMALL-TOWN ASPECTS

While the government focused on greed, lawyers for the defense focused on the family's small-town aspects.

John Rigas was depicted by lawyer Peter Fleming as the hardworking son of Greek immigrants, who built a company from scratch and 58 years later is flat broke.

"This is not a case where John Rigas or any of the Rigases walked off with millions of dollars and left Adelphia and its employees high and dry," Fleming said. "This is a case where John Rigas and the other Rigases walked off with nothing."

Fleming also pointed out that Adelphia is still operating and is valued at more than $20 billion.

"This is a case where Adelphia, supposedly looted by these defendants, prospers with a bright future when John Rigas, in his 80th year, has lost all that he has built including his wealth," Fleming said.

"This case is tragic."

The trial is expected to last at least three months.

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