New York -- Former Adelphia Communications Corp. director Dennis Coyle testified Wednesday that the company’s board of directors approved $2.284 billion in co-borrowing agreements to entities controlled by the family of founder and former chairman John Rigas, but he did not know the money was used by the family to buy stock in Adelphia.
Coyle said during the federal fraud trial of four former Adelphia executives here that he thought the co-borrowing money would be used by the company to finance the acquisition of cable systems and for operating expenses, and not to purchase securities.
He recalled how Adelphia stock "plummeted" March 27, 2002 -- the day the MSO revealed during an earnings call that the Rigas family used money from the co-borrowing agreements to buy Adelphia stock.
Assistant U.S. Attorney Richard Owens asked Coyle several questions Wednesday about private sales of Adelphia stock to Rigas family members that the board approved, along with public offerings of Adelphia stock in 1998 and 1999.
Coyle said John Rigas expressed concern about how the public offerings of stock would dilute the Rigas family’s ownership and voting shares in the company, and that former chief financial officer Timothy Rigas would detail during board meetings how many shares of stock Rigas family members would need to buy to avoid diluting their stake in the MSO.
"All right, we’re going to sell this many shares. What is that going to do to our total ownership interest and our ownership of voting shares?" Coyle quoted Timothy Rigas as asking during board meetings. "Tim would run through calculations on what needed to be done," Coyle added.
Owens also asked Coyle to discuss the compensation packages for John Rigas and his sons, Timothy and former executive vice president of operations Michael. Coyle noted that in addition to salaries and bonuses, the Rigases were each entitled to a single company car and "reasonable" allotments for country- and social-club memberships.
Coyle said the board was never asked to approve additional automobiles and country-club memberships for the Rigases. Prosecutors have alleged in the past that Timothy Rigas used Adelphia funds to purchase a $700,000 country-club membership in Hilton Head, S.C.
U.S. District Judge Leonard Sand warned jurors at the end of Wednesday’s testimony to avoid media coverage of the trial, including coverage of other high-profile cases, alluding to the Martha Stewart trial, which was being held in a nearby courtroom.
Prosecutors told Sand they expect to complete their direct examination of Coyle Thursday. The court session Thursday is scheduled to end at 2:30 p.m. EST, and the trial will resume Monday morning.