A group of the largest shareholders of Adelphia Communications Corp. has
filed a lawsuit in U.S. Bankruptcy Court for the Southern District of New York
to force a shareholders' meeting to replace the troubled MSO's existing board of
News of the lawsuit came at the same time that sources said negotiations to
hire former AT&T Broadband executives William Schleyer and Ron Cooper as
Adelphia's next CEO and chief operating officer, respectively, have been
According to a source close to the negotiations, Adelphia's board of
directors is busy trying to reconfigure a controversial compensation package for
both men, a draft of which was first outlined in Wednesday's New York
That package was loaded with incentives that could pay Schleyer and Cooper a
total of up to $65 million over the next two years.
"The much-publicized draft agreement is not going to happen," a source close
to the negotiations said. "Changes are being made. It's a little fluid right
now, but I don't expect this to be a several-hours process. This is more like a
Adelphia had been expected to announce the appointments of Schleyer and
Cooper this week.
The delay should come as good news to Adelphia's official committee of
equity-security holders, which filed suit Thursday to oust Adelphia's board.
The committee includes the five largest holders of Adelphia stock. Leading
the group is Citizens Communications Corp. chairman Leonard Tow -- himself
Adelphia's largest individual shareholder -- and Blue River Capital LLC managing
member Van Greenfield.
Tow has been a vocal opponent of Adelphia's board of directors. He even
managed to win a seat on the board in May, but he resigned after two weeks.
Tow amassed about 12 percent of Adelphia's outstanding after selling his
Century Communications Corp. cable holdings to Adelphia in 1999 for about $5.2
billion in stock and assumed debt.
Tow's 27 million Adelphia shares -- worth as much as $838 million Jan. 9,
2002, when the stock was trading at $31.05 per share -- are now worth about $3.2
million based on Adelphia's share price of around 12 cents each.
"Shareholders are entitled to exercise their corporate-governance rights and
elect a board of directors of their choice. This suit is solely to allow the
proper exercising of these rights," Tow and Greenfield said in a joint
Tow has been quiet for months. But according to sources, he became incensed
when Adelphia's board began negotiations to hire Schleyer and Cooper.
Those sources said Tow was especially angry when he learned of the lucrative
compensation package Adelphia's board was planning to give both men. Including
salary, bonus and incentives, Schleyer and Cooper could reap as much as $65
million over two years.
In its lawsuit, the shareholders' committee called the Schleyer package
"unconscionable and severely prejudicial to the interest of [Adelphia] and its
The committee also chastised the board for limiting its CEO search to
Schleyer, claiming that Adelphia "blithely conducted the search process in a way
that excluded from practical consideration a large swath of highly qualified
Adelphia declined comment.
Adelphia's current board of directors is led by chairman Erland Kailbourne.
Other directors are managing director of Mannesmann Dematic Systems Peter
Metros, Caithness Corp. president Leslie Gelber, FPL Group Inc. general counsel
Dennis Coyle, former Renaissance Cable vice chairman Rod Cornelius and Yale Law
School Dean Anthony Kronman.
The shareholders' committee is also asking the court to prevent a special
committee of the company's current board from influencing the outcome of the
election by voting the shares of the Rigas family.
The Rigases -- who had controlled about 20 percent of outstanding shares and
held 60 percent of the voting power of Adelphia -- agreed to put those shares in
a trust after they resigned in May. Adelphia created a special committee of
directors that would vote the Rigas shares, consisting of Kailbourne, Coyle and
According to the suit, the three have been serving at the pleasure of the