Adelphia holds out on Rigas' severance
Copyright 2002 Gannett Company, Inc.
NEW YORK — Lawyers for Adelphia Communications Corp. founder John Rigas say the No. 6 cable company has reneged on a severance agreement it made in May — and the one-time CEO is retaliating by refusing to place his stock into a voting trust.
"It won't happen," says Steve Harmelin of Dilworth Paxon. They consider the deal "null and void," says a partner at the firm, Larry McMichael.
"It's disturbing when anyone, including a corporate board, would break a contract presumably signed in good faith," says Peter Fleming of Curtis Mallet-Prevost Colt & Mosle, who also represents Rigas.
Adelphia declined to comment.
But one person briefed on the situation says the company considered the severance agreement obsolete early in the summer after it uncovered new information about some of Rigas' business deals.
That contributed to the July 24 arrests of Rigas, 77, and sons Timothy, 46, and Michael 48, on multiple charges of conspiracy to commit fraud, as well as to a civil suit against them by Adelphia and a temporary restraining order preventing Rigas from selling real estate in which the company also has an interest.
The company filed for bankruptcy protection in June, months after it disclosed that Rigas and his family had secretly used Adelphia assets as collateral for more than $3 billion in loans to a private, family-run partnership.
In May, Rigas resigned from the company, transferred about $1 billion in assets to Adelphia, and agreed to put his shares into a voting trust. The Rigas family holds shares with 60 percent of the company's votes.
In return, the company was to pay him $1.4 million a year for three years, cover his health insurance, and provide additional benefits, including use of the company plane and secretarial support. The agreement relieved Adelphia of these obligations if Rigas was convicted of a felony.
In other Adelphia news, the company is said to be closing in on a deal to hire board member Rod Cornelius as CEO, replacing acting CEO Erland Kailbourne.
Cornelius rose through the ranks at Cablevision Industries before it was sold to Time Warner in 1996. Then he helped to form Renaissance Communications, which was sold to Charter Communications. He's now a cable investor.