Adelphia fraud trial under way
Copyright 2004 The Atlanta Journal-Constitution
The Atlanta Journal-Constitution
March 2, 2004 Tuesday Home Edition
A conspiracy of lies and greed drove cable company Adelphia into bankruptcy as its founder John Rigas and his two sons looted the corporate coffers to pay for everything from massages and bedroom slippers to a $13 million golf course, a prosecutor said Monday.
They "used Adelphia as their private piggy bank," Assistant U.S. Attorney Richard Owens told a jury in opening arguments. He said the Rigases and a fourth top executive deceived the public and investors, inflating the company's financial image with crooked stock deals and "cooked books."
The trial against the former leaders of Adelphia Communications Corp., the nation's fifth-largest cable company, is the latest in a parade of high-profile government cases against alleged corporate wrongdoing playing out in Manhattan courtrooms.
Even as Owens began his case on the 26th floor of the federal courthouse, far below and across the street prosecutors wrapped up their case against millionaire businesswoman Martha Stewart.
The charges in the Adelphia case include securities fraud, wire fraud, bank fraud and conspiracy. John Rigas, sons Timothy and Michael, and assistant company treasurer Michael Mulcahey have pleaded innocent.
Defense lawyers portrayed the family as full of love for the company they built and a small Pennsylvania town that benefited from their success, and said any financial irregularities were the fault of company crooks turned government witnesses.
"This case is tragic," said Peter Fleming, an attorney for John Rigas. He said Rigas, 79, "has lost all that he built, including his wealth."
"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 not a case where a company — like an Enron — collapsed and disappeared. Adelphia never stopped operating."
Adelphia, now based in Greenwood Village, Colo., has more than 5 million cable subscribers in more than 30 states and recently proposed a bankruptcy reorganization after securing $8.8 billion in financing. John Rigas founded Adelphia with $300 in 1952.
The trial, which is expected to last three months, is in New York because many allegedly false financial reports were filed there.
Rigas, a slight white-haired figure, listened with hands clasped on a desk before him as Owens told the packed courtroom that the family stole more than $100 million from 1999 until 2002, when "the vast fraud the Rigases created came tumbling down."
Prosecutors say the defendants boosted Adelphia's profits by concealing more than $2 billion in debt from investors. The Rigas family also sought to reassure investors by making it appear it was investing $1.5 billion of its own money when it was not, Owens said. "Most of the money went out the back door where no one could see," he said.
Owens walked among the two defense tables crowded with attorneys, jabbing a finger at the Rigas men and Mulcahey as he identified them for the jury. Speaking for nearly two hours, Owens detailed how the defendants allegedly misused corporate funds on items big and small.
John Rigas, Owens said, used Adelphia as a source of occasional "pocket change" in installments of "$100,000 here, $100,000 there."
"No expense was too large or too small for John Rigas to shift from his pocketbook to the pocketbooks of Adelphia shareholders," Owens said.
John Rigas also once ordered that a company jet be used to fly a Christmas tree from Pennsylvania to New York for his daughter, Owens said. The daughter thought the tree was the wrong size, prompting a second tree to be flown out at a total cost of up to $20,000.
Owens described Timothy Rigas, formerly Adelphia's chief financial officer, as so enamored with golf that he had the company pay $700,000 for a club membership and $13 million to build a course.
Michael Rigas also stole hundreds of thousands of dollars while he was executive vice president, Owens charged. He said Mulcahey helped hide much of the theft.
Timothy Rigas also once became fond of a pair of hotel slippers that could only be ordered in lots of 100, Owens said. "So Adelphia bought Tim Rigas 100 pairs of bedroom slippers."
Paul Grand, Timothy Rigas' lawyer, said the $700,000 golf club membership was bought for the company because "a great deal of business gets done at golf courses across America."
He said the membership could be sold back to the golf club at any time for the same amount of money or more. The golf course, he said, was a strategic investment to entice more people to move to the company's headquarters in tiny Coudersport, Pa.
The Associated Press contributed to this article.