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Low View of Adelphia's High Life

Courts: The Rigas family routinely raided the firm's accounts, federal documents allege.

July 26, 2002|SALLIE HOFMEISTER | TIMES STAFF WRITER

Early last year cable mogul John Rigas allegedly was taking so much money from Adelphia Communications Corp. that his son Tim Rigas, the company's chief financial officer, had to put on the brakes.

Tim notified Michael Mulcahey, Adelphia's finance executive in charge of the company's cash, that he must approve any further requests by his father beyond a $1-million-a-month limit. Over the next year, $12 million--paid in increments of about $1 million a month--was wired from Adelphia to John Rigas' personal account at Bank of New York, according to court documents.

As far as Adelphia shareholders knew, John Rigas was paid about $1.9 million a year. They were not told about the additional payments, as required by law, according to a criminal lawsuit filed this week by the Justice Department against five former Adelphia executives, including John and Tim Rigas and Mulcahey.

The payments were part of a widespread pattern of deceit alleged in the federal case and a related civil complaint filed Wednesday that accuse the executives of improperly using corporate funds for personal enrichment, charging them with several counts of mail, wire and securities fraud.

For The Record
Los Angeles Times Thursday August 01, 2002 Home Edition Main News Part A Page 2 National Desk 10 inches; 381 words Type of Material: Correction
Golf course designer--An article Friday about John Rigas, founder of Adelphia Communications Corp., and fraud charges brought by federal authorities against him and four other former company executives, misidentified the designer of a golf course being built by the family. The course designer is Rees Jones, not his brother Robert Trent Jones Jr.
*

The Rigases doctored financial records at Adelphia and created sham transactions and phony companies to inflate the firm's earnings and to conceal its mounting debts, the suits allege. Adelphia is the nation's sixth-biggest cable TV operator and the largest in Southern California.

Peter Fleming, a lawyer for the Rigases, said he would challenge allegations that the family was using Adelphia's money for personal transactions.

It is unclear from the complaints precisely what Rigas was buying with his alleged $1-million-a-month allowance. But since he founded Adelphia in 1952 in the sleepy outpost of Coudersport in rural Pennsylvania, this son of Greek immigrants who grew up above his family's hot-dog joint has upgraded his lifestyle significantly.

The family routinely stayed at vacation homes in Cancun, Mexico; Beaver Creek, Colo.; and Hilton Head, S.C., as well as two luxury apartments on the Upper East Side of Manhattan. Three private jets in the only hangar at the airport near the company's headquarters whisked Tim and his friends to an African safari or to a castle in the south of France.

A $700,000 membership at a luxury country club is said to have kept Tim well-practiced in his favorite hobby, golf. He also was busy overseeing construction of a world-class 18-hole course on the outskirts of Coudersport for visiting cable TV dignitaries and top executives of Adelphia. Tim said it would make it easier to recruit top executives to the hamlet, a five-hour drive from the nearest major airport, in Buffalo.

Adelphia's shareholders paid for many of these family perks, according to court documents.

Intermingled Finances

Federal authorities allege that the fraud cost Adelphia shareholders nearly $6 billion in lost value since late March, when the company's stock plunged after the Rigases disclosed they had taken out $2.3 billion in personal loans backed by the cable giant. In May the Rigases relinquished control of the company, and last month Adelphia filed for Chapter 11 bankruptcy protection because of a cash crisis.

John Rigas and two of his sons, Tim and Michael, were arraigned and each released on $10-million bail Wednesday. Mulcahey and another former corporate officer, James Brown, also were released, without bail.

In the two lawsuits, authorities described how the Rigases allegedly used Adelphia as their personal cash register: Revenues from Adelphia subsidiaries and the scores of businesses owned by the Rigas family were dumped into one central account. Bills then were paid out of the same account, an accounting no-no.

"Although the financial affairs of Adelphia and the Rigas Family Entities were intermingled ... the financial results of the Rigas Family Entities were not consolidated or combined with Adelphia's on Adelphia's financial statements," the Justice Department complaint said.

The Rigases also drew money out of Adelphia through many of their privately owned firms. A car dealership owned by John Rigas leased some of the vehicles in Adelphia's corporate fleet. An interior decorating shop run by his wife, Doris, sold furniture and design services to Adelphia. A farm owned by John supplied landscaping, snow removal and other maintenance services to Adelphia. And the Buffalo Sabres hockey team, owned by the family, sold hundreds of tickets every year to Adelphia.

Distributing Largess

In Coudersport, John Rigas was widely considered a hometown hero. He espoused conservative values and prevented Adelphia from carrying sex-oriented channels on its cable systems.

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