Adelphia Investigators Allege AbusesJul 28, 2002 | AP Adelphia Communications' septuagenarian founder and chairman at one point allegedly ran up $66.9 million in advances from the cable television company's cash management system, and had his withdrawals reined in by his son, federal investigators say.
John J. Rigas then drew a $1 million-a-month maximum set by Timothy Rigas, his son and vice president for finance, for 12 straight months, although the company was publicly reporting his annual compensation as $1.9 million, investigators said in one of the most dramatic of an array of allegations of self-dealing by Rigas and family members.
Rigas and his sons, who gave up executive posts and board seats at the company a month before it filed for Chapter 11 bankruptcy protection in June, are accused — in a complaint by federal prosecutors, a civil lawsuit by the Securities and Exchange Commission ( news - web sites), and a lawsuit and SEC filings by the company itself — of misusing Adelphia funds in myriad ways.
The 77-year-old Rigas and sons Timothy, 46, and Michael 48, were freed on $10 million bond after being led from their Manhattan apartments in handcuffs in what President Bush ( news - web sites) touted Wednesday as an action showing that the government would prosecute even corporate executives accused of white collar crime.
Adelphia's former vice president of finance, James R. Brown of Coudersport, and former vice president and assistant treasurer, Michael C. Mulcahey of Port Allegany, were also arrested.
A civil complaint the company filed made allegations similar to the federal charges, and also named Rigas' son, James, former executive vice president of strategic planning; John Rigas' wife, Doris, and his daughter, Ellen Rigas Venetis, as defendants.
"I think there's been a major distortion here," said Peter Fleming, attorney for John Rigas, maintaining that the family's activities were complex rather than criminal.
"It's a very complex and complicated situation. This characterization as looting is very unfair," Fleming said. "John Rigas started his company in 1952 and built it. All of his net worth is tied up in Adelphia stock. He never sold a share."
The federal prosecutors, the SEC and the company itself alleged a long string of Rigas family misuses of company money.
The complaint by U.S. Attorney James B. Comey in Manhattan elaborated on many allegations the company had made in SEC filings concerning its former management.
The federal complaint accused the Rigas family of using $252 million in company money to pay margin calls, or demands for cash payments on loans for which they had put up Adelphia stock as collateral.
The Golf Club at Wending Creek Farms, an Adelphia subsidiary, spent $13 million in company funds for construction of a still incomplete golf course and club on 830 acres of which John Rigas owns 661 acres, the complaint alleged.
Family members used company planes for personal travel without reimbursing the company, including an August 2000 trip by Timothy Rigas and friends to Africa for a safari, the complaint said.
In addition, John Rigas' daughter and son-in-law had rent-free use of two condominiums in New York from 1998 through May 2002, the complaint said, alleging that the rental value was at least $150,000.
Rigas family members owned a furniture and interior design company, a car dealership and a number of partnerships, the complaint alleged, saying Adelphia employees regularly performed work for the other Rigas family owned entities and their bills were regularly paid with money from Adelphia bank accounts.
The civil complaint that the company filed listed numerous Rigas family owned businesses including the Buffalo Sabres pro hockey team, Coudersport Television Cable Co., Coudersport Theater and Wending Creek. It also listed Dobaire Designs, owned by Doris Rigas, and said John Rigas and daughter Ellen owned Eleni Interiors Inc., ErgoArts Inc. and an interest in SongCatcher Films.
Apparently anticipating further financial tangles, Adelphia's complaint described other possible Rigas-owned partnerships and companies as "Defendant XYZ Company Nos. 1-25," companies it said were allegedly involved in wrongful conduct "but whose identities are yet unknown."
The company complaint said the golf course was "apparently the brainchild of Timothy Rigas, who is an avid golfer, and was known to use the company planes to leapfrog across the country to play golf on various courses."
It alleged that the family made payments in company money — for example, about $1.5 million to Eleni Interiors and $370,000 to Dobaire for furniture and design work, and $2 million to Wending Creek for maintenance and other services — without the Adelphia board's approval.
And the Adelphia complaint said only Rigas family members could authorize use of company planes, and it was often for personal travel.
"Indeed, the Rigas defendants caused the company's jet to be used to transport guests attending Ellen Rigas Venetis's wedding as well as a player on the Buffalo Sabres hockey team to a hockey game," the complaint said.