Adelphia Communications Corp. won’t make $4.2 million in payments to John J. Rigas under a severance agreement reached when the cable TV systems company founder and former chairman stepped down in May, according to a person who has been briefed on the situation.
No payments had been made yet under the severance agreement, said the person, who agreed to speak on condition of anonymity. The company has been operating under bankruptcy protection since late June.
Adelphia outlined the severance package in a May filing with the Securities and Exchange Commission. The package was to include payments to Rigas of $1.4 million a year for three years; lifetime health care coverage for Rigas and his wife; use of an office, computer, telephone and secretary; and emergency use of company planes.
“The company doesn’t anticipate making those payments,” the person said Wednesday, referring to the annual cash payments. The board hadn’t made decisions about other portions of the package but may reconsider those as well, the person said.
Rigas’ attorney, Peter Fleming, said in a statement, “It’s more than disturbing when anyone, including a corporate board, would breach a contract presumably signed in good faith.”
Rigas and his lawyers were considering alternatives and hadn’t determined how to respond, said attorney Stephen J. Harmelin, who is representing Rigas in the civil suit.
“The severance arrangement is something which was part of a May agreement that the company has obviously breached,” Harmelin said.
Eric Andrus, a spokesman for Adelphia, said the company wouldn’t comment.
Adelphia, the nation’s sixth-largest cable television company, filed for Chapter 11 bankruptcy protection June 25.
John Rigas, the 77-year-old founder and former chairman and chief executive, was arrested July 24 along with sons Timothy, 46, and Michael 48, on charges of stealing hundreds of millions of dollars from the company. The Rigases had stepped down from their executive posts and seats on the company board in May.
The Rigases, who have denied any wrongdoing, are free on $10 million bail each, secured by cash plus land and other property.
The company filed a civil complaint in the U.S. Bankruptcy Court in New York the day the Rigases were arrested, accusing them of conspiring to use company funds for their own benefit. The lawsuit alleged that off-the-books transactions and self-dealing by the Rigas family resulted in damages and loss in market capitalization of more than $1 billion, for which the company sought triple damages.
The company, based in Coudersport in rural northern Pennsylvania, decided about that time not to make payments to Rigas under the severance agreement, the person said.
Adelphia also obtained a temporary restraining order Aug. 27 from U.S. Bankruptcy Judge Robert E. Gerber barring John Rigas or family members from selling any real estate until it could be determined whether the company held part ownership.