Former Adelphia chairman John Rigas, accused of bilking investors of billions, never took the stand in his own defense when he was tried — and convicted — of securities fraud in 2004.
But now he has plenty to say. Rigas, 82, recently agreed to tell his side of the story about the sequence of events that led to the collapse of the business he and his family built.
It is John Rigas' version of events. Bill Johnson, chief of the securities and commodities fraud unit of the U.S. Attorney's office in New York, which prosecuted the Adelphia case, noted the conviction and declined to comment on any aspect of this article.
Rigas spoke with USA TODAY as his prison sentence looms. On Sunday, he will begin serving 15 years in a federal penitentiary; his son Tim, 51, Adelphia's former chief financial officer, will begin a 20-year term. (The difference is because of their ages.)
The former cable mogul, whose net worth topped $2.5 billion in 2002, could have cut a deal with the government and perhaps received a lighter sentence. But Rigas says he would not plead guilty to crimes he believes he did not commit.
"I believe there is a time when you can't compromise your values," says the World War II vet. "My legacy is to my grandchildren, and you have to stand up — as difficult as it is — for something. And that is not something to be compromised or amended."
Bottom line: Rigas says the government's case wasn't really about fraud, "because, you know, there was no fraud." Rather, he says, "It was a case of being in the wrong place at the wrong time. If this had happened a year before, there wouldn't have been any headlines."
For Rigas, the headlines began in spring 2002. By then, the Enron, WorldCom and Tyco scandals were in full bloom. To calm markets, the Securities and Exchange Commission vowed a crackdown.
Back in Coudersport (pop. 2,000), Rigas and his executive team prepared for what they expected would be a routine earnings call.
It was anything but.
During the March 27 call, in accordance with new SEC accounting rules, Adelphia disclosed that the Rigas family had "co-borrowed" $2.3 billion with the company over a period of time. Concerned that highly leveraged Adelphia would have to borrow an additional $1 billion, at least, because of the loans, investors drove shares down 30% that day.
As criticism mounted, Deloitte & Touche, Adelphia's auditor for 20 years, started reviewing the audit it had completed but hadn't yet certified. By then, Rigas says, the firm had declared the just-completed review "our best audit ever." To celebrate, he says, James Brown, Adelphia's vice president of finance, threw a party for the Deloitte auditors and the accounting staff at a local hunting club. The celebration didn't last long. Deloitte refused to sign Adelphia's federal 10-K filing, causing company shares to be delisted. By summer, Adelphia had filed for bankruptcy-court protection.
Arrested on fraud charges
On July 24, 2002, Rigas and sons Tim and Michael, Adelphia's head of operations, were handcuffed and arrested in New York City. Brown and Michael Mulcahey, director of internal reporting, were arrested in Coudersport. The charges included securities, bank and wire fraud.
The White House crowed. Spokesman Ari Fleischer announced that day the fraud arrests of "five former corporate executives" was "a clear sign of this (Bush) administration's commitment to enforce the laws so justice can be done."
Larry Thompson, chairman of the president's 2-week-old Corporate Fraud Task Force, told the press that he was "particularly pleased to announce that the task force is fulfilling the president's directive" to stamp out corporate crime. He then laid out the complaint that accused the Rigases of "systematically looting" Adelphia and costing investors more than $60 billion.
Walking out of the courtroom after their arraignment that day, the Rigases were greeted by a crush of reporters. Their arrests dominated the evening newscasts that night. Rigas still smarts over the events that day. He says he offered several times to turn himself in but was rebuffed by prosecutors. "They wanted the publicity," he says.
Being the face of one of America's largest corporate scandals is tough to take, Rigas says. He says Adelphia did a poor job explaining the co-borrowing to investors, "But, at the same time, there was nothing illegal about it." That $2.3 billion was a big number, so he says he understands why some were surprised. But he also says he wasn't concerned because the loans, dating to 1996, had been reviewed regularly by independent board members and Deloitte & Touche.
"Whatever they recommended, in terms of how and when things got disclosed, we abided by. … We didn't hide anything," he says.
He also says information about the loans was in Adelphia's SEC filings. "Anybody could have calculated it." Few did, however, and Adelphia didn't really try to explain — a big mistake, Rigas says.
Alone at High Noon
After Deloitte jumped ship, Rigas says, Adelphia got another surprise. Buchanan Ingersoll, Adelphia's law firm for more than a decade, sent a letter stating, in effect, "that they'd never represented the Rigas family." Rigas says he found it odd because the firm "had done all of our private transactions for years."
Buchanan spokeswoman Lori Lecker confirms that a letter was sent. "On May 19, 2002, we informed certain Rigas family members that we were unwilling to represent them when we realized that we could not rely on the Rigases to supply us with accurate information." Lecker says in a written statement that the firm stopped representing Adelphia about a month later when it became clear that the Rigases "had deceived us, just as they had deceived other professionals, the investment public and their community." Then there was Brown. The ex-finance chief changed his plea to guilty in a deal with prosecutors and became their star witness.
Rigas says this mass exodus of supporters was like the final scene in the classic Western High Noon, when Gary Cooper faces a gang of gunslingers in the town square — alone. "I felt like I was Gary Cooper," Rigas says, a rare smile creasing his face. "Because all this time people are saying, 'You can depend on us.' But when you really needed them, and expected them, they weren't to be found."
At the trial, Brown testified — for 13 days — that he repeatedly lied to auditors and investors to make Adelphia look better on paper than it actually was. He did so, Brown testified, with the Rigases' full knowledge and support. Prosecutors argued Brown's testimony alone justified convicting the Rigases.
Testifying recently in a civil trial, however, Brown told a different story, according to court documents filed by Rigas lawyers. Brown testified that he had never lied to Adelphia's auditors and investors about "co-borrowing," debt reclassification and other financial matters that figured prominently in the criminal trial. He also denied hiding information from auditors, the documents say.
Rigas says Brown's recent testimony confirmed his suspicions that Brown, like so many others in that tension-filled summer of 2002, just got scared.
"If you ask me today what Jim did wrong, I don't know of anything he did wrong, criminally … except he lost his nerve. He became fearful" of government prosecution. The Rigases' lawyers are now seeking a new trial based on Brown's latest testimony.
Brown declined to return calls. His lawyer, Jonathan Bach, says any suggestion that his client's testimony was untruthful "is unlikely to withstand scrutiny."
The government's cases against the other two Adelphia executives fell apart. Charges against Michael Rigas were reduced to one — signing a regulatory filing without properly reviewing it — for which he was sentenced to 10 months of home confinement. The jury acquitted Mulcahey of all charges.
In 2005, Deloitte & Touche agreed to pay $50 million to settle with the SEC, without admitting or denying guilt. The agency said the firm "engaged in improper professional conduct and caused" Adelphia's recordkeeping violations.
In a statement prepared for USA TODAY, Deloitte said it was unable to complete the audit because "a long series of open items had to be investigated and satisfactorily resolved before Deloitte could issue a report" on the financial statements. "It is now clear that the fraud perpetrated by the former Adelphia executives was designed to deceive Deloitte as well as members of the investing public."
Teed off about golf course
Rigas says some prosecution tactics still rankle him. At the top of his list: The Golf Course.
Prosecutors alleged that Rigas used Adelphia like a "personal piggybank" to fund many vanity projects, including a private, luxury golf course. Prosecutors said the golf course, which was never built, would have cost shareholders up to $15 million. In addition, they said, it would have lined Rigas' pockets because it would have been built on his land.
Rigas' version: The golf course would have been owned by a foundation, jointly supported by Adelphia and the family, being put together with help from an outside board member. Rigas says he planned to donate the land, so he wouldn't have made a dime. "From the very beginning, I said I'd donate the land," he says.
Why build a resort course in tiny Coudersport? Rigas says the goal of the project, hatched in 1999 and discussed with board members until it was abandoned in 2002, was to create jobs and draw talent and businesses to the area. The PGA-quality golf course, clubhouse and conference center would have been a magnet, he says. Rigas says he also hoped to bring national attention to Coudersport, just as the Augusta golf course has for that Georgia city. "It was an opportunity to show that a major corporation could exist in an environment away from money centers."
Cutting down the tree
Also sticking in Rigas' craw: the "$6,000 Christmas tree." Prosecutors said Rigas cost shareholders $6,000 by using the company plane to fly two Christmas trees to his daughter, Ellen, in New York City. She didn't like the first one, so the company flew her another, prosecutors alleged.
The family's version: The trees went as baggage on a plane taking Adelphia executives to New York City on business. "That was pretty much it," Michael Rigas says.
The elder Rigas says what hurts most is not that he's been stripped of 95% of his wealth by the federal government. He's also square with the idea that Adelphia, which he founded and grew for 50 years, is gone forever. (What was left was bought and divided up recently by Time Warner and Comcast.)
What he does mind — a lot — is that his family name has been dragged through the dirt, exposing his children, grandchildren and the town he loves to hurt and shame.
Tiring of the fight
At times, he admits, "It's hard to be courageous when things have all gone wrong."
Other cable TV chiefs don't come around much anymore. A notable exception, he says, is Chuck Dolan, chairman of Cablevision, who visited recently. "I thought that was really nice."
Locals also show a lot of support, he says. "I get an awful lot of hugs I never used to get." And local churches have also offered their prayers, he says.
That sort of thing, together with his belief that the truth, as he knows it, will come out, keeps him going. "It may take awhile for the truth to unravel and come out, but I know it will happen," he says.
Meantime, Rigas and son Tim are to report to separate prisons on Sunday: John to Rochester, Minn.; Tim to Elkton, Ohio. The family asked that they be placed in the same facility; the Bureau of Prisons has yet to rule on that request. There is no parole in federal prison. Owing to John Rigas' ill health — he is hard of hearing, has a weak eye and has bladder cancer that's now in remission — the sentencing judge ruled that he could be released after two years if a prison doctor determines he has less than three months to live.